Will the world soon “hear the roar of our engines,” as Clint Eastwood suggested in Chrysler’s viral Super Bowl spot? You hear similar sentiments from Rick Santorum and Mitt Romney, now speechifying at Michigan factories ahead of that state’s Feb. 28 Republican presidential primary. President Barack Obama talks about “an economy built to last, an economy built on American manufacturing.” Yet when one looks at the economic trend lines for the U.S., future American workers are more likely to be manipulating ideas, numbers, and designs than bending metal.
The recent outbreak of factory-hand nostalgia resonates with baby boomers, who are old enough to remember the steady income growth and middle class expansion that manufacturing jobs helped deliver from about 1950 to 1973. In the early 1960s, roughly one-third of U.S. jobs were directly tied to manufacturing (that figure is 9 percent today), as America’s global dominance in autos, steel, appliances, and other fields created a plentiful supply of assembly-line jobs that didn’t require fancy academic credentials. “The romance associated with it is actually economically legitimate because it reminds us of the period of the greatest growth that we had in the U.S. economy,” wrote Jeffrey Bergstrand, a finance professor with the University of Notre Dame’s Mendoza College of Business, in an e-mail. “It’s also, at the same time, an association with the boom in the middle class, and the reason is that you had so many people’s incomes tied to the manufacturing line and they were all sharing in that economic boom.”
America still boasts a huge and highly productive manufacturing sector that generates $1.7 trillion in economic output, or about 11.7 percent of U.S. gross domestic product. The problem is that few American companies still produce heavy manufactured goods using large numbers of low-skilled workers. Today’s successful American manufacturers look more like Apple (AAPL). For most companies, Bergstrand says, “basically the research and development is done here, the branding is done here, the high value-added end of manufacturing, high technology manufacturing, is done here.” And the assembly work can be done by Chinese migrant workers in Guangzhou. Typically work done in the U.S. requires fewer workers with greater technical chops than in the past. When the Bureau of Labor Statistics published a 2008-to-2018 labor market forecast, the agency’s economists saw robust job growth in health care, professional and scientific services, waste management, government, retailing, and finance. At the same time, the study predicted a 9 percent decline in manufacturing employment from 2008 levels, thanks to productivity gains, outsourcing, and international competition.
The major GOP candidates and Obama all have sensible ideas about how to keep American manufacturing vibrant. Obama and Santorum are proposing tax incentives for companies that move overseas production and jobs back home, while Romney thinks getting tough on Chinese currency policies will help American companies. Such measures won’t take us back to the 1960s and 1970s, though. The best way to secure this country’s position in high-tech manufacturing is by dramatically improving the education system and turning out more qualified engineers, computer programmers, and other technicians. “That gap in education is more serious for high technology manufacturing than it is for services,” says Bergstrand. Even with an increase in qualified workers, manufacturing isn’t likely to support middle class jobs and incomes as it once did. The real action will be in the service sector, where there is far more variance in skill levels and compensation. Hence the widening income inequality, according to Bergstrand. That’s the challenge. Yearning for a lost era isn’t going to help much.