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Yes, we do still make things in America

Even as U.S. companies move production of everything from board games to dishwashers to other countries, American factories churn out billions of dollars worth of goods.
Boeing Co. 747-8 Freighter airplanes are shown on the factory floor, Monday, Feb. 8, 2010, in Everett, Wash. (AP Photo/Ted S. Warren)Ted S. Warren / AP

Walk into any big-box store in the country and you’d be forgiven for thinking that nothing is made in America anymore.

So many of our everyday purchases — the clothes we wear, the toys our children play with and the electronic devices we rely on for work and entertainment — are manufactured abroad.

Nearly everyone knows someone who lost a job in manufacturing in recent years. The recession that began in December 2007 has been devastating for the sector, leading to a steep drop in production and eliminating more than 2 million manufacturing jobs, about one out of every seven positions, exacerbating a long-term trend.

Yet even as countless U.S. companies have moved production to other countries, American factories continue to churn out hundreds of billions of dollars worth of goods annually — everything from Ford trucks and Boeing airplanes to Gordon & Smith surfboards and Viking appliances. U.S. plants also still produce, assemble or manufacture tons of fertilizers, cosmetics, pharmaceuticals, computer chip components and specialized industrial machine parts.

“There’s been a loss of manufacturing jobs, but that’s not the same as a loss of manufacturing,” said Ken Mayland, an economist with ClearView Economics who works with several manufacturing trade associations.

The U.S. manufacturing sector gradually has been transformed to focus primarily on sophisticated items that require fewer skilled workers to produce but create far greater value than the T-shirts, tennis balls and other consumer products that are mainly made overseas. Some U.S. factories also have been able to continue producing lower cost items, such as housecleaners or toothpaste, using highly automated machinery and few people.

In fact, the dollar value of the manufacturing sector's output generally rose between 1987 and 2007, according the Bureau of Economic Analysis, even as its importance as an employer fell.

As manufacturing employment has declined, the service sector has become the chief engine of U.S. employment growth. While service sector jobs in the financial industry, real estate, law and health care provide a middle-class livelihood for many, the manufacturing sector generally has been a more lucrative option for people with lower skills or less education.

“Manufacturing still remains one of the best industries in the country in terms of wages and benefits for workers who don’t have a college degree,” said Robert E. Scott, senior international economist with the Economic Policy Institute.

The manufacturing sector also traditionally has provided a more promising career path for people who start on the factory floor but aspire to management, said David Wyss, chief economist with Standard & Poor's. That's not necessarily the case in other fields.

"You're not going to start out as an orderly in a hospital and work your way up to chief surgeon," he said.

Red flags
Economists and policy experts also say there is reason to be concerned that the United States is beginning to rely too much on other countries to manufacture even high-value products.

One major worry is that the United States, by ceding more and more skilled, technical manufacturing work to other countries, is slowly beginning to lose its traditional edge in research and development.

Such concerns are particularly acute in emerging areas such as cutting-edge solar technology and compact fluorescent lighting, where foreign companies aren’t just manufacturing products but increasingly also are doing the design and product development work.

“When you separate the production from the innovation, the innovation leaves. It goes, and it goes where the production is,” said Scott Paul, executive director of the Alliance for American Manufacturing, which represents manufacturers and steelworkers.

The U.S. also is at risk of losing the infrastructure and suppliers that would be needed to create vital, high-tech manufacturing sectors in these hot new fields.

“There are still some industries where the U.S. manufacturing (sector) is very present and continues to have advantages,” said Tim Hanley, a vice chairman at professional services firm Deloitte & Touche who specializes in industrial products. But, he adds, “In some other industries, including some of the high-tech ones, other countries candidly have such an advantage.”

The problem has been exacerbated by the fact that emerging economies such as China and India have a growing number of skilled engineers and scientists, while the U.S. has had trouble getting enough students interested in those fields.

To maintain a robust economy that includes high-value manufacturing, some say the United States needs to invest more in a better education system and scientific research.

