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OM in the News: Manufacturing’s Mirage

April 10, 2013

These are good times for Libbey, a 125-year-old American glassmaker that nearly went bankrupt 4 years ago, reports The New York Times (April 2, 2013). Its sales are at a record high and its energy-intensive factories saved more than $5 million in 2012 as natural gas prices fell. Despite all the upbeat news, however, Libbey recently announced it would lay off 200 workers at its Louisiana plant. Libbey’s decision is just one example of why manufacturing is likely to fall far short of the claims that millions of new factory jobs are about to be created in the U.S. because of the unlocking of abundant supplies of domestic energy.

“Even though the U.S. is more competitive globally, manufacturing doesn’t give you the kind of direct job creation it did in years past,” says one expert. “At the end of the day, there aren’t as many people on the factory floor.” Indeed, while the sector has added 500,000 jobs since the recession ended and the value of what the nation’s factories churn out is close to a high, there are nonetheless 2 million fewer manufacturing workers today than in 2007. The share of jobs in manufacturing has been on a nearly uninterrupted downward slope for 50 years, now accounting for less than 9% of all employment.

A recent study by the American Chemistry Council (ACA) estimated that increased gas production could create 200,000 jobs in the broader manufacturing sector, including several thousand in the glass industry. “It’s resulting in a renaissance in manufacturing,” says their economist. But glass industry veterans say cheaper natural gas isn’t a game changer in terms of jobs, however beneficial the cost savings are. Pressure from inexpensive imports remains intense, and labor in Mexico and China is still cheaper than here.

Other industries identified by ACA as potential winners from the energy boom, like paper producers and foundries, have continued to lose jobs. But nearly all of the U.S. manufacturers that survived the lean years of the last decade are globally competitive companies that depend on high productivity and advanced technology for their success more than masses of assembly line workers.

Discussion questions:

1. Will manufacturing job levels ever return to the 1960s levels? Why?

2. Which is more important–job creation or productivity?

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