Old Jobs, New Jobs: Do They Match Up?

“To simply measure manufacturing health based on the number of jobs, that’s not fair.”

                                 Todd Teske, CEO, Briggs & Stratton

The transformation of Midwestern manufacturing, from its powerhouse past to its uncertain future, continues to play itself out. Here are some capsule insights into what’s happening now:

• Manufacturing in the Midwest is vigorous, even growing. But the number of jobs on factory floors continues to fall, with no end in sight. The reason is automation.
• High-end or advanced manufacturing is cited by most experts as the wave of the future. But no one knows how many jobs it will create.
• Solid statistics on the number of manufacturing-related jobs are hard to find. If the old-line assembly line jobs on factory floors are vanishing, companies require a new breed of “indirect employees,” high-skill engineers or IT specialists, who don’t show up in the manufacturing jobs figures, as the government counts them.
• Presumably, these “indirect” jobs will pay well. This presumption may be right or wrong. Earnings for college graduates are falling and it’s logical to assume that jobs in a fiercely competitive field such as industry are part of this slide.

I’ve long argued that the only measure of an economy is the well-being of the people who live within it. The quote at the top of this posting says that manufacturing is doing fine but the people who depend on manufacturing for their living aren’t – and that’s OK.

If this is our economic future, we’ve got a problem.    

A good place to view these trends is Wisconsin, which ranks with Indiana as the nation’s leading industrial state – that is, the states that rely on manufacturing for the biggest share of their jobs and income. John Schmid of the Milwaukee Journal-Sentinel keeps a sharp eye on manufacturing employment, nationally and in the state, and his latest article wrestles with these conflicting figures.

Schmid’s main point is that Wisconsin’s manufacturing output has been going up for four years but its manufacturing employment has been going down.

One of those manufacturing companies is Briggs & Stratton Corp., a Milwaukee-area leader in small gasoline engines which has kept itself strong in both Wisconsin and the nation – but only by cutting jobs.

In the 1980s, Briggs had 12,000 workers in Milwaukee. Thirty years later, it’s producing more but with half as many workers – 6,100 worldwide, with 5,000 in the U.S. and 1,200 in Milwaukee.

As Teske, the company’s CEO, said, this is the way it has to be.

“We have gotten substantially more productive,” he told Schmid. “We have more robotics now in our manufacturing process. We took out heads, but we still have people that maintain those robots.”

This isn’t good enough. The Midwestern economy has been based for the past century on mass production from big companies – auto, steel, auto parts, appliances – that employed millions of workers on vast assembly lines, all belonging to unions who won both decent wages and steady employment.

As everyone knows, that era is gone forever, and so are most of those jobs. That’s half of our problem. The other half is what’s going to replace this industrial economy and who’s going to employ those workers.

Will it be the new, 21^st-century versions of industry, the advanced manufacturing? Will it be the researchers, engineers, IT specialists – the highly-educated and well-paid workers who do the jobs that robots can’t do or who tell the robots what to do?

As Schmid writes, it’s hard to measure this impact. The best data come from the government’s Bureau of Labor Statistics. But the BLS considers manufacturing workers as those who actually work in factories. The new “indirect employees” work outside factories or in firms that contract with factories, so they fall into other, more vague categories.

Schmid quotes Milwaukee’s Rockwell Automation Inc., which makes systems and software for factories, as saying that this new “21^st-century manufacturing ecosystem” actually employs more new workers now than the workers laid off from the heavy industry of old. Moreover, it pays better.

Is this accurate? We better hope so. But all the anecdotal information, plus data, indicates this is wishful thinking. Otherwise, employment figures would be stronger, median wages would be going up, and we wouldn’t be seeing so much growing inequality.

What seems to be happening is solid growth in relatively well-paid jobs for college graduates with STEM (science, technology, engineering and math) skills who live in global oases, including college towns, where these companies locate and grow.

There also seems to be a market for highly-skilled workers with post-secondary education, mostly in community colleges, who are needed in factories to do the work that robots can’t do. These factories say they can’t find these workers and would hire them if they exist.

At the other end, there is little work for workers with routine skills – the sort of workers who used to man assembly lines.

Unhappily, the pay situation for all three strata of these workers isn’t very bright.

A recent study shows that the real average earnings of college grads with bachelor’s degrees, aged 25 to 34, have gone down by 15 percent in the last decade. An earlier blog posting here reported that, while employers need skilled workers, they aren’t paying them enough to justify the skills. And the routine workers at the bottom are driving fork lifts or stocking shelves for not much more than minimum wages.

What does this mean for Wisconsin or other Midwestern states where manufacturing still accounts for 16 percent of all jobs, about twice the national average? Many of these jobs – the ones the BLS still classifies as “manufacturing” – will keep disappearing. New “indirect” jobs will be created but, despite what Rockwell says, there’s no sign they will be either plentiful or highly-paid. And the inequality gap will keep growing.