by Don Lee. Originally published at the LA Times
Here’s a little reality check on the current presidential campaign and promises by both Donald Trump and Hillary Clinton to bring back jobs from overseas.
It’s about a private Michigan company called Ranir, which makes, among other things, the business end of electric toothbrushes. After spending two years and millions of dollars to reengineer its toothbrush heads, Ranir brought back fully one-fifth of that production from China to its facility in Grand Rapids.
It’s precisely the kind of thing that both Clinton and Trump, with varying degrees of emphasis and policy prescriptions, have pledged to accelerate as a way to cure America’s blue-collar woes. Using tougher trade policies with China and others to restore the nation’s manufacturing sector will bring home jobs, the theory goes.
Ranir’s experience appears to back up such assumptions at first blush. After all, now it is American workers who are busy around the clock churning out 13,000 toothbrush heads a day for Wal-Mart, Walgreens and other retailers.
And they spend much of their time watching to make sure the computer-driven machines are working properly. Instead of the clang and bustle of a traditional plant, the four workers go about their chores in a clean-room setting, wearing large white protective hats.
So what the Ranir story actually shows is not how easy it would be to bring back manufacturing jobs, but how small the results can be, thanks largely to the very thing that made the return possible: automation.
“It sounds appealing. It sounds like an easy solution. You close borders or impose tariffs, and magically you get jobs popping back up,” said Brad Hershbein, economist at the W.E. Upjohn Institute for Employment Research, referring to protectionist policies such as those proposed by Trump.
But that’s just not going to happen, he said. “We’ll probably continue to see flatlining of employment or it declining,” Hershbein said.
There are many reasons to question whether tougher trade policies alone will bring back U.S. manufacturing jobs to their past levels.
Some manufacturers would respond to tariffs and other protectionist policies by simply moving existing overseas jobs to other countries, rather than back to the U.S. Other powerful forces working against large-scale increases in U.S. manufacturing jobs include regulatory costs and an absence of suppliers in the U.S.
But even if manufacturing did return, the jobs may not, thanks to advancing technology.
Arnold Kamler, whose family has been in the bicycle business for a century, never thought he would make anything in the U.S. again after he tearfully shut the doors to his New Jersey plant in 1991. Like all one-time domestic bike makers, including better-known firms like Huffy and Schwinn, Kamler’s company, Bicycle Corporation of America, turned entirely to manufacturers abroad or it buys foreign-made bikes to supply to the U.S. market.
But two years ago, Kamler brought back a small share of production from China to a rural corner of South Carolina. He was prodded by Wal-Mart’s “Made in America” campaign and the realization that China’s best manufacturing days were over. Annual employee turnover at his factory outside Shanghai today is more than 120%.
But automation also made it more feasible to return the work to the U.S.
This year, Kamler will make almost 300,000 bikes in Manning, S.C., about as many as he produced domestically in 1991. His company operates with about a third fewer employees than it needed back then. With 4,000 feet of overhead conveyors and the latest wheel-building equipment, his 115 employees assemble bikes at a rate that would require twice as many workers in China.
Those are indeed new American jobs, but the pay scale is modest — they earn $11 to $12 an hour to start, plus health insurance, 75% employer-paid — not quite the renaissance sometimes suggested by the presidential candidates.
And Kamler still imports 2.6 million bikes a year from China. Its South Carolina manufacturing won’t be profitable for at least another couple of years.
Even as he expands his production volume and capabilities in the U.S., he doesn’t foresee large increases in employment. Next year, Kamler plans to go to 450,000 bikes in South Carolina, a 50% increase. But the company may add only 30 workers.
He also is investing in a state-of-the-art painting operation and wants to make his own aluminum rims rather than importing them. He recalled how in 1991, bike rims were made completely by hand, first cut, then welded, buffed down and finally holes punched in them before being sent for painting or chrome-plating.
Today, he says, a new and expensive Dutch-made system can take 20-foot sections of aluminum and churn out a finished rim in about 90 seconds. For that, the company would need only one operator, just to make sure that the machines don’t jam.
“It’s so automated, it’s inspiring,” he said of bike manufacturing today.
Some economists think the U.S. could bring back as many as 2 million factory jobs by eliminating the country’s merchandise trade deficit, which hit a record $745 billion last year, half with China. But it is not that simple.
“Hiring someone is kind of the last thing you do because it’s a potentially long-term commitment,” said Augustine Tantillo, president of the National Council of Textile Organization. “The mentality is, ‘Can we increase our output first by becoming more efficient by using better technology as the first resort?’ ”
Tantillo remembers when 1.8 million people worked in textile and apparel manufacturing about 20 years ago. Today, it’s around 600,000, including cotton and fiber industries, with some of the decrease caused by technology and some by cheaper labor overseas.
Although U.S. manufacturing employment overall, as a share of all non-farm jobs, has been falling since the end of World War II, there was a particularly severe drop from 2000 to 2009. During that period, factory jobs plunged from more than 17 million to 11.5 million; about half of that came between 2000 and 2003 when the U.S. was in a relatively brief and mild recession. (It since has edged back up to about 12.3 million.)
When Trump and Clinton point the finger at China, they aren’t totally off-base. Research suggests that a large chunk of the manufacturing job loss during the 2000s was the result of a surge in Chinese imports and competition, itself the consequence of changing U.S. policy in 2000 that gave permanent normal trade relations status to China and the country’s ascension to the World Trade Organization the following year.
That designation removed the uncertainty of annual tariff renewals and spurred large-scale investments and activity from both U.S. and Chinese companies, accelerating what had been gradually shifting trends in global production and trade flows amid China’s rise, said Peter Schott of Yale University, who wrote a paper on the subject with Justin Pierce of the Federal Reserve.
Part of that shift, though, included large-scale investments in technologies and processes — which boosted productivity but also restrained employment at home.
In motor vehicle and parts manufacturing, domestic employment fell by half from 2000 to 2009, to about 650,000. Since the economic recovery in mid-2009, car sales have taken off and the industry’s gross output has more than doubled, to $662.5 billion last year.
Another government measure of car-manufacturing value that excludes costs for energy and raw materials shows that the industry tripled between 2009 and 2015. But during that same period, the industry’s employment went up by only about 40% and remains far below what it was in 2000.
The difference can be seen in the tens of thousands of robots and other streamlining processes, including advances in transportation and information technology, that have reduced the need for human hands at American auto plants.
Since 2000, the traditional Big Three domestic automakers — General Motors, Ford and Chrysler — have sliced in half the labor hours needed to assemble a car, to about 22, according to Harbour Reports and the Center for Automotive Research in Ann Arbor, Mich.
And the industry’s not done. Many of the labor hours of car production are in the final assembly stage, where seats, instrument panels and other parts are installed. Though still done largely manually, those tasks eventually will be performed by smaller and more dexterous robots, said Jay Baron, president of the Center for Automotive Research.
“That’ll be the next big growth area,” he said.