Certified financial planner Wes Moss provides personal finance advice and accessible investment strategies. His guest post appears here weekly.
When is the last time you bought something made in China? Today? If you haven’t, you probably haven’t been to Target or Walmart yet. It’s nearly impossible to make a shopping trip without buying something that was made in China. Or Mexico. Or Vietnam. Or Guatemala.
This concerns many Americans. They believe we are exporting jobs, undermining our industrial base and making our country dependent on others for things we should build here at home. Let me put their minds at ease: America is still the world’s manufacturing superpower. And while changes in the global economics of making things have caused some pain for low-skill and unskilled workers, consumers have benefited mightily.
The U.S. is currently responsible for 28 percent of the world’s manufacturing output. We produce more than industrial giants Britain, Germany, Japan, and China. In fact, we crush the Chinese, who are responsible for just 12 percent of the world’s products. And we’re on track to have another record year of manufacturing output.
What’s more, some of the manufacturing that appears to have gone away is still here, re-classified by economists as “service.” Example: Publix used to buy its bread from an outside bakery. Now, it has its own in-store bakeries, and the money you pay for that baguette is considered retail revenue.
True, many factory jobs have disappeared in recent decades. We don’t make hangers, plastic toy dinosaurs, or even televisions anymore. It is simply more efficient to allow that work to be done where labor costs are significantly lower — places like Mexico, China or Vietnam. It’s easy to get nostalgic for those jobs, especially in a weak economy, but we are talking about grinding, thankless work that paid low wages, offered little hope of advancement, and returned ever-thinning profits to the employer. And because these jobs have moved overseas, American consumers now pay less for “low-value” products — casual clothes, electronics, sporting goods.
Advances in technology have also reduced employment in manufacturing. But any company that didn’t take advantage of those strides would soon go out of business, costing even more jobs.
America still dominates manufacturing because we now specialize in making sophisticated products that are hard to replicate; things that require as much brain as brawn. Stuff like jet engines, locomotives, cars, iPads and Nike shoes. Hey, aren’t iPads and Nikes made in China? Sort of. The simple, repetitive task of assembling the parts is done overseas. But Americans conceive and engineer these “intellectual property” products, which are really built using imagination and brainpower. The iPhone consists of parts made by 15 foreign manufacturers. The devices are assembled – you guessed it – in China. While that arrangement creates employment in those countries, the best jobs and the biggest profits come right back to Apple’s headquarters in Cupertino, California, home of the 70 percent margin.
So the next time you hear someone whining about the end of domestic manufacturing, tell him to start using his head. That’s what America’s world-beating manufacturers are doing.
– By Wes Moss, for Atlanta Bargain Hunter