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Manufacture This

The blog of the Alliance for American Manufacturing

Don’t blame the robots for job loss -- industry has always dealt with automation.

You might have seen an article floating around pushing a “little reality check” on American manufacturing. Published by the Los Angeles Times and other Tribune publications, the piece by Don Lee rehashes the old, tired argument that automation is the real manufacturing job killer.

Sigh.

You know the drill by now: Robots! They’re taking over production, so any manufacturing that is brought back to the United States isn’t going to create any jobs. So why even bother taking on issues like China’s persistent trade cheating? Why bother investing in manufacturing at all — technology is the future!

Look, we try not to respond to every one of these sorts of articles. But since this one isn’t going quietly into the night — and we expect others will make the argument since manufacturing is a big issue this election cycle — we thought it worth responding.

Technology and Manufacturing Go Hand in Hand

First things first — technological progress is inevitable. It is unrealistic to believe that we can (or should) go back to the days of Henry Ford and the moving assembly line, or even the mass production that dominated the American economy in the 1950s. New technology means more efficiency.

But that is absolutely no reason to give up on American manufacturing. Technology, in fact, is a big reason why we should continue to prioritize it. If America abandons manufacturing, we will have a much more difficult time maintaining our technological edge.

The sector is a key part of our economy, and it certainly punches above its weight. In 2013, manufacturing’s gross output reached $5.9 trillion. The gross domestic product (GDP) generated by manufacturing industries reached $2.1 trillion in 2013; the sector provided at least 10 percent of the GDP in 32 states.

Manufacturing also is essential to maintaining America’s research and development (R&D) edge. The sector drives much of that R&D activity, as it is our nation’s leading buyer of technology, accounts for 90 percent of all new patents — 90 percent! — and 70 percent of private-sector R&D. Manufacturing is essential to ensuring R&D remains strong, as Sridhar Kota explains in ReMaking America:

“The fact is that, in high-technology industries, manufacturing and R&D are closely knit. Ample evidence shows that combining the two is key to fueling real innovation, and that the co-location of R&D and manufacturing facilities adds value to each. Promising ideas must be matured through translational R&D if they are to end up in products that meet performance goals and are at the same time cost-effective, reliable and safe. Only a small fraction of discoveries and first-generation inventions prove worthy of scaling up, and it is during scale-up and initial manufacturing that many improvements in design and efficiency are made.”

We can see this happening in the desert outside of Reno, Nev., where Tesla is building its $5 billion Gigafactory. The factory will manufacture tens of thousands of lithium-ion batteries in an effort to lower costs, since the batteries are now largely made overseas and expensive to acquire.

Having a facility close to the Tesla Factory in Fremont, Ca., provides a huge advantage for the company. It can oversee production much more closely and make changes more quickly than if the battery factory was located overseas. It also is located within 200 miles of a large lithium mining company, helping to reduce the cost of raw materials. All of this will allow Tesla to stay ahead of the technology curve.

Side note: That factory in California? It is considered one of the most technologically advanced in the world. It employs about 6,000 people.

About the Jobs…

Look, there is no doubt the United States doesn’t employ as many manufacturing workers as it once did. America has lost 5.7 million factory jobs between 1998 and 2013.

But don’t buy into the myth that automation is the main reason why those jobs disappeared — that job loss was an effect of offshoring, particularly the result of opening up trade with China, as researchers like David Autor have shown.

Despite the challenges, manufacturing still employs more than 12 million Americans, representing 8.8 percent of total employment. It remains an important provider of jobs for Americans without a college degree, as these workers on average make $1.78 per hour more than those working in other sectors. In the manufacturing-heavy state of Michigan, that wage premium reaches $3.35 an hour. Manufacturing also is a job multiplier — for every one job in the U.S. steel industry, for example, seven more are created.

Now, the Los Angeles Times piece would have you believe that manufacturing jobs don’t really have a place in the modern economy. Featured in the piece is a family-owned company called Bicycle Corporation of America, which fully offshored production of its bikes in 1991.

Two years ago, the company brought a small share of production back from China to South Carolina. The company will produce 300,000 bicycles in South Carolina this year, about the same as it made in 1991. The catch, according to the article: It operates with about a third fewer employees.

Okay ... so what?

Bringing back production not only created some jobs, it also led the company to build its products more efficiently and helped spur local economic growth. Yes, there are less workers than the company had during the George H.W. Bush administration, but the company still employs 115 people — and that's nothing to sneeze at.

Even the most technologically savvy factories need employees. Take Tesla’s massive Gigafactory, which is designed around robots. Tesla’s whole business model is based around automation, in fact. But somebody still needs to run all those machines — and Tesla’s Elon Musk said the factory could employ up to 10,000 people (while cutting production costs by more than 30 percent).

The days of the Model T are gone, but the days of the Model 3 are here. Building them here means American communities will reap an economic windfall. American manufacturing still matters, and manufacturing job growth should remain a priority for our policymakers.