In this week’s State of the Union address President Obama will likely extol the return of manufacturing to the United States. Reports from various media outlets (including Yahoo Finance) also claim a great resurgence in factory jobs -- that the rust belt has finally been injected with a healthy dose of WD-40. In a New York Times op-ed, however, Steven Rattner argues that it’s not quite time to take out the party hats.
“We need to get real about the so-called renaissance, which has in reality been a trickle of jobs, often dependent on huge public subsidies,” writes Rattner. “Most important, in order to compete with China and other low-wage countries, these new jobs offer less in health care, pension and benefits than industrial workers historically received.”
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In the video above, Zachary Karabell, head of global strategy at Envestnet, joins The Daily Ticker to discuss Rattner’s take on the U.S. manufacturing resurgence.
“It’s certainly true that the lower cost sectors that had been up there as a threat, particularly in China, are not so low cost anymore,” says Karabell. “But the issue is that you have a lot of cool, high-tech hubs and plants but it’s not going to create 1950s employment in manufacturing because you’ve got robotics and technology and highly skilled people manipulating just-in-time manufacturing on floors.”
Karabell’s bottom line? “We’re touting this as a revival…but don’t think that we’re going to suddenly have millions of manufacturing jobs.”
And for the few jobs that are coming back, wages are severly impacted. According to Rattner: “Wages for blue-collar automotive industry workers have dropped by 10 percent, after adjusting for inflation, since the recession ended in June 2009. By comparison, wages across manufacturing dropped by 2.4 percent during the same period, while earnings for Americans in equivalent private-sector jobs fell by “only” 0.5 percent.”
Not to mention that the subsidies Washington and local governments are doling out to keep the additional 586,000 manufacturing jobs are massive. Volkswagen received about $288,500 per worker to bring its factory to Tennessee and Boeing received $158 million to bring only 1,000 jobs to Alabama. Boeing recently threatened to leave Washington unless it was paid $8.7 billion with labor concessions- - Washington state lawmakers agreed to the terms.
“We are not ending a 30-year nightmare or dark period and returning to some sort of golden age. This is going to be a very different economic reality, a heavily subsidized one, a low-paying one, and a high-tech one,” says Karabell.
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