You Can’t Get it Back

Why is manufacturing so important to our economy? The simple answer is because it generates jobs, but that begs the question of why a manufacturing job is any better then other types of jobs. The simple answer to that question is because manufacturing jobs create more additional jobs in the economy then job in other sectors.

There is a plethora of statistics that state for every manufacturing job created from three and a half to almost five other jobs are created in the rest of the economy. This number contrasts to only about one and a half jobs created in the rest of the economy for service sector jobs. The number is even less for retail jobs.

Many of the manufacturing jobs are well paying. Manufacturing worker compensation can average more then $65,000 a year. In addition, manufacturers typically provide higher levels of employee training then other sectors of the economy. Both these statistics are good for the individual employee and the overall economy.

So to put the numbers is perspective, if a manufacturing plant closes and 1,000 workers lose their jobs, the direct impact on the economy is the loss of $65,000,000 in salary and benefits. As the loss of jobs ripple through the economy, up to 5,000 other jobs are lost elsewhere in the economy.

This is a double hit since tax revenue arelost from both the company and the individuals. It is further compound because the fired workers often go from tax paying contributors to the economy to users of the nation’s support systems, such as unemployment, food stamps, etc.

In some cases the lost jobs are temporary, but in most cases the lost manufacturing jobs are not coming back. There have been numerous news reports indicating that with the higher cost of transportation, energy costs, and the weakening US dollar manufacturing jobs are starting to return. This is a fallacy since there is no evidence that a significant number of manufacturing jobs are coming back due to the change in economic conditions. There is only evidence that the above factors are slowing down the loss of manufacturing jobs.

Almost all economists will agree that it is easier to keep a job from going off shore then it is to get lost jobs to return. Once an industry is lost we also lose the required supply chains and technical manufacturing acumen needed for that industry. This makes the return of the lost industry almost impossible. As a country we need to work to retain and strengthen the manufacturing jobs we currently have and work to create new manufacturing jobs by creating new industries.

I do not want to get political, but when discussing how to retain and strengthen manufacturing or creating new manufacturing jobs, the discussion usually gets political. In future posts, I will start addressing some of the issues in a, hopefully, non-bias manner. Although, if I was political I would probably get more people to post comments.