Even though Airbus has opened in Alabama and the South is the nation's factory hotbed, this is no sign of an American manufacturing renaissance.
Q: When is a CEO lying? A: When his lips are moving.
Not always. Airbus Group Chief Executive Fabrice Bregier told the German weekly Welt am Sonntag that the company’s new plant in Alabama is cheaper than factories in Germany or France. “Europe really needs to do something to remain competitive,” Bregier is quoted as saying.
That would specifically be lower labor costs. And no pesky unions.
This was the lure of the South devastated by the Civil War when New England textile mills (which profited mightily from slave-picked cotton) began moving into the region. They were followed by furniture and carpet-makers, which remained a backbone of Southern industrialization until recently.
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Despite a heroic labor effort in the early decades of the 20th century, Southern business managed to keep unions out and wages low. White Southerners began to see unions as un-American, a situation that continues today. And their wages from manufacturing are better than anything else there.
In recent decades, this dynamic has helped empty out the Midwest and lure auto factories. Airbus is especially emulating BMW, which opened an assembly plant in South Carolina in 1994. The German company did an exemplary job of training low-skilled employees and transplanting its suppliers, indeed an entire highly sophisticated operation. A few years ago, Boeing opened a 787 line in North Charleston with plenty of room to expand.
Even so, South Carolina has lost more than 105,000 manufacturing jobs since 2000.
In Alabama, according to Seattle-based PayScale, Airbus line worker pay starts at $35,367 annually, a king’s ransom in a low-wage state. The company expects to employ about 1,000. The starting wage for a Boeing machinist is $38,263. It’s not a huge difference, but Boeing has more experienced, higher-paid workers in the Puget Sound region.
And I hasten to add: You get what you pay for. Not merely in perceived quality, but Boeing enjoys a world-class aerospace cluster here, along with huge subsidies (Alabama paid a mere $158 million; is that “business friendly”?). We compete on quality and brains — and sunken costs by both the company and Washington taxpayers.
The end-game is hard to predict. Southern states remain poorer and perform worse on almost every measure of well-being, despite being the nation’s manufacturing center. They lost hundreds of thousands of jobs to China. And even such wins as Airbus won’t help them evade the consequences of offshoring and automation. (China labor costs are starting to send its factory jobs into the race-to-the-bottom pinball machine).
None of this is to elide over other factors, such as being closer to a huge customer (thus, Boeing’s plans to open a 737 finishing operation in China) or Airbus wanting to gain two U.S. senators to do its bidding. But the South continues to lure individual, often high-profile, factories, even though American manufacturing employment is barely growing. Not much of a renaissance.
Today’s Econ Haiku:
I’ll give Donald this
He’d tax carried interest
Wall Street would wig out