MANUFACTURING AND WELFARE ASSISTANCE

May 13, 2016


I have never presented to you a “re-blog” but the one written by Meagan Parrish below is, in my opinion, extremely important.  We all know the manufacturing sector has really taken a hit in the past few years due to the following issues and conditions:

  • Off-shoring or moving manufacturing operations to LCCs (low cost countries). Mexico, China, South Korea and other countries in the Pacific Rim have had an impact on jobs here in the United States.
  • Productivity gains in manufacturing. The ability of a manufacturer to economize and simply “do it better” requires fewer direct and indirect employees.
  • Robotic systems and automation of the factory floor has created a reduced need for hands-on assembly and production. This trend will only continue as IoT (Internet of Things) becomes more and more prominent.
  • Obvious forces reducing jobs in American manufacturing has been the growth in China’s economy and its exports of a large variety of cheap manufactured goods (which are a great boon to American and other consumers). Since China did not become a major player in world markets until after 1990, exports from China cannot explain the downward trend in manufacturing employment prior to that year, but Chinese exports were important in the declining trends in manufacturing during the past 20 years. More than three-fourths of all U.S. traded goods are manufactured products, so goods trade most directly affects manufacturing output.  Thus, increases in net exports (the trade balance) increase the demand for manufactured products, and increases in net imports (the trade deficit) reduce the demand for manufactured goods. The U.S. has run a goods trade deficit in every year since 1974 (U.S. Census Bureau 2015).
  • The recession cut jobs in all sectors of the American economy, but especially in factories and construction.
  • Manufacturers need fewer unskilled workers to perform rote tasks, but more highly skilled workers to operate the machines that automated those tasks. Manufacturers have substituted brains for brawn.
  • Trade Negotiations have to some degree left the United States on a non-level playing field. We simply have not negotiated producing results in our best interest.

Manufacturing employment as a fraction of total employment has been declining for the past half century in the United States and the great majority of other developed countries. A 1968 book about developments in the American economy by Victor Fuchs was already entitled The Service Economy. Although the absolute number of jobs in American manufacturing was rather constant at about 17 million from 1969 to 2002, manufacturing’s share of jobs continued to decline from about 28% in 1962 to only 9% in 2011.

Concern about manufacturing jobs has become magnified as a result of the sharp drop in the absolute number of jobs since 2002. Much of this decline occurred prior to the start of the Great Recession in 2008, but many more manufacturing jobs disappeared rapidly during the recession. Employment in manufacturing has already picked up some from its trough as the American economy experiences modest economic growth, and this employment will pick up more when growth accelerates.

As a result of the drop in manufacturing, many of our workers are on welfare as demonstrated by the following post written by Ms. Meagan Parrish.  Let’s take a brief look at her resume.  The post will follow.

MEAGAN PARRISH BIO:

Meagan Parrish kicked off her career at Advantage Business Media as Chem.Info’s intrepid editor in December 2014. Prior to this role, she spent 12 years working in the journalism biz, including a four-and-a-half year stint as the managing editor of BRAVA, a regional magazine based in Madison, Wis. Meagan graduated from UW-Madison with a degree in international relations and spent a year working toward a master’s in international public policy. She has a strong interest in all things global — including energy, economics, politics and history. As a news junkie, she thinks it’s an exciting time to be working in the world of chemical manufacturing.

PARRISH POST:

Study: One-Third Of Manufacturing Workers Use Welfare Assistance

There was a time when factory jobs lifted millions U.S. workers out of poverty. But according to new data, today’s wages aren’t even enough to support the lives of 1 in 3 manufacturing employees.

The study, conducted by the University of California, Berkeley, found that about one-third of manufacturing workers seek government assistance in the form of food stamps, healthcare subsidies, tax credits for the poor or other forms of welfare to offset low wages.

This amounts to about 2 million workers, and between 2009 and 2013, the cost for assisting these workers added up to $10.2 billion per year.

What’s more, the amount of employees on assistance shoots up 50 percent when temporary workers are included. In fact, the use of temp workers, who can be paid less and offered limited benefits, is one of the main reasons why the overall wages picture looks bleak for manufacturing.

“In decades past, production workers employed in manufacturing earned wages significantly higher than the U.S. average, but by 2013 the typical manufacturing production worker made 7.7 percent below the median wage for all occupations,” said Ken Jacobs, chair of the UC Berkeley Center for Labor Research and Education, in the paper.

“The reality is the production jobs are increasingly coming to resemble fast-food or Wal-Mart jobs,” Jacobs said.

By comparison, the number of fast-food workers who rely on public assistance is about 52 percent.

Oregon was named as the state that has the highest number of factory workers using food stamps, while Mississippi and Illinois lead the country in states needing healthcare assistance. When all forms of government subsidies were factored in, the states with the most manufacturing workers needing help were Mississippi, Georgia, California and Texas.

The research found that the median wage for non-supervisory manufacturing jobs was $15.66 in 2013, while one-fourth of the workers were making $11.91, and many more make less.

CNBC report on the study detailed the struggles of a single mom working as an assembler at a Detroit Chassis plant in Ohio for $9.50 an hour. She often doesn’t get full 40-hour work weeks and said she has to rely on food stamps, Medicaid and other government programs.

“I absolutely hate being on public assistance,” she said. “You constantly have people judging you.”

The report comes as debate about the minimum wage heats up in the presidential race. Raising the federal minimum wage to $15 has been a chief platform issue for Democratic presidential hopeful, Bernie Sanders. Presumptive Republican candidate Donald Trump has also shown support for lifting wages to some degree.

The findings have also added a sour note to recent good news about jobs in the U.S. Recently, the White House was boasting about improvements in the economy and cited a government report showing that about 232,000 new positions were created during the past 12 months.

CONCLUSIONS: MY THOUGHTS

To me this statistic is shameful.  We are talking about the “working poor”. Honest people who cannot provide for their families on the wages they earn or with the skill-sets they have.  Please note, I’m not proposing a raise in the minimum wage.  I honestly feel that must be left to individual states and companies within each state to make that judgment.  I feel the following areas must be addressed by the next president:

  • Revamp the corporate and individual tax code. What we have is an abomination!
  • Review ALL trade agreements made over the past twenty (20) years. Let’s level the playing field if at all possible.
  • Eliminate red tape producing huge barriers to individuals wishing to start companies. When it comes to North American or Western European manufacturing, there are certainly more regulatory barriers to entry.
  • Review all regulations, yes environmental also, that block productive commerce.
  • Overbearing regulations can give too much power to a few, and potentially corrupt ruling regime and prevent innovative ideas from flourishing. It can perhaps be an obstacle for a foreign nation to invest in a country due to those conditions and regulations which increase costs. (The fact that some of these regulations are usually for the benefit for the people of that nation poses another problem.
  • We have a huge skills gap in this country. Skills needed to drive high-tech companies and process MUST be improved.  This is an immediate need.
  • Beijing signaled with its currency devaluationthat the domestic economic slowdown it has failed to reverse is no longer a problem confined within China’s borders. It is now the world’s problem, too.  This problem must be addressed by the next administration.
  • Companies need to review their labor policies and do so quickly and with fairness. I’m of the opinion that people are almost universally the best judges of their own welfare, and should generally see to their own welfare (including continuing skill improvement and education), but I’m not in any way opposed to market based loans and even some limited amount of public funding for re-education of indigent non-productive workers (although charity & private sources would be a first choice for me).

 

As always, I welcome your comments.

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