How Workers Can Drive Growth in US Manufacturing Jobs

Steve Willcock
The politicians are talking about trade deals, but is there a strategy for the American workforce to encourage the return of manufacturing jobs from low-wage economies?

The 2016 U.S. election season highlighted many things, with one of the most prominent issues being that the loss of U.S. manufacturing jobs has devastated many rural and rust belt communities in this country. Much of this talk has focused on government trade deals that have purportedly encouraged corporations to move their manufacturing operations to countries with lower wages and fewer regulations, such as China and Mexico.

It is not surprising that the political dialog focused on trade laws, as losing out to foreign competition is a powerfully emotive issue in a country that takes great pride having in pioneered modern manufacturing. There is plenty of anecdotal evidence that the changes in trade policies and the subsequent migration of factory work having severe impact on American communities. However, as I listened to the politicians recite their well-rehearsed rhetoric again and again, I felt a growing sense that this debate about the trade deals doesn’t tell the whole story.

Working for a project management consultancy, I am aware that colleagues of mine continue to be involved in the construction of several new and upgraded manufacturing facilities throughout the United States. This information didn’t match what candidates from across the political spectrum kept repeating, about American manufacturing being on its knees.

So I Started to Look Into Where the American Manufacturing Jobs had Gone? The Results Were Surprising.

The long-term decline in the volume of US manufacturing jobs is real, one of the few facts that most candidates seemed able to agree upon. A strategy-business.com article states that "In the past 20 years… America has shed 28 percent of its manufacturing jobs."

My surprising discovery was that according to marketwatch.com, the US manufacturing industry is actually booming, with output increasing year on year and now being within 3% of its pre-2007 peak.

Not only has there been a steady rise in manufacturing jobs since the Great Recession, but the manufacturing sector continues to be the largest and most valuable sector of the US economy in terms of gross output, which this graph emphatically demonstrates:

The economic success of the American manufacturing industry is continuing despite the fact that according to fivethirtyeight.com “More than 80 percent of all private jobs are now in the service sector”.

So How Can Manufacturing be Booming, While it Keeps Employing Less People? These Facts Don’t Seem to Add Up?

The answer to this conundrum appears to be increasing mechanization / automation. It is true that many manufacturing jobs have historically been lost to lower wage countries, but that trend appears to have halted some time ago. In fact, the work of The Reshoring Initiative® shows that since the low watermark of manufacturing employment in 2010, over 265,000 manufacturing jobs have trickled back to the USA. This is supported by a variety of factors that can make automated production more attractive in the USA, such as the significantly lower electricity prices in comparison to China, highlighted in a study by BLS & Co. 

However, while the factories may be coming back to America’s industrial heartlands, they are not returning the same volume of jobs as those that had already left. This is because the new factories are more machine than man. As an increasing number of manufacturing tasks are becoming automated, the skilled hands that the industry needs are the ones that can calibrate and maintain their machines and not the masses of workers who used to make their products.

An article from The Washington Post, tells a story about Thomaston, Ga., a once thriving mill town reduced to a shadow of its former self. Thousands of local jobs were lost when the garment industry moved abroad years ago, then Marriott International made a recent decision to return the production of their hotel towels to the U.S. from factories in the middle-east. The large mechanized factory only returned 150 jobs, but represents a step forward in providing the town with a much needed employment boost and optimism that other firms will be looking to follow Marriot’s lead.

This trend offers hope to the modern American worker, although unfortunately this is not the mass-scale return to the labor-intensive factories that employed the generations before us; but a decent volume of well-paid jobs returning to the rural heartlands of Middle America. This is because wages are rising in China and other traditionally low-wage countries. This dynamic is making the local-mechanized option more attractive from a cost perspective, not least because it also reduces the shipping cost and drastically reduces lead times when changing product specifications.

As an increasing number of manufacturing tasks are becoming automated, the skilled hands that the industry needs are the ones that can calibrate and maintain their machines...

Added to this leveling of the cost playing field, the international exodus of manufacturing fueled a political backlash that has significantly increased the public recognition of the human costs that came from the forfeiture of so many good American jobs. This empathy has heightened the status of the words ‘Made in the USA’, in the eyes of the powerful American consumer. It appears that there is a real opportunity to build on this momentum in bringing jobs back to the States; however, it requires the collective workforce and our policy makers to embrace a process that has traditionally been a big killer of jobs - mechanization. If the machines are starting to out-compete the low-wage economies, the average American worker doesn’t stand a chance in that fight. 

So What can the U.S. Workforce do to Make the Most of This Trend in the Return of Manufacturing Jobs to the USA?

Why should big American corporate manufacturers not just mechanize production in Central America, staying relatively local but not having to pay higher wages in the USA?

I think the answer to these questions have already been prophesized, when Steve Martin offered some words of wisdom on how to make it in America’s favorite industry – show business. Martin was asked by a reporter what advice he provides to those who want to make it and he replied that the answer is simple, it’s just not what people want to hear: “Be so good they can’t ignore you.”

So How Does the American Workforce Get so Good that it Cannot be Ignored?

Well first and foremost the quality has to be higher than others are capable of producing. This is an area where American manufacturers are already well positioned, as a nation that leads in innovation and technological solutions, the quality of ‘Made in the USA’ products has long been well regarded. However, quality alone wasn’t enough to stem the flight of manufacturing from the U.S. before, so we have to assume there are other areas where we need to improve. The key areas left in a mechanized environment are worker efficiency and how that affects plant downtime.

With the rapid development of the internet of things, factories are getting smarter and the need for human input is reducing throughout the production line. Many of the new jobs created by these mechanized factories are maintenance roles. Skilled labor that is employed to keep the plant running as much as possible, and ensuring that change-overs between product lines are swift and issue free. Operating safely in these roles is a major focus, as they require people to interact with heavy machinery and electrified systems, and facilities in America are required by law to abide by the necessary safety measures to keep their employees out of harm’s way.

The challenges here are that the work can be relatively complex and the hazards are real, so in these environments, where tasks need to be carefully planned and executed, the proportion of time workers spend using their tools to maintain the plant is typically less than 50% of their working day. As plants cannot afford to have their production lines down for long, this relatively low return in working time provides significant challenges in delivering key maintenance in the timeframes available.

Facilities like major oil and petrochemical refineries are well aware of these challenges, with the cost of lost production at these mega-scale manufacturing plants far exceeding the labor costs at the site. Therefore, they have gotten ahead of the curve in investing in planning and workforce management, to give their operations and maintenance staff the best possible conditions to complete their work in the time available.

This is where the wider manufacturing industry and workforce can learn to out compete their global rivals, in the race to win more mechanized production in the United States. Having extensively reviewed a major database of working time studies containing over 25 man-years of field observation at refineries, the best practice demonstrated at these facilities can be as high as 65% working time in a shift. Comparing these best practice results to an industry average of just below 50% working time, this 15%+ improvement of working time translates to millions of dollars more work being executed in a year. Perhaps most importantly this working time improvement directly correlates with a significant reduction in plant downtime, as the workforce delivers their key activities more expediently.

The learning from these best practice examples, is that those operating at that top level all share a common trait. The workforce, unions and management have committed themselves to a culture of collaboratively identifying and mitigating the barriers to working time. Open and honest communication between management and the workforce about what interrupts work - and how these issues can be mitigated - is the key to those workforces achieving a higher standard of performance, which makes an enormous difference to the success of the plant.

The American workers and corporations have a major opportunity to get ahead of their international competition, by being open to challenging traditional working practices and removing the barriers that prevent them from safely delivering their skilled labor that keeps our factories running.

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