Pick up the latest issue of the popular car enthusiast magazine Road & Track, and you'll find a letter written by David MacNeil, founder and CEO of MacNeil Automotive, based in Bolingbrook, Ill.
In the ad, he's photographed in one of the company's newest U.S. factories. MacNeil writes, "The exporting of American jobs is a trend that must be stopped and reversed." He goes on to say, "So in 2007 we transferred all of our floor mat manufacturing back to the United States. Today, we build the best fitting, highest quality automotive floor mats in the world, right here in America." MacNeil's message is clear: Rather than save a few dollars in the manufacturing process by outsourcing work overseas, he's determined to do his part to bring manufacturing jobs back to the United States because he believes the industry is vital to the country's economic health.
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The U.S. manufacturing industry has its work cut out for it. Since 2001, the country has lost almost 5 million manufacturing jobs, according to economic consulting firm Economic Modeling Specialists Inc. (EMSI) of Moscow, Idaho. Of the 460 sectors EMSI tracks, only 50 sectors added jobs over the past 10 years. A big concern is that many of the industry's most rapidly growing areas are heavily subsidized by the government. For instance, the ethyl alcohol manufacturing industry, which produces ethanol, currently employs about 11,000 workers and grew by more than 7,400 jobs, or by 227 percent, over the 10-year period, the biggest percentage leap of any group. Another big growth sector: military armored vehicle, tank, and tank component manufacturing, which grew by 84 percent and added almost 5,000 workers over the same time period.
Last year was an important milestone for U.S. manufacturing, as the number of jobs in the industry increased for the first time since 1997. Still, those gains fell well short of the number of jobs needed to revive the sector. Since 2010, the number of manufacturing jobs has increased by about 150,000, which brings the industry total to just over 12 million jobs.
Two major problems plague the industry. Technological advances in manufacturing have resulted in fewer positions. And, as MacNeil points out, many companies have chosen to outsource a lot of low-skilled labor to countries with lower labor costs. "As a global trend, dramatic increases in manufacturing productivity mean that the same volume of goods are produced with less labor," says Hank Robison, chief economist at EMSI. "In addition, China's cheap yuan policy makes U.S. goods expensive relative to Chinese, and U.S. labor costs are among the highest in the world."
That's led to a shift in the number of manufacturing workers who have moved into service-sector jobs, Robison says. In 1950, 30 percent of all U.S. jobs were in manufacturing, while 63 percent were in services, according to EMSI. Currently, 9 percent of jobs are in manufacturing, and 86 percent are in services. Many job openings in the manufacturing sector are "replacement jobs"—meaning openings are for positions that already exist.
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But the news isn't all bad. Recent research from global consulting company Accenture found that many companies are reconsidering their rationale for shipping many jobs overseas. In the study, 61 percent of respondents, which included more than 200 manufacturing executives from a wide range of industries throughout the world, reported that they were considering more closely matching supply location with demand location by onshoring or "nearshoring" manufacturing and supply. Executives said they're focusing more on where consumer demand is coming from and relocating accordingly, says John Ferreira, executive director of Accenture's North American manufacturing division. Being closer to the customer base allows for more flexibility, and as labor rates and transportation costs rise in other countries, U.S. companies are reassessing their decisions to offshore. "Decisions have often been made to move offshore without a complete understanding of the impacts of total costs," Ferreira says.
This has mixed implications for those seeking manufacturing jobs in the United States. While the United States is the largest market for many types of goods, emerging economies with rapidly growing middle classes are catching up. One example of a large, multinational firm that recently decided to add to its manufacturing capacity in the United States is German carmaker BMW. In a bid to remain the leading luxury carmaker in the United States, BMW has recently invested $250 million to develop its headquarters in New Jersey and create two regional distribution centers, according to the Accenture report. On the other hand, Ferreira points out other manufacturers are considering moving to Latin America, which is geographically close to the U.S. market but also near expanding markets in South America.
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As for Ferreira's outlook for the future of U.S. manufacturing jobs, he says "It's mixed, but with a positive expectation. ... Making the changes to a supply chain doesn't happen overnight. If that has to be modified, it doesn't happen with the flip of a switch."
However, the biggest issue for the manufacturing industry in the United States may not be a lack of jobs, but a gap between what skills manufacturing companies demand and the experience of the American workforce. A recent survey on talent in the manufacturing industry sponsored by Deloitte and The Manufacturing Institute found that 67 percent of more than 1,100 manufacturers reported a moderate to severe shortage of available, qualified workers. Of those surveyed, 56 percent said they anticipated the shortage would grow worse over the next three to five years. Overall, the study found that about 5 percent of current jobs, or up to 600,000 jobs, remain unfilled due to a lack of qualified candidates—a frustrating number considering the country's 14 million unemployed. "We just don't have the skilled workforce that allows us to expand and compete," says Jennifer McNelly, senior vice president at The Manufacturing Institute.
It's partially a public perception problem. Eighty-six percent of respondents in a separate survey indicate that America's manufacturing base is "important" or "very important" to our standard of living. But at the same time, manufacturing ranked second to last among seven key industries that Americans wanted to work in. "Everybody agrees hands-down that they want manufacturing jobs in their community, just not necessarily for them or their children," McNelly says. Education and retraining will play a huge role in the fate of the industry going forward, she says.
Twitter: @benbaden
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