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Dirk Dusharme @ Quality Digest

Customer Care

Do You ‘Buy American?’ Why?

It’s not about jobs... believe me

Published: Thursday, March 2, 2017 - 12:03

‘Made in the U.S.A.” Do people really care about those words on the label, and more important, how motivated are they to buy American-made products? The answer is yes... and sort of. Yes, consumers in the United States say they want to “buy American” and are willing to pay up for it. According to Consumer Reports research, about 80 percent of American consumers would prefer to buy American-made products, and more than 60 percent say they’re willing to pay 10 percent more for it.

The reasons vary. For some, it’s the belief that American-made products are of higher quality and safety. For others it’s akin to buying local, a way of supporting your own economy. For others it’s about supporting U.S. jobs.

But consumers are only willing to go so far. Even though an Associated Press-GfK poll revealed that nearly 75 percent of Americans say they want to buy American, similar to the Consumer Reports data, respondents said that those items are often “too costly or difficult to find.” Just 9 percent said they only buy American, according to the report.

Put another way, in order for consumers to buy American, the product has to be easily obtainable, be of equal or greater quality than an item made elsewhere, or have a cost/quality factor that makes sense for its use. As U.S. consumer-goods manufacturers learned, “Buy American” consumers will quickly look to foreign imports if the cost/quality equation leans them in that direction.

Big box bargains

We saw this decades ago with automobiles, and then consumer electronics. We see it today with items such as throw-away tools. What DIYer hasn’t bought an inexpensive foreign-made tool for a specialized one-off task? Nobody wants to pay $500 for an American-made, built-to-last tool when a (usually Chinese-made) $80 tool will get the job done the one time they need it? Need proof? There’s an entire big-box chain (the red one) dedicated to the throw-away tool market.

When we think about why shelves aren’t stocked with American-made products, it’s easy to point at greedy manufacturers and retailers, and blame their offshoring with some sort of, “They don’t care about America” rhetoric along the lines of, “If it weren’t for ‘them,’ there would be plenty of U.S.-made products on the shelves.”

Not so. Retailers and the manufacturers that supply them respond to us, the consumers. If we want to buy cheap products, then manufacturers have to deliver, and that means going offshore.

Am I saying that consumers are to blame for all those products made in China? Yes. Think about that as you walk into Walmart or Home Depot wearing your Buy American cap.

To keep jobs in the United States, politicians usually want to impose stiff tariffs, renegotiate trade agreements, or give tax breaks to companies that keep their manufacturing in the United States. But, in the long term that isn’t sustainable. After all, who foots the bill for tariffs and tax breaks? At the end of the day, it’s the ones who caused the offshoring in the first place: We’ve just got to have our $300, 60-in. flat-screen TV. Consumers rebelled against expensive or lower-quality U.S. goods in the past by buying foreign goods, and they will rebel in one way or another against footing the bill to support U.S. manufacturing if those manufacturers can’t compete head-to-head on cost and quality.

The only real solution to getting consumers to buy American is to provide products manufactured in the United States that meet the consumer’s cost vs. quality requirements. Give them a bottom-line reason for making that purchase. You know, competing in the marketplace, just as it has always been.

Fewer workers in the cost vs. quality ratio

This means dealing with one really big manufacturing expense: labor. Bringing down labor costs is not about decreasing the cost per unit of labor—you and me being units—in fact, we’re trying to increase those unit costs through actions like raising the minimum wage. No, the solution is to use fewer units, not so many yous and mes on the factory floor. Which is why we are seeing so much automation and alternate forms of manufacturing across U.S. industry. Manufacturers in many sectors are innovating to make high-quality products with less labor, which allows them to keep manufacturing at home. We’re doing what Americans do best, which is to come up with amazing ideas and innovations, like robotics and additive manufacturing, which allow us to produce high-quality products at a lower cost... by using fewer people.

Although examples abound, let’s look at a couple of old industries that have changed dramatically in response to tremendous decreases in employment: steel and textile goods.