“You can’t compete in high-tech industries without an educated work force,” Wyss said.

Wyss and others also say it's worrisome that the United States has for decades been buying more from other countries than we sell to them. The U.S. trade deficit, which counts both goods and services, stood at $378.6 billion in 2009, having reached a peak of $760.4 billion in 2006.

“If you’re buying stuff from overseas, you’ve got to sell stuff overseas. We certainly do, but I don’t think you can do it entirely with services,” Wyss said.

Some products are made in America because it would be too expensive to make them elsewhere and import them for U.S. consumers. That includes things like household cleaners, shampoo and food products, as well as large, unwieldy items built mainly for the U.S. market, such as recreational vehicles or heavy construction equipment.

High-value items, such as medical devices and semiconductors, are made here because their complexity requires highly skilled workers and close coordination with designers and engineers.

Many defense-related and technical products are still made in America at least in part because of security or confidentiality concerns.

Mostly missing from the U.S. manufacturing landscape are familiar consumer products such as toys, apparel and home electronics, which generally are assembled by large numbers of low-skilled workers. Those products have been moving to developing nations for decades, and economists say there’s little chance that tide will turn.

“There are places where we aren’t going to be competitive,” said Scott of EPI. “We’re not going to make clothing, for the most part. … We’re not going to make much in the way of footwear, toys, furniture. Those things aren’t going to come back.”

Foreign companies, domestic productionManufacturers often move to where the market is, so many made-in-America products are produced by foreign-owned companies. That includes everything from deodorant to cars. The National Association of Manufacturers estimates that one of every 12 U.S. manufacturing workers is employed by a foreign-owned firm.

On the flip side, U.S. companies making everything from soft drinks to construction equipment have moved production overseas in part to reach the biggest growth markets.

“Ten-plus years ago, companies sought out low-cost labor markets because it was cheaper to manufacture and bring these things back to the United States,” said Hanley, of Deloitte & Touche. “Increasingly now, global manufacturers have to have a presence in the developing market … because there’s where their customers are.”

When people think of American manufacturing, they tend to think of behemoth companies such as Caterpillar and General Motors. While those companies are certainly key to the health of U.S. manufacturing, the sector also relies on many small, privately owned businesses that employ fewer than 100 workers.

Many of these manufacturers make niche products most Americans have never heard of, such as specialized screws, and then supply larger companies here and abroad. They offer another reason for the continued presence of U.S. manufacturers.

“It’s not like a Fortune 500 company that has this sharp pencil and says, ‘We can save three pennies if we move this to Mexico,’ ” said Mayland, the economist. “These are family businesses. They’re not going to move.”

No going backAs the U.S. economy moves forward in a fragile recovery, economists have been heartened to see slight gains in manufacturing jobs over the past couple months.

Nevertheless, the recovery is expected to be slow and difficult. And few think that the United States will return to an era in which millions more workers with relatively low skills and education can find long-term manufacturing jobs that fund a middle-class lifestyle.

Thanks to technological gains, such jobs also are disappearing in the United Kingdom, Japan, Germany, France and even China, said David Huether, chief economist with the National Association of Manufacturers.

“This reduction in manufacturing employment is not a U.S. phenomenon, it’s a global phenomenon,’” Huether said.

Mark J. Perry, an economist at the University of Michigan in Flint, thinks a more likely scenario is that manufacturing employs a smaller group of workers who are more highly skilled, highly productive and highly compensated.

Perry likens the situation to America’s switch from a largely agrarian economy, in which most people worked on a family farm but farming was generally inefficient and back-breaking.

“I don’t think anybody would want to go back to the early days where everybody worked on the farm,” Perry said.

Still, others say the recession has been a wake-up call to the possibility that the American economy should make more of an overt investment in manufacturing.

That leaves open the question of what, exactly, the U.S. manufacturing sector of the future should look like.

“I think it’s a mistake to say, ‘Is something that was in existence in 1975 and 1982 coming back?’ ” said Huether, of the National Association of Manufacturers. “It’s just going to be … what can we make competitively?”