What's Killing Manufacturing?

Via D29, an answer that may surprise:
“Wages?” I ask. 
His dark eyebrows arch as if I were clueless, then he explains the reality of running a fab -- an electronics fabrication factory. “Wages have nothing to do with it. The total wage burden in a fab is 10 percent. When I move a fab to Asia, I might lose 10 percent of my product just in theft.” 
I’m startled. “So what is it?” 
“Everything else. Taxes, infrastructure, workforce training, permits, health care."
Take tax policy. Historically, manufacturing was the high-wage sector of the economy -- manufacturing jobs still pay about 30 percent more than service jobs in education and health care -- so tax policy milked it. Manufacturing companies, in the old days, actually paid the corporate income taxes that many others avoided. Commodity producers (oil, timber, agribusiness) lobbied for, and received, federal subsidies, with investors in oil and gas wells simply voiding corporate income taxes on the profits they earned. Banking, retail and services found their own ways around taxes, often by offshoring intellectual property or shifting profit to tax havens. Eventually, manufacturers figured out how to duck taxes as well -- by going overseas. 
Yet it isn’t just taxes. Wind turbines, for example, are enormous, heavy and expensive to transport -- so there is a big advantage to fabricating them close to the installation point. But consider the predicament of the Spanish wind manufacturer Gamesa Corporacion Tecnologica SA after it began operations in Pennsylvania. Because the George W. Bush administration’s Department of Transportation wouldn’t establish uniform standards for transporting the enormous turbine blades, each state followed its own rules. Whenever a blade crossed a state line it had to be unloaded by a construction crane and then reloaded to conform to the next state’s specifications.


bthun said...

"“Wages have nothing to do with it. The total wage burden in a fab is 10 percent. When I move a fab to Asia, I might lose 10 percent of my product just in theft.

As I've heard friends from up north exclaim, badda boom, badda bing!

Having worked on the team designing the off-shoring process for a certain BACC*, I know for a fact that the actual wage component of labor costs was but a very small contributor comprising the overall need of the corporation to offshore high tech jobs along with the attendant management jobs, and facilities costs, etc. a few years ago.

I wish I had the patience to argue with the folks who spew forth with the evil corporations export jobs to save wage expense boilerplate propaganda.

*sigh* Yeah, I would attempt the appeal to reason with the sources of the spewage... did it not so often turn out to be an exercise in futility. All the more reason to appreciate those who will take the time and effort, so, ah, thanks Grim and Dad, etc., etc., etc.

*Behemoth Arsed Computer Corporation

Anonymous said...

Reading the comments proves there's no shame in Bthun passing up "the appeal to reason". It's hard to imagine such a challenging article eliciting that stream of PC bullshit and political nonsense.

Mr. Pope's going to follow up with how we got here and how to fix it. The commenters demonstrate how we got here and how damned difficult it's going to be to fix it.

In Bloomberg too! I thought I was on the Daily Beast. This also provides a peek into the Obama strategy to target the votes of those feeding off the government tit and of college educated professionals. They're counting on a gold mine of worthless leeches in both demographics.

Dad29 said...

You'll note that his third installment is full of crap. (See my blog).

Having said that, the "regs, laws, and general crapola" in most States (and from the FedGov) are a very significant burden.