Master Lock's Insourcing, Praised By Obama, Could Be More Fluke Than Trend
President Barack Obama stressed the importance of "insourcing" jobs once lost to foreign countries back to the United States during a trip to Wisconsin Wednesday, and called on other companies to join what the White House asserts is a growing trend.
In his State of the Union address, Obama praised the Wisconsin company, Master Lock, which has a unionized workforce, as a prime example: Since mid-2010, the world's largest manufacturer of padlocks brought back to Milwaukee about 100 jobs previously off-shored in China. A White House press release preceding the event stated, "the ‘insourcing’ trend among businesses continues to gain steam, both in Wisconsin and across the country."
But some manufacturing groups said Master Lock's insourcing success is more fluke than trend. The United States lost more than 5 million manufacturing jobs in the last decade, many to overseas production. Some of the jobs came back; since January 2010, 404,000 manufacturing positions have been added. But most of that growth came from employers hiring as demand picked up after industry-wide layoffs during the recession -- not insourcing, according to the Alliance for American Manufacturing, a pro-labor research and advocacy organization.
The president's proposed budget for fiscal 2013 called for tax revisions that would encourage domestic job creation and a $517 million investment in the Department of Commerce's International Trade Administration, with provisions encouraging "insourcing."
But critics in the manufacturing industry said it is simply not enough.
Scott Paul, executive director of the Alliance for American Manufacturing, welcomed the encouragement of insourcing, which he said hasn't been a focus of the manufacturing debate since the 80s. But, he said, "I'm not convinced these proposals are sufficient to turn a trickle into a trend, and that's the real challenge."
While some companies, such as General Electric and Caterpillar, have started insourcing, cheaper labor costs overseas can still be a significant draw for many businesses. Additionally, insourcing doesn't necessarily lead to quality jobs. Caterpillar Inc., the world's largest heavy machinery manufacturer, recently closed a factory in London, Ontario, citing, in part, lower labor costs at their U.S. plants. Just days after the company shuttered the London plant, where employees earned around $35 an hour, Caterpillar held a job fair at its plant in Muncie, Ind., where wages range from $12 to $18.50 an hour.
While those in Muncie welcomed the jobs, labor advocates worry about the standard Caterpillar and others are setting. "If insourcing is based on the model that we have to have labor flexibility and lower wages, ultimately those are jobs that are gong to leave again," Scott said. "Because the United States is not going to win a race to the bottom, nor do we want to."
Some said they see Obama's promotion of insourcing at Wednesday's event as little more than a campaign stunt, to boost Obama's job creation credentials as the election grows close.
"I think this so-called insourcing strategy is a transparent election year gimmick that has no potential to increase either manufacturing growth in this country or employment to any meaningful extent," said Alan Tonelson, a research fellow at the U.S. Business & Industrial Council Educational Foundation, a nonprofit research organization with nearly 2,000 members including small- and medium-size manufacturers.
In Tonelson's view, only a major overhaul of U.S. trade laws would discourage U.S. employers from building factories oversees, and no such overhaul has been seriously considered, he said. "Master Lock is clearly the exception to the rule."
But for labor advocates, the visit is a small win. The president's visit falls one year after tens of thousands streamed to the Wisconsin Capitol to protest Gov. Scott Walker's legislation attacking public sector unions.
"Master Lock is a story that stands out as a successful model of bringing work back to the country, in collaboration with labor. It demonstrates how powerful the collaboration between unions and employers can be," said Phil Neuenfeldt, the president of the Wisconsin State AFL-CIO.
Walker originally was expected to accompany Obama to the factory, but called out sick.