What Really Creates Jobs? Pt1: Manufacturing

Monday, September 26, 2011

Politicians love to talk about manufacturing as the main job engine in the U.S. But how much does the manufacturing sector actually contribute? And is supporting that sector the best road to recovery? Director of the Business & Economics Reporting Program at CUNY Journalism School, Greg David, discusses.


Greg David

Comments [46]


As an owner of a small manufacturing business in NJ, my employees and I are on the front lines of a daily competition with companies around the world. To be a successful manufacturer in the US, owners and employees must constantly be innovating and automating so that we can justify middle class wages. This is where our nation's brightest can thrive - these are the wealth building knowledge workers we desperately need.

When your guest highlights the inability of US workers to compete against $1/hour labor and emphasizes that everyone in the US should be a "knowledge worker" , I think he misses the big picture. A nation of 300+ million citizens needs a diverse economy - an economy that consists of enterprises that do the routine and yield its owners small steady returns and cutting edge companies that are the seed bed of new industries, where the returns can be high but the risk is also great.

When I travel through upstate NY and see the many small communities that are struggling because the local factory closed or was bought out or because the local dairy farmer sold his property because he could make more money living off the real estate proceeds, I wonder what benefits we derive from our short-term hyper competitive economic model. 24 hour markets for stocks, commodities and bonds provide liquidity, but does it set prices properly for the long run? When these items are traded by speculators rather than direct market participants, pricing becomes influenced by the market activity itself not by the factors on the ground which leads to short term distortions in prices and therefore short circuits the decision making process necessary for productive wealth building activities such as opening factories, modernizing farms and investing in unproven technologies.

Too much economic activity in the US is devoted to distributing and re-slicing pieces of the economic pie rather than growing the overall economy. An overemphasis on short term financial returns makes it difficult to invest for the long-term. An examination of the balance sheets of the largest companies in the US shows that most have relatively low tangible value (cash, plant and equipment and receiveables less debt). Our inability to work through the financial crisis is a result of thin balance sheets - we don't have the wealth foundation needed to invest and correct the overvaluations that occurd during the bubble.

These cycles of boom and bust will continue to occur, but a diverse economy, with fewer speculators and greater emphasis on long-term wealth will enable the economy to recover more quickly and prepare us for downturns in the future. Manufacturing needs to be part of that future.

Sep. 27 2011 09:20 AM

Jobs is the issue and the guest apparently is unaware that nationally only about 30 percent of the work force has Bachelors degrees, which might be roughtly the percent of the work force doing high-level or creative work, i.e., around 70 percent of the work force is capable of/just trying to find an ordinary job. Yes, factory work was drudgery and it would be great if we were all high-level, but it's not realistic.

Previous recessions were short and shallow in this country because eventually people needed to buy the basics and when the basics were made here, eventually enough people went back to work to make them. This will not happen now.

So for millions of jobs to be created, either the speculative bubbles in finance and housing need to be reinflated (not likely) or some new technology/item that everyone must run out and buy (like PCs/Internet in the late 90s) must materialize. But in the latter case, it will not be made here.

Oops, the policy experts did not think of this downside of globalization, or they did and don't care. Of course they were just facilitating the multinational corporations' desire to get 20-cent an hour labor, through the so-called free trade agreements. Screw the middle class workers that made these corporations what they became.

Without manufacturing jobs, the middle class is finished and it's terminal at this point. But we're hearing why sending these jobs away is good from the same experts that didn't see the financial crisis coming.

Sep. 26 2011 11:09 PM
DL from BK

Why was this guest the choice for a segment about manufacturing jobs? He seems think good manufacturing jobs could never exist in modern America. He talks about myths of good manufacturing jobs but then tells us how Italy and Germany still have them. All he seemed to know about was Caterpillar and auto-manufacturing in the US.

Wasn't Brian's lead into this segment "Is American Manufacturing Really Dead?' But now the headline on the web is "Does Manufacturing Really Create Jobs?" I'd lover a segment on the original headline with someone who actually can think past Wall Street concepts about manufacturing.

