Iowa Daily Democrat: Bringing back our factories: The silver bullet for the Democratic Party

[Omaha Steve]

Workers in factory. Credit: InAutoNews

http://iowadailydemocrat.com/news/2015/11/guest-opinion-bringing-back-our-factories-the-silver-bullet-for-the-democratic-party/

By Dave Sly, PE, PhD, MBA 11/06/15

It is rare that there is a single task that can solve most of our economic problems. When this opportunity arises, it is imperative that this task becomes the focus of public policy. Bringing our factories back from China and Mexico and putting an end to tariff-free outsourced manufacturing is that task. This raises wages, reverses income inequality, leads to economic growth that can reduce the federal deficit, expands health coverage, shrinks the deficits in Medicare and Social Security, and even addresses racial inequality and poverty. Too good to be true? Think again.

For the past 30+ years, America has aggressively shipped tens of thousands of factories to China and Mexico. The exact number is unclear because the manner of this outsourcing ranges from the obvious (Webster City moving their laundry division directly to Mexico) to the obtuse (US companies dropping local suppliers for those located in China or Mexico).

The facts are undeniable. Since 1990, the US has lost 6 million manufacturing jobs, and nonfarm payroll in manufacturing has dropped from a peak of 22% to 9%. During this 30 year period, consumption of manufactured goods, such as cars, appliances and electronics, has increased over 50%. Assuming an average of 500 employees per factory, and an estimate of 10 million manufacturing jobs supporting the market demand of today, this equates to at least 20,000 more factories that should be operating in the US. Imagine our economy if 10 million high paying jobs had been created during the last 8 years! Much of China’s sustained growth over the decade has been at our expense.

From a corporate perspective, outsourcing manufacturing is driven by perverse incentives in our trade laws. Twenty years ago, a typical manufacturing job in a union facility paid more than $20 an hour, while that same job could be performed in Mexico for around $1.50/hour, and in China for less than 30 cents an hour. While hourly labor rates in China and Mexico have risen to $3.50 and $2.70 respectively, US labor rates are still averaging less than $20/hour and most manufacturing is no longer performed in unionized factories. The relentless attack on unions, combined with open trade policies, have decimated the middle class. Any factory with a large quantity of lower-skilled people was encouraged to move to China and Mexico. A company with a 20%-30% cost of labor simply cannot produce a product in the US while competing with products made in China or Mexico.

FULL story at link