Why manufacturing isn't making jobs

After more than 25 years in manufacturing, Deborah Gillespie was laid off from her quality-assurance job at Hitachi in 2005, and she decided to look for a work in a field where her job would not be sent abroad."It scared me to change," said Gillespie, now a medical coder with a large insurance company, "but it scared me more to stay in manufacturing."

The state's manufacturing sector shed almost a fourth of its work force between 2001 and 2008, while its output increased by 5 percent.

Since 1998, more than 151,000 manufacturing workers here have lost their jobs while South Carolina's total employment grew by approximately 70,000 jobs.

"Manufacturing in America is flourishing," said Bruce Yandle, dean emeritus of Clemson University's College of Business and Behavioral Science. But "manufacturing output and manufacturing employment are two very different things."

Manufacturing has approximately the same number of production workers as it did in 1937, Yandle said, but "we are producing many-fold more output."

The exporting of manufacturing jobs by U.S. companies to countries where the cost of labor is cheaper is well documented.

But it's also true that American manufacturing workers are dramatically more productive than they've ever been, with productivity soaring during the recession to the point that many economists are predicting a recovery without a corresponding rebound in factory hiring.

""There has to be something else in the economy to absorb those workers," said Don Schunk, research economist with Coastal Carolina University. "We don't do that so well. In the past 10 to 15 years, we have seemed to hit a wall in creating new opportunities. Usually, economists talk about productivity gains in glowing terms because it leads to higher income and salary for workers."

But if productivity gains continue without the creation of new jobs elsewhere, Schunk said "the standard of living can fall and economic growth can be held back" as it was in the 1970s and 1980s. He said he does not consider this a likely outcome.

Mark Perry, professor of economics and finance at the University of Michigan-Flint, said that each of the manufacturing sector's 11.6 million workers produced an all-time average high of $234,220 in November, according to Federal Reserve data.

Each South Carolina manufacturing employee was responsible for an average production worth $103,953 in 2008, up from an average of $76,360 in 2001. South Carolina had 211,900 manufacturing employees in November.

"Workers today produce twice as much manufacturing output as their counterparts did in the early 1990s and three times as much in the early 1980s, thanks to innovation and advances in technology that have made today's workers the most productive in history," Perry said.

And that's true in South Carolina and the rest of the country.

"The past manufacturing sector in South Carolina was characterized as a big plant with a big parking lot," Yandle said. "The future will be large plants with small parking lots. Productivity is the name of the game."

Productivity comes from improved technology, including robots, the Internet and faster, more efficient computing.

For example, each time BMW has completed a major expansion at its Greer plant, its assembly line becomes more automated, adding robots and decreasing actual handling by employees.

In addition, Schunk said, global competition does have an effect as does "outsourcing" some jobs - food service, maintenance, grounds, accounting and contract production workers - to other domestic firms.

In a crude measure, if "disintegrated jobs" - those outsourced domestically and usually found in the professional services sector - are added to manufacturing employment, the result is "sort of flat" to slightly negative, Yandle said.