Blue Collar Job Blues – Are We Losing Our Workers?


abandoned_factory_2Workers hammered down the last spike to complete the first transcontinental railroad in 1869 in Utah. This symbolic event ushered in a new era, the Gilded Age from the ashes of Civil War to the turn of the century, which would see America drive past England as the world’s number one economy. The phenomenal leap from farms to industries was built on the shoulders of the working class, the blue collar labor whose hands built America’s factories, railroads, cities, oil rigs, mines, and industry machines. Around the world, they would become the immigrants’ American dream when hard work earns for one a comfortable middle-class life.

Over a century and shifting global economic plates later, the American blue collar worker seems to be riding along the aging railroad in a chugging train that is under constant threat of being toppled over by global free markets, Asian factories and unsound labor unions. What happened?

Road to Rusting

The Rust Belt, the states straddling the Midwest, Northeast and upper South, once America’s factory muscle that produces large-scale manufacturing for consumer and industrial products, is now littered with semi-abandoned plants, for-lease signs and towns literally thinning out from Cleveland to Detroit. In a 2013 report published in the Department of Economics-Yale University’s website, the authors cited labor union pressure, limited investment on new technologies and productivity growth as factors that led to the region’s decline.

But the decline didn’t happen overnight, not even over the years. The symptoms were showing since right after the Second World War. Decades before factories are being shipped to China they were moved from the Rust Belt to the southern states, a migration that started in the mid- to late twentieth century. Cheap labor, a growing population and burgeoning education in South Carolina, Texas, Southern California, Tennessee, among others, attracted investors to put up shop away from the historically manufacturing-centric of the north.  Many of these plants belong to automobile companies, such as Toyota, Nissan, GM, Volkswagen, and Mercedes Benz.

According to U.S. Census data since the fifties across the steel, rubber and auto sectors, factory jobs across the Rust Belt dropped from 43% share of total national employment to just 27% in 2000. Meantime, the region’s share of total manufacturing jobs in the U.S. shrunk from about one-half to just a third in the same period. While these shifts happened within the country—from traditionally industrial north to progressive but cheap south—they are a precursor to the biggest challenge that blue collar workers face today: highly skilled, cheap and millions of Chinese workers across the ocean. Made-in-America is perhaps as common as grass in Antarctica today and the glacier keeps threatening to encroach more on what’s left of the country’s lush manufacturing base.

Automation brought in by advances in robotics engineering also started to replace manual labor. Elliott Morss, a global finance expert who has worked with the International Monetary Fund in over 45 countries, pointed out that between 1987 and 2000, manufacturing output rose by 123%, while manufacturing jobs fell by 21%. The robots are clearly more productive and don’t require social security.

The US Bureau of Labor shows that from 1978 to 2007, manufacturing job losses were highest in garments (-78%), textiles (-67%), and primary metals (-59%). Other sectors that have experienced job losses were computers/electronics (-35%), transportation equipment (-26%), and paper/printing (-30%). Morss was explicit about one cause: “Americans have to understand that people in other countries are willing to work harder for less.” But are our blue collar workers willing?

Labor is Cheap

blue_collarAmerican labor is one of the least expensive among industrialized countries at $30.77 per hour, according to the U.S. Bureau of Labor Statistics 2011 data. But that is still over twenty-two times more expensive than in China in 2008. We can all blame Corporate America’s greed for money by outsourcing jobs, but it’s like blaming a lion for its carnivorous instincts. Interestingly, cheap labor may not be the primary reason for outsourcing. The late Steve Jobs once said that iPhone jobs won’t be coming back because of economies of scale. Chinese factories’ can scale up or down their operations at a flick of a button to adjust to market demands. If an iPhone, for instance, needed a new glass covering in six weeks, Chinese factories could put up rows of assembly lines in fifteen days. American factories might need six to nine months to put up the facilities and pull in skilled workers and qualified plant engineers.

Perhaps the issue is not that blue collar jobs are moving out of the country. Rather, which ones? Morss argued the fallacy of looking at the manufacturing sector as one industry. It is, he said, composed of various industries with different dynamics. Blue collar workers are happy and earning a middle class lifestyle, indicated by the Forbes report on top-paying manual jobs. From elevator installers to commercial diving, drill operators to boilermakers, and aircraft mechanics to locomotive engineers, these blue collar jobs can earn from $50,000 to $78,000. Clearly, location-based manufacturing, where the job must be performed in U.S. soil, is robust and China-proof.

Light at tunnel’s end

Cheap labor and fast-turnaround; how can the American blue collar compete in this area? How about give China its own dose of medicine. A news item in Foreign Policy provides a clue. Technologies that may happen in the next few years will make American manufacturing cheap and masters in economies of scale, the news pointed out. Ironically, automation, the same factor that is argued to have caused manufacturing job losses among others, may bring

the plants back here. More powerful and deft electromechanical devices run by sophisticated applications can now fly jets, milk cows, perform surgery and engage in combat. Not blue collar enough, yes, but if these robots can do complex jobs, surely, they can make pinheads and nails. Likewise, artificial intelligence also makes it possible now to print manufactured goods from shoes to chairs, even organic materials for medical procedures. This technological leap will replace mass production with personalized production, where smaller factories can print products on demand.

These technological leaps may sound like bringing back the plants here only to be manned by robots. Not entirely. The robots are far from science fiction that humans are still needed to operate or at least maintain them. And this new line of robotics and software will spawn derivative industries that will demand manual workforce, too. But the blue collar of yester-years may need to evolve into a more educated, more highly skilled workforce. In this respect, the American laborer may be on track.

The U.S. Census Bureau reported that the number of works with a bachelor’s degree rose by 25% from 2002 to 2012 and the figure for those with associate’s degree by 31% in the same period.  The nonprofit Center for College Affordability and Productivity said that the problem is a result of more Americans graduating in college in 2010 at 41.7 million than jobs requiring a college degree being produced at 28.6 million within the same year. “There are going to be an awful lot of disappointed people because a lot of them are going to end up as janitors,” Richard Vedder of the Center said. Or, we can look at the glass as half full—once the manufacturing jobs are back with newer technologies in place, we have an abundance of highly educated blue collar workers on track and chugging at full speed ahead of global competition.

Submitted by Robin Renford

Robin talks about a wide range of financial topics, from macro-economics to personal finance, and investment portfolios to proprietorship. He focuses on providing financial advice to his readers as part of the FinancesOnline team. He is also working on a book about wealth management for the average American, using his more than a decade of experience on and exposure to the business sector as inspiration.

Category: Financial News

Leave a comment!

Add your comment below, or trackback from your own site. You can also Comments Feed via RSS.

Be nice. Keep it clean. Stay on topic. No spam.

You can use these tags:
<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

This is a Gravatar-enabled weblog. To get your own globally-recognized-avatar, please register at Gravatar.