Sep. 26 2011 04:54 PM
william morgan

brian should talk to MIT president susan hockfield.
she knows more about manufacturing than this ... well I'll be civil.
read what hckfield wrote in NYT

Sep. 26 2011 03:58 PM
Eric from B'klyn

I commend you for raising the jobs question. One of your recent guests said that the economic/production factors impacting the jobs in the US are structural and not cyclical. There are people who have been thinking about long-term job trends whose thinking would be interesting for you to look into. I would recommend a look at Jeremy Rifkin, who is based in Washington, wrote a book called The Future of Work: Rethinking Employment in the 21st Century. As a listener, I hope you follow up. Google, Jeremy Rifkin, The Foundation on Economic Trends, or The Future of Work:

Sep. 26 2011 03:57 PM
Anabella from Washington DC

With all due respect, Professor David should read more about the subject. He is misinformed about the statistics and how to interpret them. I feel very sorry for the students at CUNY.

I hope that you are going interview other people on the subject. This is a great topic for a Monthly -Talk on Thursdays.

As always, I enjoy the show.

Sep. 26 2011 03:08 PM
George N. Wells, CPIM from Dover, NJ

Mr. David belies his own backgound in finance when he discusses manufacturing. While there are higher value added jobs in the concept and design phase of actually making things, there is a necessary dialogue that takes place between the manufacturing process and the design process that is essential. Stretch that dialogue too far and companies cannot produce effective products.

As a former Bell Laboratories employee I saw both the designers who spent time in the field and those who tended to sit-and-think. While both tasks are necessary for deveoping new products the designers who got their hands dirty brought more products to market than those who relied on thought processes alone.

To be sure, some old tech manufacturing will be outsourced if only to make room for the next generation of products. Unfortunately, we graduate fewer engineers every year and the financial wizzards are telling us that we don't need factories any longer. Sorry, that does not work becauuse the necessary dialoge has been lost and the ability to make the product better, faster, cheaper, newer disappears as well.

Sep. 26 2011 02:57 PM

Prof David has got to stop making specious arguements just to justify his world view inspite of the facts. That quip about we would pay $50 for a shirt made in the US as opposed to $20 now for one made in Vietnam is so bogus. Most people familiiar with the clothing industry know it operates on super high markups retailing at 5 to 10 times the actual cost of the manufacture including shipping. That is the old "Walmart" arguement that we need cheap stuff from overseas. We can't make it here and we couldn't afford even the most basic of needs because those greedy American workers took all the money.

Sep. 26 2011 12:56 PM
Kathleen from NJ

I'm an PhD engineer who has been working in the chemical industry for 17 years, primarily in R&D. My industry involves a high amount of skill, even among our non-exempt workers. In order to operate our manufacturing processes safely and continuously improve product quality, our frontline non-exempt employees require critical problem solving skills. This skill level is reflected in the salaries paid. Anyone who thinks that a knowledge worker does not need first hand experience with making stuff obviously has never been engaged in designing manufacturing process or products where an intimate knowledge of manufacturing techniques informs the designer of what is possible or must be solved to turn an idea into an object and subsequently an object which can be made at a reasonable cost. There was a clear differentiation amoung my US graduate school class mates versus classmates who were raised in Asia or India with servants who carried out the menial tasks around the house. Namely, no phsyical sense of how things work or how to solve physical problems. These students by and large ended up doing math related dissertations or programing projects versus experiment based work. I suggest the interviewee read Andrew Liveris book, Make it in America. There is no R&D without manufacturing.

I might remind those enchanged by IT start-ups like Facebook, that ultimately that the revenues earned by Facebook, are largely from advertisments by folks who ultimately can trace their profits back to making stuff and turning raw materials into a products.

