Workers are missing the gear in US manufacturing equipment

Workers are missing the gear in US manufacturing equipment

NEW YORK, Nov 7 (Reuters) – There is a wrench in America’s newly rebooted manufacturing machine. A factory building boom sparked by President Joe Biden’s industrial policies has led to unbridled optimism about the sector for the first time in decades. However, the hardest part of the process is still at stake: filling all expected job openings.

Biden has done all his predecessor’s talk about reviving manufacturing. The bipartisan infrastructure agreement, the Inflation Control Act, with its tax breaks for renewable energy projects, and the semiconductor subsidies under the CHIPS and Science Act have had their desired effect. Spending on building new stations rose to an annual, seasonally adjusted pace of about $200 billion in September, 60% higher than a year earlier and two and a half times the level in 2021, according to Census Bureau figures, before adjusting for rising construction costs, which tempts eye-popping increases. To some extent.

Taiwan Semiconductor Manufacturing Co. (2330.TW), for example, is building a $40 billion chip manufacturing facility, or FAB, in Arizona and expects it to be operational next year, and another, more advanced facility is scheduled to be ready. By 2026. Other companies that have unveiled plans for dozens of similar new and expanded U.S. factories include Intel (INTC.O), Bosch and Linde. More industrial construction in turn leads to more investment by suppliers of chemicals, specialty gases, equipment and other materials used in operations. Additional spending on research and development can also be expected.

Likewise, the United States has accelerated the pace of production of zero-emission vehicles and the batteries used in them, after lagging behind China, Europe, and the rest of Asia until recently. By 2030, car, truck and battery makers plan to allocate $860 billion worldwide to the transition to electric vehicles, with nearly a quarter of the amount going to U.S. initiatives, more than any other country, according to Atlas Public Policy estimates. By the end of last year alone, 23 different companies, including Ford Motor (FN) and SK Innovation (096770.KS), had committed at least $1 billion each to a specific EV or EV battery manufacturer in the United States.

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This manufacturing renaissance is expected to support the American economy, in part by stimulating investment from abroad and demand for domestically produced goods. It should also in some ways facilitate and reduce risks in supply chains, drawing at least one lesson from the pandemic. Government incentives give the fight against climate change a greater sporting opportunity. But despite these notable benefits, the widespread enthusiasm merits caution.

Manufacturing accounted for more than a quarter of nominal U.S. GDP in the early 1950s, then declined steadily to less than half that rate, according to Commerce Department data. Any significant rebound in this ratio appears unlikely, as services maintain their dominance in the $23 trillion economy. Moreover, the government’s efforts to revive the manufacturing sector may reveal significant deficiencies in the US labor force.

In 1979, manufacturing accounted for nearly 20 million jobs, or 22%, of the nation’s 90 million nonfarm jobs, according to the Bureau of Labor Statistics. Today, it’s just 8%, and even assuming robots will be a significant part of all new and improved factories, it’s unclear whether there will be enough skilled labor available to handle the rest of the load. Based in part on planned construction spending, Goldman Sachs analysts estimate that Biden’s initiatives could lead to as many as 250,000 new manufacturing jobs over the next two years.

There is already a scarcity of workers. The average gap between the number of monthly vacancies and hiring in the manufacturing sector exceeded 400,000 in early 2022; The spread has since fallen to about 180,000, but is still three times the pre-pandemic rate level. In some sectors, including construction and retail, earlier labor shortages have virtually disappeared.

Part of the problem is that the United States has failed to develop the required workforce. For example, employment marketplace ZipRecruiter advertises about 60,000 apprenticeship jobs in the United States. In Germany, a manufacturing-focused country with a quarter of the population, there are 500,000 similar jobs available.

The burden currently falls on individual employers, who already face lower labor costs abroad. Moreover, workers no longer necessarily want manufacturing jobs as much as they used to, with the decline of unions blamed for the 3% erosion of average hourly wages that existed compared to other private sector jobs until 2006, according to the Federal Reserve. The study found last year. Wage growth is also decelerating faster for production and manufacturing jobs, reaching 4.2% year over year in August, down from the annual peak of 11% in December 2021 and compared to the national average of 4.5%, according to the jobs website Indeed.

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In addition to boosting salaries, companies are under pressure to invest heavily in training, expand benefits and hire more women, Black and other underrepresented workers. By 2030, demand for technological and cognitive skills in the manufacturing sector will be much higher, with the share of physical and manual tasks falling by more than a quarter compared to 2016, McKinsey says. Many of the jobs targeted under the Biden campaign are less likely to provide retirement plans and health insurance than national averages, according to an assessment by the Political Economy Research Institute at the University of Massachusetts-Amherst.

It is questionable whether the private sector is willing to do all this on its own. There are already calls from industry groups for the public sector to do more, including supporting vocational education and childcare. However, Uncle Sam is already strapped for cash, having committed to too much fiscal stimulus that will further swell the national debt. A more flexible immigration policy may also help fill the manufacturing employment void, but even more open borders constitute a political hot button that few elected officials would be willing to press.

The US manufacturing engine may be running, but labor complications threaten to throw sand at the gears.

He follows @jgfarb On X

Context news

The number of U.S. manufacturing jobs fell by 35,000 jobs in October to a seasonally adjusted 13 million jobs, due in large part to worker strikes at automakers, the Bureau of Labor Statistics reported Nov. 3.

Edited by Sharon Lam

Our Standards: The Thomson Reuters Trust Principles.

The opinions expressed are those of the author. They do not reflect the views of Reuters News, which is committed, under the Trust Principles, to integrity, independence and freedom from bias.

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