Manufacturing Will Not Be What It Was

As much as we'd like to hear that manufacturing jobs are returning to the US, the truth is that not as many of them will be created here as have been lost. It's not that there isn't the need for manufacturing jobs so much as it's businesses learning to do more with less, be it with more efficiency processes or more automation.

As Perry Sainati, founder and president of Belden International, explains how manufacturing has been transformed in the U.S.

U.S. manufacturing these days is in the midst of a remarkable three-year recovery because for three years running manufacturing has not been about job growth.

It's been about automation. It's been about process improvement. It's been about productivity. And it's been about quality.

In fact, it's been about reinventing the very process by which durable and disposable goods get manufactured.

What's more, it's been about streamlining our factories to the point that they're now among the most efficient in the world.

Worker productivity on the U.S. is the highest in the world. That means for every man-hour put in we get more products built. It's to the point now here we can even outproduce low-cost nations while doing it at a lower per unit cost. That means that even with cheaper labor, countries like China are finding themselves at an increasing cost disadvantage because American factories require a lot less labor to produce the same goods. It doesn't matter if workers in a low-cost country are paid an eighth that of American workers if a single American worker can make the same amount of product as ten workers in the low-cost country. The cost per unit is lower in the US than in the low-cost country.

At the moment this scenario isn't true across the board, but it's getting there. As labor costs rise overseas, and transportation costs do likewise, it becomes increasingly more economical to build products here.

However, as Sainati noted, pundits and politicians “say the word 'manufacturing' and they see in their minds' eyes things they used to see when they were kids.” But those days are long gone, and with them the old manufacturing stereotypes. The days of huge factories employing thousands upon thousands of men and women have been replaced with modern factories using lean manufacturing with better design, processes, and automation. As such, returning a manufacturing operation to the U.S. may cost a thousand workers in a low-cost country their jobs, but it won't create a thousand new manufacturing jobs in the U.S. It might only create 80, or 100, or 120 jobs. It's not a 1:1 ratio because of the high productivity of American workers.

It's likely it's going to remain that way and we best get used to it.