Sep. 26 2011 12:06 PM
jgarbuz from Queens

Look, China was the world's manufacturing center just before Christopher Columbus too the chance to sail west in hopes of finding it and creating a new trade route to it. The fact is, China and India were major centers of manufacturing until around 1820, when iron and coal made Europe, America and soon Japan the titans of manufacturing. But China and India combined have twice the population of the US and Europe combined. It is only natural that mass produced manufactures has returned to East Asia. America has only 5% of the world's population, and is far from the centers of other major population centers. Our temporary dominance was a fluke of history after the two World Wars. It was bound not to last.

Sep. 26 2011 11:58 AM
Taher from Croton on Hudson

jgarbuz from Queens: KUDOS!!!!!!

Sep. 26 2011 11:57 AM
RJ from prospect hts.

I did not hear the entire manufacturing segment, so I'm hoping I missed the portion with the representative from the United Auto Workers, or the United Steel Workers, or the International Association of Machinists or some of the other manufacturing unions. I heard Greg David's statement to the effect that back in the 60s we would have been complaining that manufacturing jobs were dirty, dangerous, etc., and generally undesirable. Those jobs were in fact ones to be proud of--they were multigenerational, socially and economically uplifting jobs where unionization--the bringing of the 40-hour workweek, safety and health laws, and regular salary and benefits increases (now complained about as "inflationary")--made them respectable and desirable. Wanting to improve working conditions is *not* the same as rejecting the jobs themselves. But I don't think I've heard Greg David ever speak positively about unions, so perhaps it would have been useful to have someone with him who is.

Sep. 26 2011 11:56 AM

Prof. David proved himself to be pure 1980s with this interview.

He neglects the fuel costs, tax losses & national security aspects of NOT having domestic manufacturing making goods for domestic consumption.

The knowledge group is 1-5%. They cannot consume the mass demand (95%) of goods/services needed to help our economy. The arithmetic doesn't work.

Sep. 26 2011 11:56 AM
Jack Cazes

Manufacturing produces a myriad of jobs that are associated with whatever is produced by the manufacturing process.For example a button factory needs plastics, color dyes, salespeople. They need machines to make the buttons and designers. I'm sure a simple button manufacturing facility would support many other jobs.
The designers who work on things that are manufactured elsewhere don't really create peripheral jobs.

Sep. 26 2011 11:53 AM
Amy from Manhattan

Brian, thanks for redirecting Greg David's last comment away from "nobility"! I don't know why he kept going on about that--I haven't heard anyone making claims that manufacturing jobs were somehow more "noble" than other kinds, & more important, it's not the point: this segment was about jobs.

Sep. 26 2011 11:50 AM
jgarbuz from Queens

What are the rest of us peasants without high IQs who cannot be scientists, engineers or programmers to do? Same as what the peasantry in Europe and England did: work as domestics in the large homes and estates of the Royal Nerd aristocracy! :)

Sep. 26 2011 11:49 AM
Mark Buccheri from Kew Gardens

I think it is inappropriately elitist to call "idea" jobs more noble than manufacturing jobs. In the same way that the blue collar workers depend on the idea people to come up with new products to manufacture, the idea people depend on the manufacturers to physically produce all that marketable material which makes the idea people their money. I think it is appropriate that the creatives make more money in the process, but to disrespect and devalue the hardwork of blue collar workers is disrespectful.

Sep. 26 2011 11:48 AM
Paul from NYC

Whether factory jobs are noble or not, what is to become of all the millions of unskilled and semi-skilled and even highly skilled workers.
Everyone cant work for Google and Apple.

Sep. 26 2011 11:48 AM
Susan Epstein from Brooklyn

I wish the discussions of "jobs" would crack open to include what work is. So many people have office jobs that include hours and hours of sitting around doing nothing. We also have a lot of work that needs to be done that was traditionally women's work (care-taking roles) that was previously done for "free" in the context of dollars. We need to reimagine the division of labor in our society, but that leads quickly to reactive accusations of "SOCIALISM" and then the conversation ends...sigh...

Sep. 26 2011 11:47 AM
Taher from Croton on Hudson

Apple hire’s a few thousand employees. That’s a real winner.
A few thousand jobs. So everyone in America is a genius worker and will get paid high wages. And that’s the feature?
Please Greg David, what planet do you live on?

