Thursday, September 16, 2010


  If you listen to the news, read political comments and debates, you probably believe that U.S. manufacturing is either dead or dying.You probably believe that China is the power base of manufacturing. Well, surprise.American manufacturing is king and we should be very proud of that.
 Here are the facts.In 1982,the value of goods and services produced in the USA accounted for 20% of the total world output.Today we produce 22% of the total world output.We are the largest producer in the world.By comparison, China produces just 8% of total world output.However, no doubt China's manufacturing base is rapidly increasing, up from 4% just a few years back.
  So why do we get the feeling  that our manufacturing base is in decline? Very simple , the employment numbers in the industrial sector have been in a long and steady decline. In 1987 industrial employment accounted for 16.5% of all employment , today just 11%. These jobs did not all go offshore.It is the increase in productivity that caused so many jobs to disappear.
 The increase in productivity is a good and necessary thing to keep our manufactures competitive and healthy.It means that we increase output per hour worked.It is not taking advantage of the working guy,it is rather a result of working smarter with better technology which is something our country has excelled at. It is good for all of us.Increased productivity helps manufacturers provide the consumer with better and less costly products, it provides more tax revenue,it helps us export more and it improves earnings for the employees.Yes I realize that the guy who spray painted cars on the production line will not buy this if he lost his job to a robot that took over his job. However someone has to build , fix ,program and maintain those robots which requires a higher skill set and is rewarded with higher pay.
 A great example is the american steel industry. Back in the 1960's ,American steel was king and employed a very high number of people.A US Steel plant in Pittsburg had up to 5000 employees. Today a plant in Kentucky can produce the same volume of steel as the 1960 plant did, with much higher quality and only 500 employees. If you were the 1960 worker this sounds bad. A 1960 steel plant in todays world could not stay in business.It could not be able to compete in todays world in terms of price and quality so it would provide zero employment.
 But there is good news. The steel plant of today may only employe 500 , but all of these employees are either high skill technicians or degreed engineers with proportionally much higher incomes. This is our future, it can not be avoided if we plan to continue to lead the world in manufacturing.This means that future job growth will require a better educated , higher skilled work force which challenges our educational system.The rate of job growth for high school dropouts and low skill workers does not look good.
 So what does this all mean relative to our future? Manufacturing is an extremely important part of our economy ,we should promote it, encourage it and stop blaming it for being greedy and sending jobs offshore. Yes economics and our own tax policies do create the forces that move jobs offshore but at the same time it also helps create jobs here.[ see tax policies /offshore jobs ] When we had high gas prices and Exxon reported record profits there was outrage against Exxxon .They were attacked for making " excess" profits at the expense of the American consumer.I say good for them, it is in our own interest that they make lots of profits.Actually as a percent of sales  their profit rate is  low compared to other industry ie. drugs. In realityit is American ingenuity,technology, and risk taking that allows Exxon to go out and find and develop the energy that we all demand at a cheap price.We are the first to scream the loudest when our gas prices go up and they will if Exxon does not make the money to invest in finding new energy sources for our future demand.If Exxon doesnt make money,where will they get the one half billion dollars they invest to develop a new well with no guarantee it will return one dollar in profit?
 There is a school of thought that corporate America runs our government through lobbies and contributions.Yes to an extent they do influence policy and in some cases this is good for our industry and good for us. But do not blame corporate America for too much influence , it is a two way street.Our politicians have the final say and the choice to limit the influence if they want to.Both parties share equally in allowing corporate influence.
 It should again be pointed out that we tax our corporations at 35 % which is the second highest in the world. Instead of burdening our big business with high tax rates perhaps we should offer support in terms of lower tax rates which will boost output, create jobs and in turn increase tax revenues .My thought is that we will get more for our investment if we raise individual rates and reduce corporate rates.Corporate America is the engine that drives our economy,and raises our standard of living.It is not the evil enemy as is often claimed to be.

No comments:

Post a Comment