Manufacturing Illusions

Improvement in the US manufacturing sector obscures the fact that workers, by and large, aren't sharing in the gains.

Suddenly, manufacturing is back - at least on the election trail. But don't be fooled. The real issue isn't how to get manufacturing back. It's how to get good jobs and good wages back. They aren't at all the same thing.

Republicans have become born-again champions of US manufacturing. This may have something to do with crucial primaries occurring next week in Michigan and the following week in Ohio, both of them former arsenals of manufacturing.

Mitt Romney says he'll "work to bring manufacturing back" to the US by being tough on China, which he describes as "stealing jobs" by keeping value of its currency artificially low and thereby making its exports cheaper.

Rick Santorum promises to "fight for American manufacturing" by eliminating corporate income taxes on manufacturers and allowing corporations to bring their foreign profits back to the US tax-free - as long as they use the money to build new factories.

President Obama has also been pushing a manufacturing agenda. Last month the president unveiled a six-point plan to eliminate tax incentives for companies to move offshore and create new lures for them to bring jobs home. "Our goal," he said, is to "create opportunities for hard-working Americans to start making stuff again".

Meanwhile, consumers' pent-up demand for appliances, cars, and trucks have created a small boomlet in US manufacturing - setting off a wave of hope, mixed with nostalgic patriotism, that US manufacturing could be coming back. Clint Eastwood's Super Bowl "Halftime in America" hit the mood exactly.

But US manufacturing won't be coming back. Although 404,000 manufacturing jobs have been added since January 2010, that still leaves us with 5.5 million fewer factory jobs today than in July 2000 - and 12 million fewer than in 1990. The long-term trend is fewer and fewer factory jobs.

Even if we didn't have to compete with lower-wage workers overseas, we'd still have fewer factory jobs - because the old assembly line has been replaced by numerically controlled machine tools and robotics. Manufacturing is going high-tech.

Bringing back US manufacturing isn't the real challenge, anyway. It's creating good jobs for the majority of Americans who lack four-year college degrees.

Manufacturing used to supply lots of these kinds of jobs, but that was only because factory workers were represented by unions powerful enough to get high wages.

That's no longer the case. Even the once-mighty United Auto Workers has been forced to accept pay packages for new hires at the Big Three that provide half what new hires got a decade ago. At $14 an hour, new auto workers earn about the same as most service-sector workers in the US.

GM just announced record profits - but its new workers won't be getting much of a share.

In the 1950s, more than a third of US workers were represented by a union. Now, fewer than seven per cent of private sector workers have a union behind them. If there's a single reason why the median wage has dropped dramatically for non-college workers over the past three and a half decades, it's the decline of unions.

How do the candidates stand on unions? Mitt Romney has done nothing but bash them. He vows to pass so-called "right to work" legislation barring job requirements of union membership and payment of union dues. "I've taken on union bosses before," he said, "and I'm happy to take them on again". When Romney's not blaming China for US manufacturers' competitive problems, he blames high union wages. Romney accuses the president of "stacking" the National Labor Relations Board with "union stooges".

Rick Santorum says he's supportive of private-sector unions. While in the Senate he voted against a national right to work law (Romney is now attacking him on this), but Santorum isn't interested in strengthening unions, and he doesn't like them in the public sector.

President Obama praises "unionised plants" - such as Master Lock, the Milwaukee maker of padlocks he visited last week, which brought back 100 jobs from China. But the president has not promised that if reelected he'd push for the Employee Free Choice Act, which would make it easier for workers to organise a union. He had supported it in the 2008 election but never moved the legislation once elected.

The president has also been noticeably silent on the labour struggles that have been roiling the Midwest - from Wisconsin's assault on the bargaining rights of public employees, through Indiana's recently enacted right to work law - the first in the Rust Belt.

The fact is, US corporations - in both manufacturing and services - are doing wonderfully well. Their third-quarter profits (the latest data available) totaled $2tn. That's 19 per cent higher than the pre-recession peak five years ago.

But workers aren't sharing in this bounty. Although jobs are slowly returning to the country, wages continue to drop, adjusted for inflation. Of every dollar of income earned in the United States in the third quarter, just 44 cents went to workers' wages and salaries - the smallest share since the government began keeping track in 1947.

The fundamental problem isn't the decline of US manufacturing, and reviving manufacturing won't solve it. The problem is the declining power of workers to share in the gains of the economy.

And, that's the Truth!