Sep. 26 2011 11:45 AM
Sonne Hernandez from LES

We are forgetting a very big part of If manufactoring is going out and the "role" of America is "creation and innovation..." the problem is that our kids AND adults are under-educated

Sep. 26 2011 11:44 AM
William from Rahway

The demand for the creative work creating the i-phone and the like is fairly limited, as is the ability. What are Americans who lack those abilities supposed to do?

Sep. 26 2011 11:44 AM
jgarbuz from Queens

A lot has to do with "branding." By the 1980s, it became the accepted myth that if you wanted a quality car, you got a German mercedes; if you wanted a SAFE care, you got a Swedish Volvo; if you wanted reliability and cost-effectiveness, you got a Toyota;but if you wanted a large LUXURY car, you got a Cadillac. America became branded as the country that produces large luxury cars for a relatively affordable price, if you don't mind it breaking down half the time. SO each country got branded with its own semi-mythological qualities in the world consumer mindset. The US care became known for size and luxury, but not reliability.

Sep. 26 2011 11:43 AM
Moshe from Williamsburg Brooklyn

My grandparents after arriving in America worked in necktie shop. When my father entered the workforce market he told I don't have much advice to give you. But one piece of advice I could give you is. Don't ever work at a sewing machine. And that was in 1975

Sep. 26 2011 11:43 AM

Why aren't we talking about the cost of shipping products from overseas? Paul Volcker has commented that the cost of shipping steel from China is about the same as producing it here. So why aren't we producing it here?

Sep. 26 2011 11:43 AM
susan mosler from NYC

I completely agree with the caller about the value of making something with your hands. There is an arrogance to think otherwise.

Sep. 26 2011 11:43 AM

A lot of white collar work is demoralizing and mind-numbing and soul-sucking, too. Boo hoo for the white-collar person, though, right? That seems to be a lot of people's stance ... but to be defined as "white collar" by the rest of the country means nothing in New York where even what seems like a decent salary is a pittance.

Sep. 26 2011 11:42 AM

The I-Pod example is not relevant since the benefits go to the corporations that market it, not to the thousands of unemployed people.

Sep. 26 2011 11:41 AM
John A.

Here's the dark side of your iPad::
number: 17
Outsource the labor but keep the human rights here.

Sep. 26 2011 11:41 AM
Diana from Wanaque, NJ

The CEO's are sitting on their cash in order to get rid of Obama. They see the unemployement as his Achilles heel and all they have to do is sit back and work their people harder for a while longer and Obama will be gone. And that will be a real shame.

Sep. 26 2011 11:41 AM
MFan from Staten Island, NY

Couldn't agree more with the recent caller. It sounds as if Greg has never used his hands for more than... nevermind. There is real pride in making things that must be experienced.

Sep. 26 2011 11:40 AM
Steve from Brooklyn

Beyond designers, ad men/women, engineers, etc. what place is there for everyday people in the high-wage knowledge economy? How many people does Apple employ in the US?

Sep. 26 2011 11:40 AM
MichaelB from Morningside Heights

What about national security? What happens if we have a situation where we are at odds with a foreign govt (can you spell China?) and we cannot get components for our tanks, aircraft, or other materiel, because we have let the manufacture of so many industries move overseas?

Sep. 26 2011 11:40 AM
Laurie Spiegel from Tribeca

Why are you leaving out of the equation the hundreds of thousands of "jobs" (self-employed) writing iPhone apps? For every iPhone made in China dozens of apps that are made in the US are created and sold.

Sep. 26 2011 11:39 AM
Phil from Park Slope

Whether it is ever discussed or not, the environmental externalities of an economy reliant on the constant consumption of things, especially textiles and cars, will catch up with us. We're going to have to reinvent the fundamental economic model in a much more comprehensive way if the economy is going to have any longevity.

