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Obama’s Jobs Plan Leaves Out Manufacturing

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Productivity is up, so where are the jobs?

When President Obama announced his jobs plan last week, he proclaimed that more goods should be produced domestically to help bolster the struggling manufacturing sector.

“If Americans can buy Kias and Hyundais, I want to see folks in South Korea driving Fords and Chevys and Chryslers. I want to see more products sold around the world stamped with three proud words: ‘Made in America,’ ” he said.

The declaration, which was prefaced earlier by his support for new free trade agreements, drew applause from members of Congress. But some experts are saying the U.S. has not established a clear plan on how to revive the manufacturing industry beyond outlining broad goals, adding that politicians have not paid enough attention to the decline.

Manufacturing is projected to have the highest productivity rate across all sectors by 2018, but jobs are not expected to grow, a new study has found. With companies already eliminating jobs or moving them overseas, that hurts areas like the Midwest, where manufacturing jobs have been disappearing. According to a new report by Georgetown University’s Center on Education and the Workforce, the industrial heartland was hardest hit by the economic crisis. More than 610,000 manufacturing jobs have been eliminated since 2007, representing nearly one-third of the sector’s national job losses during the recession.

With an emphasis on more service-oriented labor, many of these jobs that provided decent pay with few skills are gone for good, the report said. Two million jobs will be added by 2018, but only because workers are retiring. Many of the Midwestern states have shifted toward other industries like healthcare and education. That shift is projected to create demand for higher skilled workers with college degrees, creating a gap for middle-income earners hoping to find mid-skilled work.

And overall, the manufacturing industry has contributed a smaller share to the country’s gross domestic product. More than 60 years ago, the industry accounted for 28 percent of the U.S. economy. Today, it has fallen to 11.7 percent, indicating that the jobs are disappearing. In the Midwest, the manufacturing sector has fallen from 39 percent of jobs during the 1960s to 12 percent today, only slightly higher than the national average of 9 percent.

Yet even though the GDP has fallen, companies are still relying on manufacturing employees to work harder. In 2010, worker productivity was three times higher than it was in 1970, with each employee, on average, now producing $300,000. But jobs are not expected to grow in the future despite higher output. The report writes:

Our projections show that manufacturing output will grow from roughly $4.0 trillion in 2008 to $4.9 trillion in 2018, ranking it as America’s largest industry when measured by contributions to national output. But that will not translate to job growth. In fact, even as manufacturing’s output explodes over the next decade, its workforce will contract.

Even though many Americans are working harder than in the past, many multinational companies have shifted much of their production abroad. During the last decade, corporations have cut 2.9 million domestic jobs but added 2.4 million abroad. Those companies include General Electric, headed by chief executive Jeffrey Immelt, who heads Obama’s Job Council.

The Center for American Progress explains why it’s important to keep operation and manufacturing jobs in the domestic sphere:

When the basic manufacturing leaves, the feedback loop from the manufacturing floor to the rest of a manufacturing operation—a critical element in the innovative process—is eventually broken. To maintain that feedback loop, companies need to move higher-skill jobs to where they do their manufacturing.

And with those jobs goes American leadership in technology and innovation. This is why having a critical mass of both manufacturing and associated service jobs in the United States matters. The “industrial commons” that comes from the cross-fertilization and engagement of a community of experts in industry, academia, and government is vital to our nation’s economic competitiveness.

The Obama administration has instituted some initiatives. In June, the president announced a $500 million plan to spur jobs and technological innovation as part of a manufacturing partnership with businesses, universities and government. As he said in his speech, some skills training are also offered at community colleges.

The specific plan, however, does not appear concrete. An MIT economist told the New York Times that the U.S. is the only industrial power without a “strategy or even a procedure for thinking through what must be done when it comes to manufacturing.” Others point to the ostensible decline and shift toward financial and real estate sectors as a reason why politicians aren’t paying attention.

The old days of manufacturing may be long gone, but this is an industry that is slated to soon have higher productivity output than any other in the country; it’s also an industry whose decline can further widen the middle class gulf unless adequate education and training programs are put in place. Tax cuts and new spending are a large part of Obama’s jobs plan, but the consequences of neglecting the manufacturing sector is hard to ignore.

This blog originally appeared in Working in These Times on September 14, 2011. Reprinted with permission.

About the Author: Akito Yoshikane is a freelance writer and reporter for Kyodo News. He regularly contributes to the In These Times blog covering labor and workplace issues. He lives in New York City.

