$78 buck an hour...
That is a red herring.
Ayup.
The past few months aside (just another in series of historical financial panics/recessions/depressions that occur every 10 years or so in our history), American manufacturing is pretty healthy.
We've been growing at about 1% per year for decades. For all the hand wringing about how our industrial base is declining and what if there is another world war, we produce more steel in the country in 2007 then in WWII or even the 1960s. We can make 40% more steel today then in 1945.
That doesn't mean there haven't been changes -- despite the significant growth of domestic steel, our imports have also grown from neglible to about 40% of the current market. So we make more AND we import more.
However, while our output has been growing at 1%, our productivity has been improving since the Reagan era at 3% per year. That's not to say Reagan's policies were solely or even predominantly responsible -- you can thank Silicon Valley for those gains. Computer driven automation has fundamentally changed our need for workers.
To cite a local example, Electric Boat is still a major employer in my area, but it is only a fraction of the size it used to be. If Ronald Reagan rose from the grave and declared his intent to build a 600 ship navy once again...EB will never employ more then half the workers they did back in the 1980s. One of my friends used to work as a draftsmen -- that job is gone, replaced largely by computers. Takes only a fraction of the draftsmen today with Computer Aided Design then it did in the days of pen and ink drawings. In another case, EB developed robots that could make welds using stronger electrical arcs then a human could possibly hold -- once they perfected the technology, the Navy increased the spec's on the sub hulls so the quality of welds called for today CAN NOT be made by a human. That's hundreds of high paying, high skill welding jobs that will never, ever return no matter what.
When you're output is growing 1% per year, but it takes you 3% fewer man-hours to produce each unit of output per year...you need to layoff 2% of your workers per year unless you're protected from competitors. Now you take those numbers of needing to layoff 2% per year, and you extend it to a nearly 30 year long streak like we've had with those statistics you get what we have today. It's not China or Mexico stealing American jobs, computers are eliminating them.
People's perception of manufacturing decline are true from a personal perspective -- the jobs are disappearing, but from a big picture perpspective, American industry has been expanding as the jobs disappeared.
This all comes back to that $78 per hour labor cost. If the Big 3 were carrying the same retiree obligations over workforces twice their current size, you're probably talking labor costs more like $50/hour. But instead they're carrying an awful lot of retirees on very few employees because automation allowed them to (eventually) lay off people...so the per hour cost of carrying those old benefits which they had not put money away decades ago to cover goes up.
It's not to hold unions harmless. They've been guilty of the very same bad practices of going after short term gains at the cost of long term stability that the executives have rightfully been accused of.
Starting, I believe, with the 1987 UAW agreements, they had a "Job Bank" system which said the employers could not lay someone off because of:
-- Efficiency improvements due to automation
-- Outsourcing
-- Efficiency improvements in workflow developed by the company
If someone's job was eliminated for one of those reasons, then the Big 3 would continue paying them full salary and benefits for years to do nothing until a there was a job open for them, they would've been laid off anyway due to declining market share, or a new contract was signed which let the company lay them off. Outsourcing I can see the unions legitimately fighting; but saying you can't lay someone off because you've become more efficient?
So even where you had the Big 3 investing in newer, more efficient plants they couldn't see the cost saving from that right away -- they had to continue paying the workers as if they had never invested in the robots, or simply figured out a more efficient way to work. I really wouldn't doubt that over 20+ years that cost the companies more then $35 Billion that could've been spent in more investments, research, product development, put in the bank, or paid in dividends. The UAW "Jobs Banks" meant there was no way the Big 3 could ever match the efficiency of foreign auto companies building new plants in the U.S. -- they were always at a disadvantage. But management of the Big 3 didn't want the strikes, so we get 20 years on into those contracts and the chickens have come home to roost for both sides.
