Manufacturing
Prior to World War II, manufacturing was regional in that large manufacturers had one or two plants within the same geographic area, usually within the same state or within 100 miles of each other. Products were then distributed throughout the country from those facilities. World War II brought the largest expansion of manufacturing in U.S. history. To reduce transportation costs and delays in getting military support to the ports, manufacturers opened new facilities within 200 – 300 miles of sea ports, major waterways and rail yards. These facilities augmented preexisting manufacturing in the local economies. At the close of the war, most of the military support manufacturing converted to consumer products.
Corporate executives had, by this time, realized that as more Americans were working and earning living wages, sales increased. With increased sales, profits increased which provided greater expansion of new and variants of existing products. Corporate income spurred technological innovations which brought about more consumer product manufacturing. The “Space Race” had started with the former Soviet Union launching Sputnik in 1957. In 1961 President Kennedy called on manufacturers and inventors to put the U.S. on the moon within a decade. Not since the late 1800s had the U.S. seen such fast technological innovation and growth.
Between the close of WWII and the oil embargo in the late 1970s, manufacturing continued to grow. Domestic manufacturing employment had peaked by 1980, although manufacturing remained stable. Despite accelerated growth in the financial industry, manufacturing started to decrease by 1990. Changes in tax and financial regulations caused domestic manufacturing to continue to decline. The North American Free Trade Agreement with additional corporate tax relief assisted more decline in U.S. manufacturing and by 2000 manufacturing employment had fallen by almost 25%. This reduced manufacturing employment was not noticed in the economy due to the low unemployment rate; average of 4% for 2000.
The 2007 recession exposed the lack of domestic manufacturing. Previous recessions had less impact on the economy because manufacturing was strong enough to facilitate faster recovery. The 2007 recession has held a higher unemployment rate, therefore a longer true economic recovery taking more than five years. With an overall manufacturing employment rate of less than 10% (one-fourth of peak as a percent) of the workforce, return-to-work options have been reduced to the service and retail industries.
Employment
The official unemployment rate for 2012 was 8.1%, roughly 12.5 million Americans. The true unemployment rate, which includes discouraged workers, was closer to 25%. At manufacturing employment peak approximately 42.4 million people worked in direct production jobs. At the end of 2012 approximately 14 million people were employed in manufacturing. An average of 1.23 million manufacturing jobs have been lost, however, unconfirmed estimates give 20 – 25 million of those were lost after 2003. These estimates are based on the number of people who became unemployed when manufacturing facilities closed.
As a result of the lack of employment opportunities in 2012, almost half of those unemployed from manufacturing positions have been for over 27 weeks. A majority of those now employed are working in the service and retail sector at 1/4 to 1/3 of their former wages. Many consider their current situation as transient, anticipating better job opportunities. However, recent statements by government and non-government economists have implied and or predicted that the unemployment rate will not approach 5% of the labor force for another 10 to 15 years. With the absence of manufacturing, more people entering the workforce and the present slow rate of economic growth, that prediction is quite possible.
Without realizing the importance of domestic manufacturing in the U.S., Congress and corporate executives have been short sighted with economic policies for the last 30 years. Almost half of the total U.S. population is in the work force, and with a net of 1.5 million people being added to the work force every year, the current employment options will not grow or sustain the economy. At this time, the service, retail, medical and financial sectors are sustaining the economy, and most employed Americans are in the service and retail sectors.
Economics
Most service and retail sector jobs pay the federal minimum wage of $7.25 to $10 per hour. Most non-agricultural manufacturing jobs pay between $20 an hour and up to $35 per hour. With these positions no longer in America, this is a loss of $26,000 to as much as $56,600 per person per year; for some households this equates to $52,000 to $113,200 per year. With an estimated annual two household median incomes of $49,500 and 12 million unemployed Americans, this is an approximate direct loss of $643.5 trillion put into the U.S. economy per year, or $53.625 trillion per month.
Social Security's Old-Age, Survivors, and Disability Insurance (OASDI) program is funded exclusively by working Americans and their employers. The combined rate of Social Security taxes paid by employees and employers are 10.85%. The total potential direct loss of Social Security taxes paid is approximately $69,819,750,000 per year. OASDI is the only self funded federal managed program that remained solvent and growing until Congress started “borrowing” from the fund and leaving it over $2.5 trillion in debt.
The total number of unemployed Americans at this time has put a financial strain on the federal budget because of the need for supplementary taxpayer-funded resources including: unemployment insurance not otherwise paid by employers or employees, U.S. Department of Agriculture food stamps subsidies, medical assistance, housing subsidies, household energy assistance and other social programs funded by federal tax dollars. These financial resources could be served better to strengthen our infrastructure, military, natural disaster funding, and education as well as other critical assets needed to provide a safe, secure and healthy nation.
The United States Congress is missing out on $90.1 billion of personal income taxes per year – 12 million unemployed Americans x $49,500 median income x 14% effective tax rate – to which it needs to help balance federal budget, this does not include income taxes paid by employers or taxes paid by import tariffs. Over a ten year period, this is almost $1 trillion that could be infused into the federal budget.
Summary
It is imperative the United States Congress and the President set aside personal and party ideological positions and differences to secure the future economic stability of the people of the United States.
We were once a nation of builders, engineers, innovators and inventors; now we depend on the kindness of other nations. The United States used to lead the world in absolutely everything – sciences, math, innovation, invention, education, economics and defense forces. Today, we are a follower behind economically developing countries. Other nations and governments have prospered at the expense of the American worker and taxpayer.
Absent the financial sector meltdown in 2007, the employment and economic stature of the United States was already in dire straits. The recession exposed our weakened domestic manufacturing sector. The loss of tax revenues resulting from high unemployment has forced the Congress and the President to reduce, and in some cases eliminate, funding for many of the things that made this a once great nation. U.S. companies that choose to stay within the United States and the employed middle income earners have had to supplement U.S. tax revenues with increased taxes, higher cost of living, growing inflation, reduced personal income and sacrificing personal and small business assets.
There are 3,140 counties in the United States, if every U.S. based manufacturer moved the total equivalency of 1,000 manufacturing jobs to each county to the U.S. in one year, unemployment would be cut by a third. That is not to say that every manufacturer should open a factory employing 1,000 people in every county. It means that if manufacturers employed 300 – 500 people in a dozen counties each, then every U.S. based manufacturer could employ as many as 6,000 people through out the country.
Those 3.14 million jobs would then create an additional 3.14 million jobs within another year or so, which would then create another 3.14 million jobs, for a total of 9.42 million jobs in 3 – 4 years (this is almost one-third of the manufacturing jobs moved offshore in the last 30 years); thereby reducing unemployment to less than 5%. This would increase personal income tax revenue for state and federal budgets, increasing the national GDP by as much as 25 – 30%; almost 10 times the current GDP growth.
If the average annual gross wage of each of those employees was $31,200 ($15 ph x 2080 working hours per year) less 20% for taxes (Federal Income, SSI, Medicare etc) that would leave roughly $25,000 per person per year. With that, if there are two income earners per household, that would mean more disposable income available for discretionary on the local and regional economy after general household expenses.
Most of our members of Congress and corporate executives are likely aware of these facts, however, because Congress has granted trillions in tax breaks, loopholes and incentives to relocate jobs offshore. Manufacturing will not come home to support the economy as there are no tax incentives to return home; therefore manufacturing en mass will not return.
