Manufacturing Labor Supply Is Dead – What Did it In?

There are two questions when it comes to the manufacturing sector in North America – why have jobs been going overseas and what did them in?

While plenty has been made of the political ramifications for each question, the real challenge to consider is what appropriate economic choices could be made and why certain classes of people were expected to pay a price for that.

The history of the relative decline in North American (or simply American) manufacturing is a complex one, and the main to consider here is not whether the sector was “sold out” – although it clearly seems like that may have been the case – but how the American economy was forced to adapt as its comparative advantages rapidly changed, and what implications that has for the next generation to enter the workforce and find that manufacturing isn’t really something they’d like to go back to. 

The Degree to Which Manufacturing Labor Is Dwindling

The number of Americans working in a factory has declined by a full third since 2000. 3 million baby boomers retired during 2020 – double the number in 2019. There are massive shortfalls in machinists, welders, frontline engineering and plenty of the hard-scrabble jobs that built America’s reputation as a manufacturing powerhouse. 

Industries like machining, metalworking and related equipment manufacturing, median workforce ages of 48 and above substantially outpace the total labor force’s media age of 42.5. There are approximately 6.3 million manufacturers between the ages of 45 and 64, and only 4.1 million between the ages of 20 and 34. 

By 2030 there will be 2.1 million unfilled manufacturing jobs in the United States, and that will effectively cost the US $1 trillion in annual productivity. The top two consequences cited by manufacturers of not being able to fill jobs were the inability to increase revenue growth (82%) and maintain production levels to satisfy demand (81%)

Warehouse and distribution jobs are increasingly competing for manufacturing workforce share, despite entry-level jobs in manufacturing averaging $15.55/hour, or double the minimum federal wage, and manufacturing wages for skilled workers are even higher.

Starting to get a sinking feeling? Wondering how this could even be possible? Don’t worry – we’ll get to the answer soon. 

Manufacturers have clearly invested in re-shoring, and yet the supply of labor simply can’t meet demand. How did we get to this sputtering restart?

Why The Usual Suspects Aren’t Necessarily the Ones to Blame

The decline in the manufacturing labor supply can be chalked up to a variety of changes over the last 50 years:

  1. The decline in comparative advantage of US Manufacturing following post WWII recovery
  2. The relative increase of labor cost and quality of jobs available in North America and the decline of interest in manufacturing work vs other sectors of employment
  3. The opportunity for global economic integration in place of a new Cold War
  4. Long-run demographic decline that is now culminating in a rapid skills decline

These are all incredibly broad-based, macro-level concepts for which many individuals and corporations ultimately pay in their bottom line. While we can vary rarely “change the wind” in such circumstances, we can always “adjust our sails”.

Thus, what are the most salient aspects of each of these points?

Decline following WWII recovery

The United States rose from the Civil War and into the 1920s to become the largest industrial power on the face of the earth, with resources and labor power that could outstrip entire continents. This advantage became so massive that the US was considered to control half of the world’s wealth and most of its gold reserves by the end of World War II. While the US helped rebuild the rest of the world from a state of near-total devastation, those countries ultimately caught up and earned back some of the relative wealth they had lost. At the same time, countries like Germany, Japan and today China have developed the machinery and productive capacity to compete with the United States in a variety of industrial sectors, ultimately reducing the United States’ comparative advantage in those sectors. The irony here is that these countries in many ways followed US development models from the 19th century, while the US approach to more refined financial capitalism has produced its dominance in global capital markets and technology megaliths that we see today.

Relative increase in quality of jobs

There is something to be said in the satisfaction of working with your hands and making things people actually need, and for that reason the manufacturing workforce will never truly be “dead” (sorry for the clickbait title). However, given the opportunity to work all day in an air-conditioned office or at a whiteboard drinking trendy coffees and talking to your colleagues about the latest Netflix mini-series, most people will forego the discomforts of a more honestly productive line of work. At the same time, many of these more comfortable jobs are available in the United States than elsewhere in the world because of 1) the country’s large consumer sector and 2) the global presence of US corporations which are most often still managed from the United States. 