Sep. 26 2011 11:38 AM
Jonn K

People need to boycott the goods imported from china and other countries.
This seems like an old fashion idea, and it is, but it is true.
It has gotten to the point where we cannot even choose to buy a TV or cell phone manufactured in this country. How did that happen?

Sep. 26 2011 11:37 AM
Chris from Brooklyn

Could manufacturing not produce stable, well-paying jobs without greatly increased prices for our goods by making labor more valuable than ownership? Why not clothes and cars made in the US, still at prices like they are today, but with most of the cost going to workers, rather than stock holders?

Sep. 26 2011 11:36 AM
Billy Gray from Greenpoint

Apparently your guest has never heard of a place called Germany where they do protect their workers, and they do have good manufacturing jobs without crushing conditions. Having robust manufacturing sector does not mean you have to grind people into dust.

Sep. 26 2011 11:36 AM
Fuva from Harlemworld

Seems that Germany's domestic manufacturing sector is flourishing, with good wages. Apparently, this is partly because the unions/ workers have more leverage in the corporations. But also, it's because they make good, quality stuff, that is therefore in DEMAND. Does this reflect a work ethic that is lacking here, because the current (distracted, stimulant/ immediate gratification-addicted) culture doesn't encourage it? We really need to check the current zeitgeist, but this issue is not even on the popular radar....

Sep. 26 2011 11:31 AM

Why does Professor David suggest that Brooklyn Brewery is not a manufacturer, but isn't it akin to the candy store segment? They make beer, a product. Non-durable, but a product nonetheless.

Sep. 26 2011 11:30 AM
The Truth from Becky

Really? Can't meet the "demand" if people don't have money to spend, people don't have money to spend, creating demand if they don't have jobs, can't create jobs because there is no demand...a circle.

Sep. 26 2011 11:29 AM
John A.

A country is a meta-organism, a magnification of one person into many. Differentiation allows some people to be the thinkers, but that has "left behind" many who can't. It is arrogance to say they are not needed. A body needs arms and legs.
Ever think of it as military-political strategy? Outsource everything you need to survive and your servants (outside) could then cut you off and hold it all for ransom. They could flip to another axis affiliation.
An old commercial for the Presidents Council for Physical Fitness had people who were just brains in boxes. At some point the brain would say to the body: "I'm ready to move now" and the endpoint of the commercial was now he couldn't. Manufacturing is making material acts into material things needed to survive.

Sep. 26 2011 11:09 AM
baba from Brooklyn

Manufacturing does create jobs. But technologies role is to remove inefficiencies in any manufacturing process.
If we say we have to get educated for the hi-tech jobs then we have to realize that fewer and fewer people are needed. When facebook adds 200 million new people to it's system it hires at the most 2 more people to manage the additional servers.
If we think that if we bring back the jobs that went to China back we would be better of then that is a wrong assumption. Foxconn a large contract manufacturer of products like ipads is deploying a Million robots to do the work that currently humans do.
The jobs that will be available and created will be more in services, local artisnal stuff and entrepreneurship's.
The 9%-15% unemployment rate is par for the course and politicians need to state it clearly that that is always going to be the case going forward

Sep. 26 2011 10:52 AM
gary from queens

As my article describes, it is not solely manufacturing that creates wealth which creates profits which creates jobs. It's the sale of anything of value, including services.

A Tutorial on Economics for Liberals

But when the government takes profits merely for fairness---as Krauthammer wrote last friday---you get nothing except fairness. No jobs; no economic growth; no personal and economic initiative, because there's no incentive.

In other words, a typical socialist (or communist, when they still existed) environment

Sep. 26 2011 10:34 AM

I agree with hjs11211!

Without consumers with $$ to spend jobs will continue to be lost.

Consumer demand creates jobs. You can't sell goods & services without jobs that leave the worker/consumer some $$ for discretionary spending.

The Treasury & Fed's policies since 2007 have not put more $$ into more consumers' pockets = no to slow "recovery."

Sep. 26 2011 09:48 AM


Sep. 26 2011 09:32 AM

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