Over the past few months, I have been using a fine American-made bicycle to get around Chicago — a shiny new ride made in Detroit. The manufacturer, Detroit Bikes, has been producing vehicles for mass consumption for two years.
Last year, in its first full year of operation, its 50,000-square-foot factory manufactured 1,000 bikes. Its staff of about 20 is expected to grow this year amid expanding orders, including 2,415 bicycles for the New Belgium Brewing Co.
As with other artisanal manufacturers such as New York’s Re-Co Bklyn and San Francisco’s American Giant, Detroit Bikes largely produces the bikes for an upscale market. While their success is meaningful, these producers are not remotely comparable to the United States’ earlier manufacturing base in terms of job creation or economic impact.
U.S. manufacturing employment has declined significantly over the past several decades, but it is still an important part of the nation’s economy. The loss of manufacturing jobs was in large part a result of policy choices in Washington that favored Wall Street over industrial employees. This Labor Day, we should look critically at these choices and celebrate renewed efforts to create a robust, if transformed, manufacturing base in the United States.
Detroit Bikes is part of the artisanal manufacturing trend rippling through U.S. cities. In the Motor City alone, there are two other bicycle manufacturers —Detroit Bicycle Co. and Shinola, which also makes watches and other luxury products. The recent media attention on Detroit Bikes and other small scale manufacturers suggests that there is still a strong appetite for U.S.-made goods and more-stable, better-paying manufacturing jobs.
A return to the large-scale manufacturing economy that once defined the United States is unlikely. Even in Michigan, despite the notable successes of artisanal manufacturers and the general resurgence of manufacturing, there are 60,000 fewer industrial jobs now than before the Great Recession.
Still, the inevitable decline in manufacturing in the United States is often misunderstood. It is true that manufacturing has declined dramatically as a percent of GDP since its postwar peak. It employed 25 percent of the American workforce in the mid–20th century but employs less than 9 percent today.
However, in terms of raw job numbers, most of the loss did not occur in the 1980s and ’90s, as is commonly believed. It was the recessions of the 2000s that wiped out a large number of manufacturing jobs in the U.S., falling from 17.3 million in 2000 to 11.5 million in 2010. The sector has been experiencing a rebound since 2010, adding about 500,000 jobs. The current slow recovery is unlikely to engender a dramatic resurgence of manufacturing employment. But its positive trend defies widespread perceptions.
Even if the U.S. economy does not return to the levels of Big Steel or the Rouge Complex, manufacturing — which employs nearly 12 million workers — remains a significant sector. By contrast, the financial industry employs fewer than 6 million people. And those who long for the days when the United States actually made things are right to insist the U.S. economy shouldn’t be based on the type of financial speculation and gambling that led to the most recent crisis.
This Labor Day should be devoted not just to a nod to past successes but to a rallying cry to rebuild the United States’ jobs base.
The resurgence of artisanal manufacturing is taking place in other industrial cities as well, including New York and Philadelphia, which boast thousands of small manufacturing firms. These jobs don’t offer paychecks as impressive as those commanded by the United Auto Workers at their peak. But wages are nonetheless better than those found in the low-wage retail and service sectors.
In recent decades, bad policy choices have undermined the gains made by unionized workers. The major accelerants include President Bill Clinton’s North American Free Trade Agreement, other free trade deals in the 1990s and 2000s and the growing trade deficits with lower-wage nations such as Mexico and China. Those policies resulted in massive job losses for American workers, especially in the manufacturing sector. Most of the losses were concentrated in states that had a strong industrial presence, such as Michigan, California, Pennsylvania and Texas. Some losses were bound to occur, especially in low-profit-margin industries. But the flight of high-end manufacturing industries such as aerospace and semiconductors was not inevitable.
In addition to bad trade deals, U.S. tax policy has allowed and sometimes even encouraged the offshoring of employment for decades. And in the 1980s, the deregulation of financial markets lead to a surge of hostile takeovers. These corporate raiders sought to generate short-term profits, turning offshoring into a badge of honor. This was exacerbated by the fact that the U.S. does not incentivize companies that stay and keep working in the country, as is the practice in Western Europe, Japan, South Korea and Canada.
The path forward
The loss of stable manufacturing jobs has sent shockwaves throughout the economy. The unionization of steel- and autoworkers set standards for wages and benefits that not only lifted the employees out of poverty and uncertainty but also served as a model for strong labor standards that were replicated across the economy. Even unorganized firms were forced to provide retirement assistance and health care benefits to keep up with unionized workplaces.
There is evidence that today’s largely deunionized manufacturing jobs also have important indirect effects. “For every person directly employed in manufacturing, manufacturing output supports more than 1.4 jobs elsewhere in the economy,” according to a recent report by the Economic Policy Institute. That’s 17.1 million indirect jobs for the 12 million directly employed in manufacturing.
There are economic policies that could be pursued to bolster these opportunities. For example, instead of using tax incentives to shuffle jobs around or even within states, they could be given to those who demonstrably deliver new and well-paying jobs. And tax incentives should be taken away if the jobs are offshored or if they undermine regional and national labor standards.
Or consider the Los Angeles Alliance for a New Economy, an advocacy and research organization that gives the bidding advantage for multibillion-dollar public works projects to companies that meet certain progressive goals such as racial diversity and living wages for their workforces rather than to those who promise only to do the job for less money. The Brooklyn Navy Yard offers another example of the benefits of bringing back manufacturing. The public raised a quarter of the $1 billion for the redevelopment of the publicly owned industrial park, which now hosts several high-end manufacturing firms that create spacesuits, motorcycles, furniture and robots. It now generates (PDF) $2 billion in annual economic output and hosts 6,000 jobs.
Detroit Bikes is thriving even without such economic policies. We need to create a legislative and regulatory environment that welcomes and encourages more employers to open up shop in American cities. U.S. policymakers decimated good manufacturing jobs and lifted up finance. This Labor Day should be devoted not just to a nod to past successes but to a rallying cry to rebuild the United States’ jobs base.