TOPICS > Economy

How Many Manufacturing Jobs Can U.S. Realistically Maintain?

January 26, 2012 at 12:00 AM EST
As President Obama and GOP presidential candidates talk about reviving the U.S. manufacturing sector in hopes of creating jobs, how realistic is that goal in the face of continued outsourcing and machines filling jobs once held by humans? Ray Suarez speaks with three experts about the challenges and demand for skilled workers.
LISTEN SEE PODCASTS

TRANSCRIPT

MARGARET WARNER: Now, the prospects for creating a more robust manufacturing sector in the U.S. It’s a theme both President Obama and the Republican candidates are sounding this week as they talk about reviving a stronger economy.

Ray Suarez explores the challenges ahead, beginning with some background.

RAY SUAREZ: A conveyor belt manufacturing plant in Cedar Rapids, Iowa, yesterday was President Obama’s first stop on a three-day tour — a major part of his economic message: The U.S. needs a renewed commitment to manufacturing.

PRESIDENT BARACK OBAMA: So, we’re going to keep boosting American manufacturing. We’re going to keep training workers with the skills they need to find these jobs. We’re going to keep creating new jobs in American energy, including alternative energy that’s been a source of strength for a lot of rural communities in Iowa.

RAY SUAREZ: The U.S. remains the world’s largest manufacturing economy. Roughly 9 percent of the American workforce — about 12 million Americans — are employed directly in manufacturing today.

But as jobs have increasingly moved to Asia and elsewhere, the role of manufacturing is down sharply from the industry’s heyday. To encourage the opening of new plants, the president is proposing more training, additional education and new tax incentives.

But Republicans say the president’s economic policies have contributed to the decline. Mitt Romney made that point again on Tuesday during a campaign stop at a shuttered drywall factory in Tampa, Fla.

MITT ROMNEY (R): It does break my heart to see plants like this one. In 2008, this plant closed because of an economic downturn. In a normal recovery, under strong leadership, it could be full of workers by now.

RAY SUAREZ: A gap in science and engineering is fueling other problems. A new report released by the National Science Board last week showed the U.S. has lost 28 percent of high-tech manufacturing jobs, or nearly 700,000 jobs, since 2000.

There are bright spots suggesting a small revival. After a major government bailout, General Motors and Chrysler are making profits and outselling their foreign competition. A rise in exports has helped, too. Overall, the U.S. economy has added 300,000 manufacturing jobs since early 2010.

We now talk to three experts about all this. Robert Reich was secretary of labor in the first Clinton administration. He’s now a professor of public policy at the University of California at Berkeley. Jack McDougle is senior vice president at the Council on Competitiveness, working with leaders in government, business and academics. He served as undersecretary for economic affairs at the Commerce Department during the second Bush administration. And Martin Schmidt is associate provost at the Massachusetts Institute of Technology, where he’s also a professor of electrical engineering.

Gentlemen, I want to start by getting all three of you to take a look at where manufacturing stands. Politicians from both parties have recently been campaigning on the idea that reviving manufacturing is essential, a central part of reviving the economy.

Professor Reich, where do you stand?

ROBERT REICH, former U.S. labor secretary: Well, obviously, manufacturing jobs are good jobs. They have been good jobs. We do need to do what we can do to bring back manufacturing.

But let’s not fool ourselves. We’re not going to have the kind of manufacturing-based economy we had 30 or 40 years ago. A lot of the assembly jobs that are in our heads when we think about manufacturing actually have been turned into robotics, numerically controlled machine tools.

I mean if you go into an American factory or even into a Chinese factory these days, you see technicians sitting behind computer consoles controlling a lot of robots and numerically controlled machine tools. So it’s not as labor-intensive as it once was.

RAY SUAREZ: Jack McDougle?

JACK MCDOUGLE, Council on Competitiveness: Well, Secretary Reich is right that productivity improvements in manufacturing have been significant over the past 20 or 30 years.

And, as a result, there’s less requirement for workers. So, in the opening segment, when we talked a lot about jobs being lost overseas, that’s not just the case here. U.S. workers are much more productive than their foreign counterparts. In fact, the U.S. worker is 10 times more productive than a Chinese worker in manufacturing.

That’s a great advantage to the U.S. And U.S. manufacturing output continues to grow. So, you know, the idea that we’re going to bring back a significant number of manufacturing jobs the way we had in the 1960s and ’70s is probably not entirely accurate.

But manufacturing is very critical to U.S. economic growth and prosperity. And part of the reason for that is its multiplier effect. More than any other sector in the economy, manufacturing creates more wealth in other sectors. And so it’s something that we really need to take seriously and invest in and bring back a lot of the capabilities that we’ve either lost or are on the brink of losing.

RAY SUAREZ: Professor Schmidt?

MARTIN SCHMIDT, Massachusetts Institute of Technology: Well, I do agree with everything that’s been said, but I think we need to focus this discussion on advanced manufacturing.

That’s where we have real opportunities. There’s opportunities to create great jobs, high-paying jobs, jobs with substantial multipliers. And these advanced manufacturing technologies are vital to our innovation — innovation economy. We’re not going to be able to innovate in new products and technologies without a robust manufacturing base and these advanced manufacturing technologies.

RAY SUAREZ: But, Professor, that advanced manufacturing you’re talking about, does that employ mass-sized labor forces? Do you see a second shift taking over from the first shift that looks like a big parade through the factory gates? Or are we talking about fairly small numbers of people?

