by Guest Author Dan Flemming, a retired Systems Analyst and Logistician. He has utilized dozens of defense systems to identify bottlenecks, problems, systemic issues, and solutions across agencies within the Department of Defense.
Editor’s note: A number of references have been made recently to 50,000 manufacturing plant closings in the U.S. Most have referred to the last decade as the time frame, although one cited 1994 as the start date. The best known citation was made June 27 in a tweet from Sen. Bernie Sanders (I,VT). Other citations found include Scott Paul, Executive Director, Alliance for American Manufacturing, Huffington Post 2009 article (Oct. 23, 2009); Huffington Post comments from Bill Loney (July 26) and Miles Long (May 6); Video Rebel’s Blog (July 24); and TradeNewsWire (April 28). Guest author Dan Flemming has undertaken a fact check investigation of the 50,000 plant closings.
The question of the number of manufacturing plant closings in recent years in the U.S. is a good one. I have not found what I consider hard data to substantiate the 50,000 that several people have quoted. When I think of manufacturing plants, I think big; a closed plant might average 1,000 lost jobs, or more. There is something going on here. I don’t think it is true that we lost 50K in manufacturing facilities, at least not the big plants that immediately came to mind. Otherwise, our workforce was a lot larger than the total individual Federal Tax Returns which were of the order of 100M or so in the 80s, around 116M by 1995 and 138M in 2007. If we closed 50,000 plants with 1,000 workers each, that would have been 50M jobs lost. That doesn’t sound reasonable to me.
The economic multiplier for each manufacturing job is 2.9. That would mean that 145M jobs total would have been lost with my starting estimate of 1,000 employee average per plant. That is getting ridiculous – we have never had that large a level of employment. Compare that number to the 8M jobs lost at the depth of The Great Recession and you can see how far off base my original estimate seems to be.
A quick web search revealed current numbers from source Econintersect and John Lounsbury, 20 February 2011, where it stated the trade deficit for manufactured goods was the dollar equivalent of 29M manufacturing jobs being lost overseas over the last 19 years. This would mean 29M / 50K = 580 jobs on average per USA Manufacturing shop. And 29M / 100M = Rate of Change 29% or maybe about 1/3 jobs lost going back to the late 80s. This would of course be a skewed curve rather than a bell shaped normative distribution: there are many more shops with fewer employees than plants with very large numbers of employees.
Again, the numbers present a problem because there of the multiplier effect of manufacturing jobs. It may be the multiplier effect is best understood as a “one way” relationship with one direct manufacturing job loss resulting in a total of 2.9 job losses in total. Thus the 29m job losses quoted by Econintersect might actually have been only 10M direct manufacturing jobs lost, with the other 19M in the multiplier (indirect) area.
Bureau of Labor Statistics Data
The U.S. Dept. of Labor reports employment in each economic sector and the data is analyzed and reported by the BLS (Bureau of Labor Statistics). From the mid-1980s through 2000 the number of people employed in manufacturing was quite constant in the 18M range. In 2000 the number was closer to 17M. By 2007 the number had declined to 14M. At the low point through much of 2010 manufacturing employment hovered around 11.5M and the latest data for June 2011 is 11.7 M.
From this data the number of manufacturing jobs lost in the past decade would be in the range of 6M to 6.5M. With the multiplier this is 18M jobs total, direct and indirect. That would give an average of 360 jobs per plant, around 120 direct and 240 indirect.
So the bottom line is that, if there were 50,000 manufacturing plant closings, the total job loss would have been perhaps 360 per plant, about 1/3 direct manufacturing employees and about 2/3 indirect. That puts the average size of each manufacturing plant just above 100 employees.
Obviously the U.S. did not decrease employment levels by either the 29M or the 18M. Many of these people found employment in other areas, although it may have been in lower paying service jobs or part-time work. The total job losses were certainly much less than 29M across the entire population. But the quality of jobs resulting may have been diminished. A master machinist certainly has a higher pay level and probably more professional satisfaction than a handy man or a Walmart greeter.
I find no authoritative source of data to support the number 50,000, although it has been widely quoted. But, whether the number is accurate or not, the talking point of losing 50K Manufacturing Facilities is PURE POLITICS. We are not talking about 50K large facilities. As we have found with our examination here, most manufacturers are going to have few employees. Some large portion, but less than half, of the “plants” would actually be “shops” employing less than 100 people.
The problem is more properly quantified by focusing on the millions of direct and indirect manufacturing jobs, which may be as many as 18 million or more. Some of these jobs have almost certainly not been replaced with other employment, as witnessed by the fact that employment is still about 7 million below 2007 levels and about 11 million below the 2007 levels scaled for population growth.
Politicians have not done a single thing to incentivize high school students or provide small grants for materials, have contests for new inventions, spread engineering grants at universities, or provide Federal Guidance, incentives, grants, that point toward business, engineering, or invention success. We have no apprenticeship programs in America today in spite of the fact that many believe that manufacturing has to be the backbone of a healthy economy, healthy future, and healthy minds.
https://econintersect.com/wordpress/?p=6089 (29M jobs lost in Manu)
https://econintersect.com/wordpress/?p=6089 (Manufacturing Multiplier)
The Future of the Dollar: What International Transactions Tell Us by Elliott Morss
Exporting Jobs by John Lounsbury
USA Trade Deficit Exports 1.3 million Jobs by Steven Hansen
U.S. Had to Export Jobs for Demographic Reasons by John B. Lounsbury