For decades the steel industry has seen the replacement of the traditional, vertically integrated steel mills with an alternative steel plant called a minimill. Minimills use less raw material (mostly recycled metal), less energy, and less labor. Jan De Loecker of Princeton and Allan Collard-Wexler of Duke University write that, due in large part to minimills, “While employment in the steel sector fell by a factor of five, shipments of steel products in 2005 reached the level of the early 1960s. Thus, output per worker grew by a factor of five, while total factor productivity (TFP) increased by 38 percent. This makes the steel sector one of the fastest growing of the manufacturing industries over the last three decades, behind only the computer software and equipment industries.”

There is a direct correlation to the proliferation of minimills and the increase in productivity, say De Loecker and Collard-Wexler. Minimills are simply more efficient within the market they serve. There was also a knock-on effect. In the early 2000s, vertically integrated mills became, on average, as productive as minimills. This wasn’t because integrated plants necessarily improved their processes; it was because less productive plants were driven out of the industry, thus raising the overall average productivity for integrated plants. The marketplace version of Darwinism. When their backs are against the wall, U.S. manufacturers find a way to compete, sans subsidies and tariffs.

Now, let’s turn our attention to the Unites States textile industry. According to the U.S. Bureau of Labor Statistics, the apparel industry saw an astounding loss of jobs from roughly 900,000 in 1990 to about 151,000 in 2011. The reason, of course, is that garment manufacture is labor intensive, and labor is cheaper overseas. A hoodie that costs about $31 to manufacture and ship from Asia, costs about $38 to make in the United States, according to Bayard Winthrop, founder of clothing maker American Giant. Most of the difference is labor cost.

But, as with steel, garment manufacturing is slowly returning to the United States. Part of this return is because Chinese labor costs are increasing, but again, as with steel, one of the main reasons is innovation and automation. Automation in the garment industry has rapidly advanced from automation in raw materials processing, to automation in weaving, to automation in sewing and assembly. You don’t need a degree in economics to understand that while more and more garments will carry the Made in USA label, it won’t mean there will be a lot of job creation. What we will see is high-quality garments at a competitive cost that are entirely made in the United States with United States materials... but not many workers.

Yankee ingenuity

Which brings us back to why people really care about the Made in the USA label. If it’s nationalism, that’s as good a reason as any. Buy local, where local is your country. If it’s because consumers trust American quality, then that’s another good reason. Most American products are well made—they have to be because that’s often the differentiator to foreign-made products. But if the reason is because we want to bring jobs back to America, then we’re barking up the wrong tree.

To me, Made in the USA has nothing to do with buying local, or buying quality, or saving jobs. To buy American is to acknowledge American ingenuity. We can do it better, faster, cheaper if we need to because we are a country that breathes innovation and entrepreneurship. If it’s Made in the USA, it’s because, when we need to, we can make it here and have it be cost effective. Rather than whining about offshoring, tariffs, Mexican and Chinese labor, and all those other people “stealing” our jobs, or whining to our politicians to fix the problem—a problem of our own making, mind you—let’s find a way to make it work. Innovation, bootstrapping, and problem solving are what we excel at. It is not manufacturing that makes America great; it’s us and our inventiveness.

Discuss

About The Author

Dirk Dusharme @ Quality Digest’s picture

Dirk Dusharme @ Quality Digest

Dirk Dusharme is Quality Digest’s editor in chief.

Comments

You hit the nail square on the head!

Bravo Dirk!  Well said and so true.  We need to share this with many more folks and enlighten them with the hard cold truth!

Brilliant!

Dirk,  Thanks for the brilliant article!  Businesses exist first and foremost to MAKE A PROFIT, not to provide the goods or servicesm that they sell.  They make a profit by being cost-effective at what they do.

Another piece of the puzzle is corporate taxes.  Businesses in the US are taxed close to the highest tax rates on the planet.  We must stop trying to tax ourselves to prosperity.  Lower tax rates actually generate more total tax revenue to the government.  It works every time it is tried.  Lower tax rates also generate more jobs and more people paying taxes on their earnings, also leading to more net revenue.