MARTIN SCHMIDT:  Well, it’s certainly — I would agree that it’s not clear we’re going to return to the manufacturing job numbers of the past.

But there are substantial jobs out there. These are high-skilled jobs. One of the challenges we have is, the labor force just doesn’t have those skills today. And as a nation, we need to figure out how to revitalize our community college education system to train those folks that want to work in these types of jobs.

And they’re there. And when you talk — through a lot of work we’re doing here at MIT and in partnership with other companies, you talk to these companies, and they face substantial challenges in finding skilled laborers to populate these jobs. So the jobs are there. We need to get the work force trained and into those jobs.

RAY SUAREZ: If you look at the era, Jack McDougle, just before the big declines, what pushed and pulled manufacturing jobs out of the United States over the last 30, 40 years?

JACK MCDOUGLE: Well, jobs leaving the United States, for a whole variety of reason.

And, oftentimes, it’s portrayed as being a chase for low-cost labor. And some of that’s true. And other economies do offer lower wages than the United States. But there are a number of other factors that have driven jobs offshore: taxes, regulatory policy, as has been mentioned, skill sets.

And, just, the environment has become more competitive. Other governments are investing a lot in their training and development of their work force. They’re graduating engineers. They’re investing in manufacturing capabilities. And so that’s putting up a really strong challenge.

And so we need to look at the entire landscape of manufacturing in order to make sure that we can be successful going forward. And just to echo the point, by our estimates in working with one of our partners, Deloitte, we estimate somewhere around 600,000 to a million manufacturing jobs are unable to be filled right now because manufacturers just can’t find the skilled workers to take those positions. That’s a huge gap.

RAY SUAREZ: Professor Reich, hundreds of thousands of jobs that can’t be filled because you can’t find the workers?

We used to have the flip-side problem, didn’t we, highly trained people who no longer could find a place to practice their craft?

ROBERT REICH: Yes. It is the flip side.

But the kinds of skills that are needed in advanced manufacturing — that is, engineering skills, manufacturing engineering, design, systems integration, all sorts of things, knowledge of computer-aided design, computer-aided manufacturing, that does take time. It takes some skills.

Community colleges are important, but there’s also a need for more graduate engineers from four-year colleges and engineering programs. And even if we did all of this — and we have to try to do all of this — we’re still not going to see — and I want to emphasize this — we’re not going to see the vast numbers of good unionized high-wage manufacturing jobs that are assembly line, blue-collar jobs we used to have.

You know when we talk about skill upgrades, we need to do this for the entire work force, not just for manufacturing, but also for service jobs that also could pay much better if people had the right skills.

RAY SUAREZ: Well, Professor Schmidt, that’s exactly your cue, because you’ve been talking about advanced manufacturing. But if we look at that sector and start to make it more robust, are there still things that American workers can do and things that they can make that can’t eventually be made somewhere else in the world for equal quality for less money?

MARTIN SCHMIDT:  Well, I think what we’re finding is, there’s an awful lot of technologies where — or manufacturing — products we want to manufacture where labor cost is not the dominant cost of manufacturing. It’s the cost of the capital, the tooling.

And so having the right work force is critical. And the U.S. can compete in that area. So we need to focus on training. And as I stated earlier, this is really vital to our innovation economy. The engineers that we’re graduating at MIT are going to design exciting new products, but in order to do that design, they really need a deep understanding of how these products are manufactured.

And that comes from being near where the manufacturing is occurring. So having a robust domestic manufacturing base, I think, is absolutely essential to our innovation economy. And so, if only for that, we need to really ensure a strong manufacturing base.

But I also think there’s plenty of evidence to suggest that the jobs are high-paying and the multipliers around manufacturing jobs are quite substantial.

RAY SUAREZ: Jack McDougle, in the time we have left — and I want to hear from you and the secretary before we go — what’s your best pitch on why, in a competitive world, where a lot of outsourcing has already been successfully accomplished, there needs to be more investment in American manufacturing?

JACK MCDOUGLE: The Council on Competitiveness, with our industry, university and labor members, we’ve undertaken a really intense manufacturing initiative over the past two years, and recently released a report, “MAKE: An American Manufacturing Movement.”

And the consensus amongst our members and lots of leading experts is, is that we’re on the brink of a potential uptick in manufacturing in the United States. We’re seeing wages increase and labor unrest increase in China. We’re seeing other pressures on companies operating in China.

So, when companies are evaluating their total cost of production, what they’re seeing now is that, in the United States, the fully burdened cost of production isn’t as extravagant as they once thought. And so people are taking a new look.

And, you know, it’s just beyond — it’s beyond just advanced manufacturing, although that will pay a critical role. I was reading an article earlier today that Wham-O Industries is bringing Frisbee manufacturing back to the United States.

So I think, overall, it’s government and the private sector and universities working together to create the kind of collaborative environment here that anybody that wants to make something in the United States can do so in a cost-effective manner. And I think we have that potential.

RAY SUAREZ: Even if it’s something as simple as an injected, molded plastic disk?

JACK MCDOUGLE: As simple as that, sure, because one worker can turn out 10 times as many in the United States as they can in China.

RAY SUAREZ: Jack McDougle, Professor Schmidt and Professor Reich, good to talk to you all.

JACK MCDOUGLE: Thank you very much.

MARTIN SCHMIDT:  Thank you.