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.

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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

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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.

Category: Financial News


  • Avatar DBD says:

    I agree that new technologies are on the horizon that will bring more industry back to the U.S. as the lower cost of manufacturing by robots competes directly with the lower costs of outsourcing. Unfortunately, that will not bring back jobs for humans in the industry, since the automation will also eliminate the need to rehire them.

    There was an awesome study done by Oxford University in 2013 that projected the risk of automation for 702 U.S. occupations and plotted them on a chart. It turned out to be a U-shaped distribution with better job retention for humans in the high- and low-skilled categories. Moderately skilled individuals like factory workers have a big target painted on them for imminent replacement by automation. Retraining isn’t keeping up with the rate of job automation. Students and workers just entering the workforce need to be aware that they may not be employable in their chosen occupation in the near future.

    The Future of Employment: How susceptible are jobs to computerization” – Carl Benedikt Frey and Michael A. Osborne

    Incidentally, high-export, low-labor-cost countries such as China are likely to be deeply impacted by an accelerated trend in automated manufacturing. China is currently attempting to offset that disadvantage by investing heavily in robotics technology to drive the costs of manufacturing down even further in order to hold on to its comparative advantage in that market.

  • Avatar Kevin Rose says:

    I am an electrical design engineer for a small company that manufactures, on US soil, specialized test equipment, and most of our products are exported! We sell to researchers, universities, and corporations. Because our quantities are small, most of our work is hand manufactured. By the time one could set up machinery to completely automate our manufacturing, it is the same amount of time it takes to make the items by hand. (Granted, we manufacture a few hundred to a few thousand of most items we sell, but the profit margin is high enough that we are actually a profitable company.)

    Also, if one looks around, there is plenty of work to do even with automation taking over many tasks. There is work for the people who design, maintain, and operate automation equipment. There is also work for custom types of tasks where the investment of automation is not justified.

    As an electrical engineer, I design circuits and the circuit boards these go on. Our company has a pick-and-place machine. The pick-and-place machine places electronic components onto a circuit board which is heated up so that previously-applied solder paste melts and holds the surface mount components on the board. Setting up this machine – there may be 100 or 200 different kinds of components – takes a lot of time. Likewise, I usually have one of our technicians hand assemble circuit boards for prototype purposes. This is my whole point – even with whiz-bang artificial intelligence equipment, the cost of implementing this automation is not practical.

    Here is another example: Cars vs. airplanes. A typical car manufacture may manufacture the same model of car into the millions each year. An aircraft manufacturer might make as few as 5, 10, or 50 of a given model, or even fewer! Take a 787, for example. Currently, Boeing is making 10 of these per month, and they are ramping up to 12 (

    Each one has 2 engines. That’s 24 engines per month, or if you are making 144 planes per year, that’s 288 engines per year. OK, so the engine is a big component. I don’t know how many fuel valves there are, but there is at least one for each engine – and probably custom made. Such a fuel valve is typically a part you can pick up and hold in your hands, and you would expect it to not be very expensive. For this aircraft, not only is that fuel valve custom made, but it has to undergo extensive testing at different pressure levels, and different temperature and humidity levels. After all, this is a critical component! Even custom cable harnesses on aircraft like this have extensive engineering rigor and testing like you wouldn’t believe. ….and the quantities are small. If you are building millions of cars per year, robotic welders and other automated technologies make perfect sense. For aircraft, on the other hand, there is much more manual work just due to the low quantities. This is why aircraft cost so much.

    The need for people to do work isn’t going away any time soon. The nature of the work may change, but there is a need. Also, a note about getting older: Keep learning, and keep updating your skills and the way you work. I do this, and at age 50, I’m paid well as a design engineer. What can I offer that a new graduate cannot? Experience. I can do a task in an hour that may have taken me all day when I was a new graduate. At the same time, I also take time to learn from new graduates about the latest technologies. This sense of humility helps me to be even more successful as I am open to learning. By the way, nothing I learned in undergraduate school a quarter of a century ago is outdated – it’s variations on the same theme. As an electrical engineer, I assure you that Ohm’s Law is still in effect. The C programming language is still used (it was invented in the early 1970’s). Hard-wired digital logic has given way to the FPGA, but if you can program, and you know basic logic, you can design an FPGA. Everything may be digitized, but there is an analog front end and back end that has to be negotiated. You also have to provide power for all of that.

    I still use my educational background and I am a better engineer today than any time earlier in my life. Why do my companies like me? Because I get things done in a short period of time, and because if I can’t figure it out, I am quick to find someone who can.

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