Tag: US manufacturing jobs

Teaching Tip: Talking to Students About Manufacturing

Our OM students hold many misconceptions about the manufacturing industry. There’s a widespread belief that the U.S. manufacturing industry is in decline, that jobs are going overseas, and that the industry doesn’t provide fulfilling or well-paying careers, particularly for younger workers. But this couldn’t be farther from reality.

The Manufacturing Institute says that nearly 3.5 million manufacturing jobs will need to be filled in the next decade, and 2 million of those jobs will go unfilled (Industry Week, Oct. 23, 2018). The available jobs, even at the lower rungs of manufacturing, pay well, too. According to the Bureau of Labor Statistics, the average annual salary for manufacturing production jobs is $44,595 ($21.44 per hour). In truth, the average pay for the manufacturing industry is comparable with jobs in the technology sector. For example, the average base pay for a manufacturing supervisor is $64,118, for a manufacturing engineer $71,679, and for a director of manufacturing, $146,412. That’s significantly more than what most students expect when they think about compensation in the manufacturing industry.

There’s also a perception that manufacturing jobs are repetitive, monotonous, underpaid, and involve working in decrepit, dirty factories. But the industry has evolved and is more dynamic and complex than it used to be. There’s more technology, more data, more analysis, more creativity, more gamification, more critical thinking, and more problem solving.

Our students often don’t view manufacturing as a desirable career option, and that poses a big problem. The growth of industry depends on worker participation of all demographics. Hopefully, our OM course will show that there are real opportunities for them, from professional growth to dynamic learning environments to competitive compensation. While the service sector remains a big part of the U.S. economy, manufacturing also contributes mightily and isn’t going away anytime in the foreseeable future.

OM in the News: Manufacturing’s Mirage

These are good times for Libbey, a 125-year-old American glassmaker that nearly went bankrupt 4 years ago, reports The New York Times (April 2, 2013). Its sales are at a record high and its energy-intensive factories saved more than $5 million in 2012 as natural gas prices fell. Despite all the upbeat news, however, Libbey recently announced it would lay off 200 workers at its Louisiana plant. Libbey’s decision is just one example of why manufacturing is likely to fall far short of the claims that millions of new factory jobs are about to be created in the U.S. because of the unlocking of abundant supplies of domestic energy.

“Even though the U.S. is more competitive globally, manufacturing doesn’t give you the kind of direct job creation it did in years past,” says one expert. “At the end of the day, there aren’t as many people on the factory floor.” Indeed, while the sector has added 500,000 jobs since the recession ended and the value of what the nation’s factories churn out is close to a high, there are nonetheless 2 million fewer manufacturing workers today than in 2007. The share of jobs in manufacturing has been on a nearly uninterrupted downward slope for 50 years, now accounting for less than 9% of all employment.

A recent study by the American Chemistry Council (ACA) estimated that increased gas production could create 200,000 jobs in the broader manufacturing sector, including several thousand in the glass industry. “It’s resulting in a renaissance in manufacturing,” says their economist. But glass industry veterans say cheaper natural gas isn’t a game changer in terms of jobs, however beneficial the cost savings are. Pressure from inexpensive imports remains intense, and labor in Mexico and China is still cheaper than here.

Other industries identified by ACA as potential winners from the energy boom, like paper producers and foundries, have continued to lose jobs. But nearly all of the U.S. manufacturers that survived the lean years of the last decade are globally competitive companies that depend on high productivity and advanced technology for their success more than masses of assembly line workers.

Discussion questions:

1. Will manufacturing job levels ever return to the 1960s levels? Why?

2. Which is more important–job creation or productivity?

OM in the News: How to Recoup American Manufacturing Jobs

Businessweek (April 15-22, 2012) reports that Gene Sperling, director of the National Economic Council, recently spoke before the Conference on the Renaissance of American Manufacturing,  making the case for manufacturing in the US.  Sperling  argued that manufacturing deserves special attention because it produces “positive spillovers” for the economy. (New research shows that when a factory locates in a county, the productivity of other plants in the county rises.)

Manufacturers also account for most innovation. And innovation tends to wither when it’s separated from production. “For example,” Sperling said, “when we lost consumer-electronics manufacturing, we gave up a claim on future innovation. We lost in follow-on products like advanced batteries, flat-panel display technology, and LED lighting. When we lost consumer-electronics manufacturing, we also lost the capability to make and design the batteries, including lithium-ion batteries, used in computers, cell phones, and other consumer devices.”

