Manufacturing: The most powerful jobs engine of all

On Sunday The New York Times business section put a metal fabricator front-and-center. The reporter visited Vermeer, a Pella, Iowa, manufacturer of heavy equipment--and a manufacturer The FABRICATOR covered several years ago. The Times reporter pointed out that “as president Obama urges Congress to enact a package of tax cuts and new government spending intended to revive growth and create jobs, one crucial corner of the American economy--manufacturing--has largely fallen off Washington’s radar screen.”


The article covers problems that few beltway folks are talking about. Mary Vermeer Andringa, Vermeer’s CEO, told the Times that yes, she knows the president wants to promote exports, but in recent years she found that to competitively sell to Chinese customers, she had to be close to them. “I am a very big proponent of making the United States a great place to export,” she said. “If we wanted to stay in the Chinese market, we needed to be there. That was reality.”

She’s not opening a plant in China because of cheap labor. She needs to be close to Chinese customers.

The article points out that for every one manufacturing job you get five others supporting that job.  No other industry has such a multiplier effect. A manufacturing plant is a jobs engine--which is a double-edge sword. Open a manufacturing and you make a community thrive; close a plant, and a community can die.

Still, amid all the chatter in Washington on exports, why has no one proposed a plan that actually makes it cost-effective for an American manufacturer to export? It’s a multifaceted problem. One facet involves how people with power view manufacturing. As the Times pointed out, “[politicians] don’t necessarily regard making an engine, a computer, or even a pair of scissors as having as much value as investment banking or retailing or a useful Web site.”

Another problem is voter perception. Yes, voters want jobs. But what would happen if the government showered tax breaks and other incentives to support the manufacturing sector, perhaps even an education bill that could subsidize those who went into sought-after fields like welding or manufacturing engineering? My guess is these politicians wouldn’t get reelected. Voters don’t trust government, but they trust large corporations even less. And at the bottom of the list (probably right next to investment banks) are manufacturers who shutter big plants that support communities. When a local plant closes, voters don’t forget.

How dare the government give these companies--the very ones who downsized and sent jobs overseas--more tax breaks? How would you feel if your previous employer--the one who just laid you off from the local manufacturing plant--got more money from Uncle Sam?

Problem is, like it or not, the country needs these large plants. It’s true that most people in U.S. manufacturing work for a small business. But those small manufacturers sell to larger ones, who in turn sell to even larger ones. The manufacturing behemoths are the anchors with the greatest multiplier effect for jobs creation. They are the ones that can make America be a country that manufactures locally and sells products globally.

With rising wages and inflation in China, labor costs aren’t a significant part of the conversation anymore, so many now are questioning the wisdom of outsourcing products to manufacturing plants thousands of miles away. Such questions have led to such organizations as Harry Moser’s Reshoring Initiative. Moser, who will speak on the subject at FABTECH in November, brings up a point that many small contract metal fabricators have known for years: Long supply chains are expensive--so expensive, in fact, that it often is cheaper for manufacturing plants to be closer to customers, even if the quoted price is higher.

Turns out, the same is true for U.S. manufacturers wanting to sell more products abroad. Building plants closer to the target customer base often is cheaper than exporting. As Andringa described it to the Times reporter, she wants to grow domestically and sell abroad. As chairwoman of the National Association of Manufacturers, she’s an ardent supporter of domestic manufacturing. She just needs to reach the Chinese customer. So, what’s to keep people like Mary Vermeer-Andringa--our nation’s true job creators--from opening plants overseas?

That’s a question more people in Washington should be asking.