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Postal Workers to USPS: Don’t Shred Our Contract

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The U.S. Postal Service’s plans to cut more than 220,000 jobs—that’s right, nearly a quarter million—and break a collective bargaining agreement has its employee unions up in arms.

The financially-strapped U.S. Postal Service revealed last week that by 2015 it plans to trim its workforce by nearly one-third, close 300 processing facilities and institute its own health and retirement system to replace existing federal programs, according to several reports. About 100,000 of the jobs are expected to be eliminated through attrition.

The proposal, which requires congressional approval, has drawn concern from unions and labor observers for its potential to further erode the middle class. And it’s renewed fears that other employers will soon follow with their own cost-cutting measures.

Neither snow, nor rain, nor heat—nor collective bargaining contracts?—will stay the USPS from the swift completion of its appointed rounds. (William Thomas Cain/GETTY IMAGES)

The decision comes after the USPS has suffered continuous declines in recent years due to drops in mail volume, advertising, an increase toward online communication and private competitors like FedEx and UPS. The postal service makes most of its revenue through postage fees and receives little support from taxpayers.

As a result, the agency posted $8 billion in losses last year and $20 billion in the past four. Moreover, the postal service expects to be insolvent by next month when the fiscal year ends.

The USPS has already implemented a number of cost-cutting moves, including plans to reduce their current career workforce of 583,908. More than 110,000 jobs have been eliminated in the last four years and the AP reports that currently 7,500 administrative staff jobs are also in the process of being removed. In June, the agency stopped funding pension contributions, which it says are over-funded. Almost 3,700 post offices across the country, mostly in rural areas, could be eliminated. Saturday service may also cease.

The agency also plans to reduce labor expenses. Last week, the Washington Post obtained “white papers” (PDF link) written by the USPS that seek to withdraw its employees from the Federal Employees Health Benefits Program, essentially because they view as it as too costly and want greater employee contributions.

The postal service also wants legislative changes that would allow collective bargaining agreements to be broken in order to implement layoffs. USPS workers represented by the American Postal Workers Union (APWU) with more than six years experience are protected. The National Association of Letter Carriers‘s (NALC) contract also has a clause restricting layoffs.

There’s plenty of disagreement about whether Congress’ decision to nullify a labor contract would be unprecedented, and whether it’s merely a reflection of the current employment climate or a ploy to get an anemic legislature to find a solution. A USPS  spokesman has said that “everything is on the table.”

Bill Fletcher of the American Federation of Government Employees union tells the Washington Post: “When you break a contract, basically what you’re saying is that we have left the era of good-faith bargaining and negotiation and entered into employer unilateralism.”

University of California at Berkeley labor professor Harley Shaiken told Bloomberg News that the job cuts would be “politically damaging” to the Obama administration. He adds: “It would make the federal government the largest contract breaker in the country.”

The APWU, the NALC and the National Rural Letter Carriers’ Association have opposed the post office proposals and viewed it as an attack on their bargaining rights. The unions say that labor costs aren’t the source of the USPS’s budget crisis.

The labor groups instead point to a congressional mandate from 2006 known as the Postal Accountability and Enhancement Act. The measure requires the postal service to pay for the healthcare benefits of future retirees for the next 75 years, all within a 10-year period at the rate of $5.5 billion annually. It is the only federal agency with such a requirement. The payments started in 2007 and unions cite the pre-funding plan as the reason why the postal office has declared its inability to pay the future healthcare costs by September.

NALC President Fredric V. Roland wrote in an op-ed in the Baltimore Sun that the postal service would have been profitable during the downturn and losses would have been minimized if it weren’t for the pre-funding mandate.

The unions, however, are not asking to remove the legislative requirement but are instead pressing legislators to support a bill that would allow payments to be made using funds from a pension surplus. H.R. 1351, introduced by Rep. Stephen Lynch (D-MA), would address the budget crisis, maintain bargaining rights and avoid further cuts, the APWU and NCLA said.

“This responsible business move, with zero taxpayer involvement, would leave pensions and retiree health benefits fully funded well into the future while putting the USPS budget back on sound financial footing,” Roland said.

Meanwhile, a job that had been a staple for the middle-class mobility is being threatened, echoing similar reverberations in the private sector where Verizon workers are currently on strike. The USPS is scheduled to begin negotiations with the letter carriers union this week and the smaller National Postal Mail Handlers Union next week.

*This blog originally appeared in Working in These Times on August 17, 2001.

About the Author: Akito Yoshikane is a freelance writer and reporter for Kyodo News. He regularly contributes to the In These Times blog covering labor and workplace issues. He lives in New York City.

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