The U.S. lost 34 percent of its manufacturing jobs from 2000 through 2009, and employment in manufacturing has risen only about 4 percent since. Some experts claim  manufacturing employment is in an unstoppable downtrend because fewer workers can produce more. Sperling argued that higher productivity, far from being a job killer, can lower prices, thus increasing demand for the products and saving jobs. The problem, he said, is that output is down. The physical quantity of goods made in the U.S. declined 5 percent from 2000 to 2010.

To Sperling, the solution is to boost output—which will require faster productivity growth, not slower. His plan includes denying companies a deduction for moving costs when they shift jobs abroad; making the research and development tax credit permanent; funding manufacturing training programs in community colleges; and building regional hubs for manufacturing innovation that bring together industry, government, and academia.

Discussion questions:

1. Why are some industry leaders opposed to Sperling’s plans?

2. Why are manufacturing jobs important to the US economy?

Good OM Reading: How the US Lost iPhone Production

Yesterday’s Sunday New York Times’ (Jan.22,2012) lead article tells the story of Steve Jobs speaking at a Silicon Valley dinner in front of President Obama. Obama interrupted Jobs to ask :”What would it take to make iPhones in the US”?  In the 1980s, Jobs had boasted that his Mac computer was “a machine made in America”. Today, almost all 70 million iPhones, 30 million ipads, and 59 million other Apple products are made overseas. Jobs’ answer to the Obama question was unambiguous: “Those jobs aren’t coming back”.

If you are teaching OM to a class of MBAs, the lengthy piece will make for great class discussion. It has a bit of every OM topic in our text, from supply chains, to global competition, to ethical issues regarding employee treatment,  to manufacturing technology.

Apple has benefited  the US economy in many ways, says one company exec. But he adds that curing unemployment is not Apple’s job. “Our only obligation is making the best products available”. Despite the 43,000 Apple employees in the US and 20,000 overseas, almost all 700,000 of the workers making Apple products work for Apple contractors in Asia and Europe.

Apple execs say going overseas is the only option. They tell the story of how the firm relied on a Chinese factory to revamp iPhone manufacturing just weeks before the product was due on shelves. The last-minute redesign (a Jobs idea) forced an assembly line overhaul. New screens began arriving at midnight. A foreman immediately roused 8,000 workers from their company dorm beds. Each employee was give a biscuit and a cup of tea and started 12-hour shifts to fit the new screens into frames. Within 96 hours, the plant was producing over 10,000 iPhones/day. “The speed and flexibility is breathtaking” says an Apple exec.

For Tim Cook, the new CEO, and architect of outsourcing production,  the focus is “Asia supply chains have surpassed what’s in the US. The result is we can’t compete at this point”.

OM in the News: A Shortage of Factory Workers in the US?

Would your undergrad or MBA students be interested in a manufacturing job if they knew it paid $50,000-$80,000 a year? Maybe not, but such jobs are available and often unfilled. The Wall Street Journal (May 6,2011) reports that manufacturers , despite 9% unemployment rates, are struggling to find skilled workers. Large and small manufacturers of everything from machine tools to chemicals are scouring  for potential hires and poaching each other’s employees. Some are even hiring former prisoners who learned machinists skills behind bars.

Its a confluence of 3 trends, says the Journal. First, after falling for a decade, manufacturing jobs are now growing, albeit modestly. Second, baby-boomer retirements are sapping the most experienced workers (1/4 of all factory workers are 55 or older). Third, the US educational system isn’t turning out enough people with the math and science skills needed to deal with sophisticated computer-controlled factory equipment.

“We get people coming in here all the time who say ‘I can weld’. Well, my grandmother could weld”, says the Lehigh Heavy Forge Corp  HR director in Bethlehem, PA. We need “people who understand the intricacies of $1 million lathes”. Likewise, technicians at  Houston’s Bayer AG’s plant need math/science skills for such tasks as calculating the rate at which dyes need to be added for special batches of plastics. After screening, Bayer finds that few people are qualified. Some jobs at Bayer have been open 6-9 months, laments the CEO.

Manufacturers say it’s the educational system. Only about 5% of bachelors degrees in the US are in engineering, compared to 20% in Asia. In the most recent comparison of math and science test scores of 15-year olds by the OECD, American students trailed far behind those in China, Japan,South Korea, Canada, and Germany.

Discussion questions:

1. Do your students have any interest in high paid jobs running sophisticated equipment?

2. What system does Germany use (see Ch.1) that works better to fill this demand?