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Manufacturing Is Coming Back. Factory Jobs Aren’t.

America is industrializing again, but the days of good jobs for everybody are over.

For public officials looking for the return of well-paying manufacturing jobs to their communities, there's both good and bad news in what's going on with two companies, Foxconn and Tesla.

Last November, Foxconn, which manufactures the majority of Apple devices, announced that it would invest over $100 million in manufacturing capacity in the United States. This investment will include more than $30 million for a robotic facility in Harrisburg, Pa., rather than continuing the expansion of Foxconn factories for Apple in China.

In Fremont, Calif., Tesla is manufacturing electric cars at an old General Motors production facility once known as NUMMI. Between 1985 and its final closing after the Great Recession in 2010, NUMMI kept nearly 5,000 workers employed. Today, the Fremont facility is manufacturing cars again, but with fewer than 2,000 employees and the addition of a great deal of automation.

Both Foxconn/Apple and Tesla reflect the current direction of manufacturing in the United States, toward recovery and a growth rate that the U.S. Bureau of Labor Statistics (BLS) projects at 2.8 percent annually. But job creation related to the manufacturing sector's growth is likely to continue to lag.

According to BLS, between 2010 and 2020 total employment in the U.S. will grow by 20.5 million workers, an annual rate of 1.3 percent. But most of these jobs are expected to appear in the services sector; the manufacturing sector is expected to lose jobs over that 10- year period, averaging a decrease of 0.1 percent per year. In short, what we're seeing is a jobless recovery for U.S. manufacturing. Companies will continue to expand, and in some cases, as with Apple, actually return existing capacity back to the U.S., by utilizing automation to replace many low-cost foreign workers.

While we've been hearing about robots taking over our factories for decades, the effect may have been delayed by a combination of union pressure, cheap foreign labor and inadequate technology. But the economic efficiency and aptitudes of robots have been gaining. Today, advanced systems can achieve a higher degree of precision than their human counterparts, even when dealing with delicate tasks. The impact of automation is illustrated most starkly by Foxconn's plans: Where it may have used many thousands of employees in China, in Pennsylvania the company will require only a few dozen.

A good portion of those few dozen will be better compensated and have more lasting job security than the typical laborer. The technology and machinery in today's manufacturing industry, and that of the future, demand a more-educated and better-compensated workforce. But while we are seeing expansion of opportunities for those with the skills to run operations such as Foxconn's and Tesla's, we are not left with a solution for the blue-collar worker.

In short, while most sectors of the nation's economy can be expected to grow, the days of the 20th century that seemed to promise a shot at prosperity for all are over. Today, our children and grandchildren need to be focused on how they're differentiating themselves from the less-skilled workers who have manned our factories for decades and who provide the cheap labor that powers so much of the industry of developing countries. If they do, they'll have a comfortable place in the future.

Chase B. Hinderstein is a private wealth-management portfolio specialist at Robert W. Baird & Co.
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