The Atlantic says "Don't write off manufacturing just yet."

Posted by scapozzola on 12/10/2012

The latest issue of the The Atlantic is making waves with dual stories on the resurgence of U.S. manufacturing.

A pair of articles by Charles Fishman and James Fallows suggests that not only is manufacturing starting to return to the U.S. but labor developments in China and new American technology may reverse the "decades-long relocation of American jobs to Asia."

Fishman says that after a steady pattern of decline in recent decades, a confluence of conditions is enabling the growth of U.S. industry:

--Oil prices are three times what they were in 2000, making cargo-ship fuel much more expensive now than it was then.
--The natural-gas boom in the U.S. has dramatically lowered the cost for running something as energy-intensive as a factory here at home. (Natural gas now costs four times as much in Asia as it does in the U.S.)
--In dollars, wages in China are some five times what they were in 2000—and they are expected to keep rising 18 percent a year.
--American unions are changing their priorities. Appliance Park’s union was so fractious in the ’70s and ’80s that the place was known as “Strike City.” That same union agreed to a two-tier wage scale in 2005—and today, 70 percent of the jobs there are on the lower tier, which starts at just over $13.50 an hour, almost $8 less than what the starting wage used to be.
--U.S. labor productivity has continued its long march upward, meaning that labor costs have become a smaller and smaller proportion of the total cost of finished goods. You simply can’t save much money chasing wages anymore.

So, while it was predictable for manufacturing to move offshore in the past 15 years, it now starts to seem just as logical for companies to return.

Fallows, who reports regularly from China, recognizes that America's manufactuing sector has plummeted in recent years:

Manufacturing’s share of the total American economy has fallen by about the same amount as its workforce share: it went from about 20 percent in the early 1980s to just over 10 percent now. For comparison, manufacturing accounts for some 30 percent of China’s total economy.

However, he says that a variety of factors affecting the Chinese market are having an indirectly beneficial result for the U.S., including rising wages as well as "workers are becoming choosier, public resistance to environmental devastation is growing, and the Chinese 'investment led' model is showing strain."

At the same time, advanced developments like "3D printing" along with improved communications systems and production tools have enabled U.S. producers to "bring new products to market faster than the competition by designing, refining, and making them in the United States."

Overall, Fallows and Fishman express optimism for an American industrial sector that was previously written off as a "sunset industry."

Read Fallows' full article.

Read Fishman's full article.






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