In Rust Belt, manufacturers add jobs, but factory pay isn’t what it used to be
NORTH CANTON, OHIO — More than 1,000 applicants began lining up this week outside a former Hoover vacuum plant here in the hopes of joining a surprising trend in this part of the nation’s manufacturing heartland: new jobs.
Come June, the plant will be churning out EdenPure space heaters, vacuums, air purifiers and other small appliances once made in China. The turnabout for this factory and scores of others across the long-suffering Rust Belt offers vivid evidence of a budding revival in American manufacturing that has been a key driver of the economic recovery.
The nation’s factories have added 250,000 jobs since the beginning of last year — about 13 percent of what was lost during the recent recession — marking the first sustained increase in manufacturing employment since 1997.
But the new hiring also reflects another emerging reality of U.S. manufacturing: Many of the jobs don’t pay anything close to what they used to. Assembly-line workers who will be making the EdenPure products under the auspices of Suarez Corp. Industries will start at $7.50 an hour.
That’s a far cry from the $20 an hour that most workers made with Hoover, which shifted its century-old production lines to Mexico and El Paso in 2007 after concluding that it was too expensive to make its products in the industrial Midwest.
“The communities and workers in Ohio have been devastated over the past decade and are grateful for the opportunity to earn a living,” said Robert Baugh, executive director of the AFL-CIO’s Industrial Union Council. “But this is tempered by reality. One is that the jobs at Suarez, with wages and benefits well below the middle-class ones that were there before, are not a replacement for the ones that left.”
Behind the recovery
The Rust Belt’s nascent recovery is being fueled by a host of factors, including a revitalized auto sector, innovations that have made workers more productive, and a weakened dollar, which makes American products more appealing for export.
Lower labor costs are also a critical factor. But many of the prospective workers who braved a cold rain Monday outside the old Hoover plant for a shot at a job with benefits did not complain.
“I was a little disappointed about the rate of pay,” said Leslee Valentine, 52, who rushed down to the factory after hearing about the job fair on the news. “But right now I’m on unemployment, so it looks pretty good. There is always that opportunity to move up.”
Wilmer Miller, 50, who previously has worked as a plumber, was similarly upbeat.
“It’s an opportunity,” he said. “You got to have a job, and you got to have a paycheck. I’ll take a little less to have those things. It’s good to see something open up.”
The Rust Belt’s fortunes have been one of the bright spots of a mostly shaky recovery. Nationally, manufacturing output grew at an estimated annual rate of 9.1 percent in the first three months of the year, while the overall economy expanded by just 1.8 percent, according to Federal Reserve figures.
“Everybody had written off the manufacturing sector and the Rust Belt, but now the manufacturing sector is the shining star of the U.S. recovery,” said Mark J. Perry, a professor at the University of Michigan at Flint and a visiting scholar at the American Enterprise Institute.
The recovery has been a long time coming. The nation lost nearly 6 million factory jobs, almost a third of its total, between 2000 and 2009. Those losses came on top of a long slide that started in 1979, when the nation’s manufacturing workforce peaked at 19.5 million. Currently, the nation has 11.7 million manufacturing workers, according to the Labor Department.
“What we are experiencing is first and foremost a recovery from the depths of a terrible recession,” said Robert E. Scott, a senior economist at the Economic Policy Institute. “We have a long way to go before we climb out of this hole.”
The manufacturing gains are particularly apparent in states such as Michigan, Wisconsin, Pennsylvania and Ohio, where the decline of the steel industry and, later, the sharp reduction in auto-related and other factory jobs transformed much of the region into an economic basket case long before the recession hit. Now unemployment rates in these states are falling, and some are at or below the national average.
Economists say the recovery in manufacturing work is also crucial to the fortunes of the vast majority of American workers who are not college graduates. As a group, factory jobs pay about 10 percent more on average than other jobs in the economy.
But even as manufacturers have been prospering and jobs have begun to trickle back, some analysts and union leaders worry that workers are not sharing fully in the bounty.
General Motors and Ford recently reported their highest earnings in more than a decade. Goodyear set a sales record in the first quarter of this year. Other manufacturers, including Caterpillar, which makes construction equipment, and Timken, a maker of specialized steel and bearings, reported healthy sales and earnings in the first three months of 2011.
Meanwhile, newly hired autoworkers are earning $14 an hour plus benefits, about half of a veteran autoworker’s wage. And many experts and labor leaders worry that the wage premium that factory workers enjoy is eroding.
A recent report by the Boston Consulting Group predicted that the United States is on the verge of a “manufacturing renaissance” as labor costs increase sharply in China and the Chinese currency slowly increases in value.
Those forces are combining to make the United States “one of the cheapest locations for manufacturing in the developed world,” the report said — a prediction that is not universally embraced as good news.
“It’s not clear that the manufacturing jobs that are now growing are all that desirable,” said Susan R. Helper, an economist at Case Western Reserve University.
Ben Suarez, founder and chief executive of Suarez Corp. Industries, the maker of EdenPure and other home products, said that “everybody wants to manufacture in the United States. It is just the cost of doing it” that prompts companies to move factories offshore.
He decided to move manufacturing back from China because it takes two months to get products to market from his factories there. That lag led to supply and inventory headaches for his weather-sensitive products, particularly his signature space heaters. Those problems became less tolerable as his costs for making products in China and shipping them home began to soar.
Once he began making some of the heaters in a temporary facility in North Canton last year, he noticed that they sold 30 percent better than identical ones made in China, simply because of labels identifying them as made in America, he said.
The clincher was when his company was able to re-engineer the space heater so it required fewer man-hours to build. Even with all of that, Suarez said, his production costs are higher here than they would be in China. Nonetheless, he said he is happy to be bringing jobs back to his home town, adding that he will probably hire as many as 2,500 workers over the next 18 months.
But, he added, the pay offered in his non-union shops will be commensurate with the skills workers bring to the assembly line. Anything more, he said, would make his products uncompetitive.
For the relatively simple work of assembling space heaters, that means many workers will make the $7.50 to $8.50 an hour that was advertised at the recent job fair, although some computer programmers can make as much as $16 an hour.
Suarez offers a profit-sharing plan that last year meant average payouts of $22,000 to his company’s 700 employees, but many of his new factory workers are technically employees of manufacturing contractors hired by Suarez and do not receive profit sharing.
“There isn’t anybody who doesn’t want to create prosperity, to help people out,” said Suarez, recalling that he “grew up on the wrong side of town” and worked his way through the University of Akron as a meat cutter and steelworker. But, he added, “what we are able to pay depends on the skill level needed for a job.”