Though it's often cited as an example of declining manufacturing prowess, General Electric, once the most valuable company on the planet, is doing pretty well. The industrial conglomerate earned $8 billion last year on revenue of $124 billion, and its various business units are busy these days on such tasks as upgrading gas turbines at a major energy plant, creating water-quality monitoring systems, and, just a few weeks ago, signing a $5.5 billion contract to develop two power plants.
GE is building things and it's creating jobs. The problem is, almost none of those jobs are in the U.S. It used to make trains in Erie, PA, a major source of employment in the area, and recently landed a $2.6billion contract to supply trains to India. Unfortunately for those laid off from its transportation plant in Erie, the Indian contract will see GE pour $200 million of investment in India, where they'll be building the trains. The jobs aren't coming back.
Manufacturing has been shrinking in this country since the late 1970s, when the number of manufacturing jobs peaked at 19 million. Counted as a share of the labor force, though, manufacturing jobs have been on the decline since 1953. That year, 26 percent of people in the labor force had a manufacturing job; today, the share is 8 percent.
GE is emblematic of the conundrum posed by manufacturing in America right now. The U.S. remains the world's second-largest manufacturing power, behind China, but the growth of the sector here has been anemic. Despite announcements and promises of job-creating factories, manufacturing output has barely budged since February.
The U.S. actually produces a lot of things. But thanks to technological innovations, producing them often doesn't create many jobs, according to Ken Louie, associate professor of economics at Penn State Behrend. Automation is the big job-killer.
"We can now produce more output using fewer workers," Louie explained.
The manufacturers that have survived here rely on high-tech, high-value products, like large cars or home appliances that require far fewer people to assemble than they did in the last century. Newer industries, like manufacturing of computers and electronics, follow that pattern. Electronics, which are largely built by assembly line robots, account for half of the manufacturing growth of the last 20 years, by one account.
That puts the population in towns like Erie, Pennsylvania, or their one and only responsibility": shareholder profits., which once provided the manpower for old-school factories, in a tough spot. CBSN Originals revisits Erie for a second documentary on the manufacturing sector there, airing for the first time on Monday, June 19. Erie and other small cities thrived during a time when America's own middle class and manufacturers' consumer base was growing. Today, America's middle-income ranks are shrinking; meanwhile, they are swelling in places like China and India -- whose overall economies are growing at more than twice the U.S. rate. Thus, when global conglomerates decide where to put new factories, they're more than likely to locate them in these fast-growing regions, often because that's where the customers are. It doesn't hurt that the labor there is also cheaper, making it easier for the companies to pursue "
Of course, there are still plenty of companies producing for the American consumer, and doing it domestically: from small-batch food manufacturers to makers of high-end sporting equipment. It's far from impossible to make a good product domestically, and to do so at a profit. But to go back to a 1950s-level of manufacturing, those factories would need to employ 7 million more people than they do now. And that kind of math seems pretty unlikely.