26 May 2013

US manufacturing back in fashion

8:43 am on 26 May 2013

The phrase ''Made in the USA'' could be coming back into fashion. After years of shedding jobs, manufacturing industries in the United States are employing more people again.

The United States President Barack Obama is making much of it, pinning hopes of an economic revival on the return of manufacturing.

For decades, out-sourcing was all the rage making products in countries where wages were lower.

But now insourcing is the future for some American companies.

After General Electric invested $US1 billion at a plant in Louisville, Kentucky, which makes cylindrical water heaters, it is making new products for the first time in 55 years.

''Two years ago this place was full of cobwebs, old steel and no lights,'' supervisor Dirk Bowman told the BBC. ''Now we are actually making a product competitively."

"What drove this is competitiveness. We came back because we can make this product here for about a tenth of the labour we use in China.

"So we are more efficient, we waste less time, and then we redesigned it so it is a better product."

Last year the plant doubled its workforce, hiring 6000 more people.

The BBC reports a new global economic reality is behind the story of jobs returning to the United States.

As wages went up in China, they went down at GE. The company cut a deal with the union: while existing workers would still get up to $US26 an hour, new ones would be paid only $US14 an hour.

Also the discovery of huge reserves of shale gas and oil in North America keeps energy costs low in the United States even as they rise in Asia.

But economist Julie Heath from Cincinnati University has a word of caution for those who believe the old days will return.

"Anytime you bring jobs back there is a positive effect on the American economy," she said.

"The problem is they are a different kind of job. The jobs that are coming back are typically lower pay, sometimes lower benefits, than the jobs that were lost.

"Half the jobs lost in the recession were mid-pay jobs - jobs that could support a middle-class lifestyle. Since the recovery, of the 3.5 million jobs that have come back, only 2% are mid-pay jobs."