The Lost Magic Of Manufacturing Employment Never Really Was

Forbes

27-05-2025

Plymouth factory in Detroit, Michigan, 1962. (Photo by Michael)
There's a pining for the glory days of manufacturing jobs among some Americans. But the great philosopher Billy Joel sang, 'the good ole days weren't always good and tomorrow ain't as bad as it seems.' We should understand why some well-paying jobs (by yesterday's standards) arose in certain locations and industries, and why new well-paying jobs will arise elsewhere in the future.
Manufacturing employment has certainly dropped. Last year's manufacturing job count jobs was one-third lower than the peak level of 1979. Yet just as the decline in farm work for over 100 years did not stymie the economy, the drop in factory employment hasn't hurt the overall economy. Unemployment has fallen from 5.8% in 1979 to just 4.0% last year.
Output of factories has more than doubled since 1979 despite the much lower employment level. So we can chalk up much of the change to higher productivity. Wage rates for factory work rose a little faster than inflation over this time period, cumulating to a 20% gain. This is a slower than the overall average for production and non-supervisory work, but growth nonetheless.
Why did manufacturing jobs seem to be great? In some regions they contrasted with dismal opportunities elsewhere. A key factor in years past was the importance of location. The 'rust belt' describes a region that was once dominated by the steel industry, its suppliers and its users. Steel is made from iron ore, heated with coal. The southern edge of the Great Lakes had access to the resources, as well as transportation links to customers across the country.
Good wages were offered because the area didn't have enough workers for all the production that was best performed in the region. People seldom leave their homes when other opportunities are no better. To induce people to move, wages were increased. The same process occurred elsewhere, such as in the Pacific Northwest forests. People were attracted by high wages to fill jobs in saw mills.
Industry concentration with unionization also accentuated the phenomenon of high wage for low-skilled work. The Big Three automakers of the 1950s (General Motors, Ford and Chrysler) faced very little competition. Their union would demand similar wages from each company, so fighting the union offered no competitive advantage for a single company. Higher costs would be passed on to consumers. But other manufacturing industries at this time, such as apparel, were much more competitive. One company's negotiated union agreement would not be applied to other companies. And instead of just three main producers, apparel had myriad small, medium and large companies. Apparel also could be made in less capital-intensive factories, which led the industry to shift to wherever wages were lower. New England and New York City's garment district lost jobs to low-wage regions in the south. At the same time, car factories paid much higher wages. So high wages for low-skilled work is not a characteristic of manufacturing in general, but of certain times and certain places.
The decline of Rust Belt manufacturing jobs began with foreign car competition. Americans learned that Volkswagens offered reliable transportation at a low price. Then Toyotas, Datsuns and Hondas offered good value from both low prices and fuel efficiency. The Big Three's union contracts—which included high wages as well as complicated work rules—placed them at a disadvantage in a competitive market. Although that disadvantage led to fewer high-wage jobs, American consumers benefited from cars that cost less and had fewer defects.
Economic development efforts of many states and cities continued to lure manufacturers, hoping to add high-wage jobs for low-skilled workers. But competitive industries offered higher wages only for skills or to induce workers to do dangerous or unpleasant work.
The willingness to move for a job has fallen. In the 1960s, about 6.2 million people per year would move from one state to another. Recent figures are down to 4.5 million people, despite a larger population. Why would people be less willing move now? Unemployment is lower, so that impetus has dropped. Social safety nets have increased, so people are in less desperate straits. And the population has aged, with older folks less likely to move than people in their 20s and 30s.
With lower mobility, companies shift work to where potential workers already live. This is easier to do with a more service-oriented economy and where the manufacturing does not benefit so much from location. Automobile plants today are located far from the Rust Belt, including Texas, Mississippi, Alabama and Georgia.
The competitive process in our economy is complicated. Businesses and workers weigh the advantages of location as well as the effects of wage changes. Company leaders hoping for a stronger economy should not expect much benefit from the current push for manufacturing in the United States. Trying to ride a dying wave will yield far less than focusing on customer satisfaction, production efficiency and long-run employment strategy.