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Edited on Tue Jan-18-11 10:31 AM by bighart
How do we create and sustain job growth in the US? This question has been on my mind over the last several months so I decided to write down my thoughts. The analysts and financial “experts” are telling us we are in a “jobless recovery”, just what does that mean? How can we be in an economic recovery that will impact and benefit the masses if that recovery is not creating jobs? The best we can hope for is a temporary recovery as defined by “more economic activity” at the highest levels. I personally don’t see any way that can be sustained if there are not jobs, and lots of them, being created that will drive consumer demand in a healthy and sustainable way. Let me relate my personal experience. I am employed in a high mid-level management position for a US manufacture, that is to say I can’t be promoted any higher than I am without becoming an “executive” in the company. We are owned by a private investment group so we don’t have to answer to shareholders but do have corporate overlords to answer to. We don’t make consumer goods, our business is focused on a specific industry and we provide product to them that supports their business. There are several big players in our customer base but one far outweighs all of the others. We support many of the big players including the largest one.
Twenty years ago my company had a base employee count that was around 15,000 and did all of our manufacturing in the US. At that time the company paid 80% of employee health insurance, gave regular and generous bonuses to all employees and it was a generally favorable place to work from the perspective of the average manufacturing floor employee.
Ten years ago that base employee number was around 10,000 and due to competition in the industry we were importing about twenty percent of what we were selling. Our gross sales actually grew during that period as did our gross profit dollars, as a percentage our gross profit dropped but was still above industry average. Health insurance costs began to go up at that point, first we had to cover 30% of our insurance cost then 40%, as the company had to find ways to control overheads to maintain profit growth. Bonuses began to get a little smaller and some of the “extras” the company provided such as paid days off that weren’t counted as sick or vacation days and periodic pizza feeds or cookouts began to get less frequent.
Today our base employee count is down under 8000 and around 40% of what we sell we import. Health insurance costs have gone up every year and we now paying 50% of our health insurance, most of the “extras” have been eliminated and bonuses are smaller. Other changes that have been made include wage caps for manufacturing positions and all salary positions, lowered starting wages for low skill positions etc. Our sales growth has slowed and our profit margins while still just above industry average have declined every year. We are still improving our sales and profit dollars and as such our taxes but the percentage of profit growth compared to sales growth has declined every year.
If you are thinking why don’t you only sell what you can produce in the US, that isn’t an option. We are forced to bid on or participate in reverse actions for “packages” of product and you have to bid it all or nothing. Most of these packages contain items that are imported and have been for some time so there is no way you can bid them domestically produced and expect to get the package as it will drive the package price up to the point you won’t even be considered.
I know my experiences are limited to this one industry but I have to believe if we are seeing these kinds of things and having to make these kinds of choices regarding our business, other industries must be seeing the same thing. We keep hearing it is getting less favorable to import from China but the pricing we see from our suppliers doesn’t really reflect that. I have seen cases where import pricing for an item, including freight to deliver it to our warehouses is less than our material costs for the same item.
Given the “globalization” of the economy and the reality that the US needs manufacturing jobs to sustain a healthy middle class, what is the answer?
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