U.S. Manufacturing Is Back. Sort Of.

(Originally published here.)

In a move sure to confuse anyone who remembers the warnings over the North American Free Trade Agreement, Ford Motor Co. says it will be moving production of its F-650 and F-750 pickup trucks from Escobedo, Mexico, to Avon Lake, Ohio. This may seem like a triumph for U.S. competitiveness, but as usual, the truth about modern American manufacturing is more complex.

For one thing, Ford won’t be adding any jobs in the U.S. The plant in Ohio currently makes E-series vans and will be repurposed to make the industrial pickups. Shifting production away from the Escobedo plant means that Ford won’t have to share profits with its current joint-venture partner, which may come at the cost of jobs in Mexico.

The move does preserve the 1,600 jobs of the people who currently work at the Avon Lake plant, fulfilling an agreement Ford had made with the United Auto Workers union. Still, none of these things is likely to boost economic activity much.

While Ford’s workers will get to keep their well-paying jobs, a lot of the recent manufacturing growth in the U.S. has been made possible by companies finding ways to pay workers less than they used to. Consider Nissan Motor Co.’s plant in Smyrna, Tennessee.

The workers there are divided into two tiers: those who work directly for Nissan and those who work as contractors with lower pay, fewer benefits and less job security. Even the U.S. carmakers traditionally dominated by the UAW have adopted the two-tier model to save money on labor costs, much to the chagrin of new employees who are paid far less than their better-paid counterparts.

In many cases, of course, the alternative to a lower-tier manufacturing job is displacement by machines, which helps explain why the output of the U.S. manufacturing sector continues to rise even as the number of people working in manufacturing continues to fall.

At the same time machines are relieving workers of many menial occupations (although not all of them), we’re also living in a time of renewed interest in artisanal production. I recently got to tour the tiny factory at Dandelion Chocolate, which prides itself on how much human labor is required to create its delicious bars.

At Dandelion, each bag of cacao beans is hand-sorted by specialists who are trained to spot defects that would be very difficult for a machine to detect, such as cracks and insect eggs. Many of the beans end up being composted rather than sent to the roaster. The result of all of this fanatical dedication to purity is an unusually rich collection of flavors, although they obviously cost far more than industrially manufactured chocolate bars.

As wages rise in other countries and machines become more sophisticated, we’ll probably hear more stories about manufacturing coming back to the U.S., although we shouldn’t overstate the benefits of these shifts for American workers.

The real future of U.S. manufacturing, at least as a source of employment, may very well be rooted in more old-fashioned techniques. Right now, artisanal products are a tiny portion of the market for manufactured goods and employ very few people. But I wouldn’t be surprised if that changed.

(Matthew C. Klein is a writer for Bloomberg View. Follow him on Twitter at @M_C_Klein.)

To contact the writer of this article: Matthew C. Klein at mklein62@bloomberg.net.

To contact the editor responsible for this article: Christopher Flavelle at cflavelle@bloomberg.net.


About Matthew C. Klein

I write about the economy and financial markets for Bloomberg View. Before that I wrote for The Economist on a fellowship provided by the Marjorie Deane Financial Journalism Foundation. I have worked at the world's largest hedge fund and read every FOMC transcript since May, 1987.
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