Avoiding a New Cold War?

Yes, it’s the China question. Yes, there’s a lot to say here. On many levels, much of the argument about manufacturing in China centered on integrating the global economy to avoid a new age of “living on the knife’s edge”. While some people have benefitted more than others, nobody is benefitting from the state of the labor market in North America today. Again, It’s important to keep population in mind – America is a big country, yes, but still leads the world in many ways despite its size, not because of it.

Demographic Transitions

US preeminence across the globe in part came from the rate at which the United States grew, but between 1950 and 2010, the rest of the world rapidly outpaced anything the US could put up in terms of sheer workforce size. In these circumstances, it’s no wonder that more cheaper labor was available globally – if that need to work wasn’t in some way satisfied, who knows what kind of instability would follow? As it happens, the population growth rates between the United States and the rest of the world are expected to converge over the next 40-odd years, something that will ultimately crush the availability of labor in the United States – exactly when the US will need a workforce (and a manufacturing workforce above all) to continue to compete. 

The sheer supply of labor overseas is something North American manufacturers simply could not have ignored. Now that global population growth is coming back into balance, considering new forms of productivity will become the priority.

The Limits of Computerization

To adapt a quote from bertrand russell, we must ask: has the history of digital technology simply been a footnotes to thomas watson? Ultimately, the introduction of computing power is the most compelling aspect of it, but then it imposes new costs – it requires us to structure data, environments, peoples behavior in new ways to get more out of it. This is incredibly labor intensive and not always productive, the biggest step forward is autonomous machines – the ability to step into the real world

The fact is, since the 1970s at least, growth has been slow, resources more costly, people have been having fewer kids and the general rate of change in society is much slower – even if it feels faster because of media, social networks and digitization expose us to the changes that do happen at a more rapid, iterative pace.

In response to this, we need new capabilities, new general purposes technologies that actually make an impact in the physical world

As it happens, this is actually the best possible thing that could happen to workers, and will happen for possibly the first time in 100 years or more – the widespread distribution of technology that fundamentally changes how, why and what people work for. 

Why All That Is About to Change

We’re in a multi-generational transition – the way humans and machines interrelate will create more and better jobs. If you look at the history of automation, the rise of machines didn’t just displace many people but did so from jobs that were miserable drudgery, and actually increased the share of growth that went to wages as a result. People no longer had to struggle en masse for a living – the advent of new energy, sanitation, transportation and combustion made life far easier and work far more manageable

Automation grew at a far faster rate between 1870 and 1940, actually increasing accrual of income to labor – all while some of the world’s most well-known corporations and modern institutions got their start. Among these technologies: the internal combustion engine, sanitation, telecommunications, chemicals, pharmaceuticals and electrical machines that made life fundamentally better, but also drastically easier, while creating ease and flexibility in the workday like never before.

Higher prices are the best way to create supply, but not at the cost of the final product. Research has shown that rapid introduction of new technology increases productivity to such an extent that it actually helps the labor market grow. Source: Robert J. Gordon, “The Rise and Fall of American Growth”.

Stepping Into the Autonomous Manufacturing Future

The fact is, the new jobs created will create increased pressure to distribute new goods and better satisfy the workforce. Giving more freedom to individuals is a part of the job of our economic machine. At different times, it achieves this with different degrees of effectiveness – it’s most recent run being somewhat lackluster.

With Artificial Intelligence that can finally be used on the factory floor, however, things will be different – a lot different. Autonomous manufacturing robots are one such technology: they can accomplish tasks like painting or coating parts without the need for programming or extensive human oversight, automating the most difficult parts of jobs that are already hard to fill, and just one example of how the manufacturing labor supply that’s still here doesn’t have to keep trudging through its days, and can instead accomplish far more than previously thought possible with new autonomous manufacturing robots at their disposal.

Omnirobotic provides Autonomous Robotics Technology for Spray Processes, allowing industrial robots to see parts, plan their own motion program and execute critical industrial coating and finishing processes. See what kind of payback you can get from it here, or learn more about how you can benefit from autonomous manufacturing systems.

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