Todays Labor Shortage

Todays Labor Shortage

Large-scale employment is not manufacturing priority

Robert Brooks
Editor

It seems like every few days brings news of another metalcaster adding capacity to supply growing domestic demand, which is welcome, of course. It fits with increasingly frequent reports of a broad-scale industrial expansion, the latest data point of which is that U.S. factory output is just 5% below its historic peak, in 2007.

More puzzling to me are the reports that the problem of U.S. unemployment following the recent recession is now under control. The Bureau of Labor Statistics released monthly data showing the U.S. economy added 227,000 jobs in February, keeping unemployment rate even at 8.3%. Keeping the rate even means that balancing those 227,000 new jobs were a similar number of jobs that were lost.

Moreover, the jobs that were gained don’t seem likely to support a new burst of consumer activity. Individuals’ average income has increased less than 2% over the past year, and after- tax per capita income has declined.

Even the 8.3% unemployment rate is a nettlesome figure, because it’s only plausible if we accept that the size of the labor force has declined since the last recession started in 2008. If the workforce were the same size now, today’s unemployment figure would be over 10%. And, if we gather in all the discouraged individuals who have given up seeking employment the rate would be almost 15%. Most troubling to me, however, is the low level of expectations revealed by tolerance for 8.3% unemployment.

I cannot fault the employers; undoubtedly they are doing as much as they can to contribute to the economic expansion, but adding new employees in large volumes plainly is not a priority in that effort.

Without any data, I arrive at a similar conclusion each time I read the news of metalcasters’ expansion plans. There’s no clear trend among the types of foundries with capital projects underway or in development. They’re large and small operations, ferrous and nonferrous castings producers. They’re in the Midwest and the Southeast. One thing they seem to have in common is a willingness to add 20-40 new jobs to fulfill their growth plans. The announcements all seem to offer estimates in that numerical range – and for the ways that metalcasting is done now, those will be considerable increases.

But, 25 jobs here or 35 jobs there is only inching the unemployment rate down from 8.3%, and for the recovery to take on the really dynamic quality that everyone would want there needs to be new business creation. New plants and new companies have to be started, jolting the employment tables with hundreds of workers at a time. Those workers’ new incomes would expand the economic activity by way of consumer spending, which has a tonic effect on businesses new and old, and provides creative energy to prolong economic growth.

Manufacturers like metalcasters have been expected by too many to lead this recovery, and though they have done an admirable job in the past two years, large-scale employment isn’t really a manufacturing priority any longer.

There was time, of course, when locating a new business meant locating a good pool of laborers. Now, manufacturers realize that affordable labor costs are pretty far down their list of concerns when planning an expansion or startup: production technology, product research and development, and customer service are all more important to the task of establishing a company. Of course, employers need workers, but the numbersof workers is not as important as the fact that they must be well educated and willing to learn new skills. They must be people who are self-reliant and responsible, and who have enough self-discipline to recognize that their personal gain will be derived from organizational success. And they must be individuals who are ready to make the organization’s growth their own priority.

Manufacturers that want thousands of workers to produce commodity goods, or to assembly vast quantities of consumer products, will continue to seek cheap labor overseas. Economic growth on that model is a long, long route to individual prosperity in any case. The growth now in progress in the U.S. economy is coming from companies that prioritize product quality, not quantity. They don’t need more workers, but we need more of those organizations, and we need economic policies that will encourage them to get started.

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