The gap between Trump’s manufactured promises and life in Middle America
Published by UnHerd (28th September, 2017)
After more than a decade working in a plant assembling circuit boards for boilers, Jody Krinn was starting to ponder retirement. Not yet though. She is only 56 years old, despite the two grandchildren. And she likes her job as a materials specialist, which takes home $16 an hour with plenty of overtime and decent health coverage.
This provides a comfortable living in her home town of Huntington, Indiana. But the day after we spoke earlier this month, Krinn was going to walk out of the low-lying factory for the final time. For production is ending at the plant, the town’s biggest employer, with loss of more than 700 blue-collar jobs.
Now she plans to open a boutique rather than find similar work in another factory. ‘I’m too old,’ she said. ‘I don’t think you can find manufacturing jobs like these any more. It’s more like manual labour on offer.’
Krinn is typical of the factory’s workforce, which is mostly middle-aged and female. Many have worked there all their lives, signs of secure prosperity seen with all the smart cars in the parking lot and well-tended homes nearby. But with production lines stopping later this year, each month some staff are being released.
Many of Krinn’s former colleagues find it tough after leaving. ‘If they were set in their ways here then there is a rude awakening when they go outside. Either it is heavier work or they do not have the skills,’ she said.
‘I know a few who have left and it is a struggle – they are working much harder at 50 than they planned and getting less money. This feels part of a wider problem. We have seen the textile manufacturing go, then the car manufacturers. There are new manufacturing jobs but they tend to be more technology-based, where there are often not enough skilled people to fill them.’
This is a typical story from Middle America. Traditional mass manufacturing jobs being replaced in the carousel of capitalism by more specialised and skilled work. But the disruption has intensified in our digital and highly-globalised age. And this makes it a potent political issue, especially with stagnant living standards, falling middle class wealth and so many struggling families.
Insurgent candidates from both left and right pounced on this subject in last year’s presidential election. But Donald Trump’s talk of protectionism and reviving American glories carry special weight in Huntington. For workers such as Krinn are losing their jobs because they make parts for an allied plant two hours down the road in Indianapolis – one the President repeatedly vowed to stop moving to Mexico.
The fate of the Carrier factory became a symbol of Trump’s savage assaults on the free trade policies of Democrat and Republican predecessors. It sits in the home state of Vice President Mike Pence. And the pair announced a deal on Thanksgiving Day to save hundreds of jobs in Indianapolis, although it has since been hotly-contested. Yet one thing is certain: they did nothing to save the loyal workers in Huntington. So from next year the Carrier components will come from Monterrey, where workers earn little more in a day than their American rivals make in one hour.
Trump’s stance was popular with voters. It helped win the presidency, while polls showed strong approval for his Carrier deal. But for all his grandiloquent nationalist rhetoric and promises to Make America Great Again, these Indiana towns at the centre of the furore show something very different about the economy. They expose the extraordinary extent and successes of globalisation – along with the remorseless complexities of managing rapid change.
Huntington is a town of 17,391 people, its industrial heritage highlighted by a canal and rail track that cut through the centre. The mayor talks of Germanic stoicism, the main religion is Roman Catholic and the town is typified by a central bar called Blue Collar. People call themselves working class in a place that has churned out products such as barbecues, dentures, ice-cream cones and shoes for generations and used to promote itself with the slogan The Town That Works!
More than one in five residents are employed in manufacturing – an unusually high proportion in modern America. Walking around the streets, with its closed theatre and slightly-scruffy feel, the state capital of Indianapolis feels a long distance away, let alone the political machinations going on 600 miles away in Washington, DC. It is, however, the hometown of a former vice president – Dan Quayle. He proclaimed it as a place where people were taught values ‘like faith in God, family, neighbour helping neighbour, the dignity of work, morality, integrity and personal responsibility.’
One visiting reporter described it as a rare town where America’s fraying social contract remained mostly intact, filled with the sort of firms that give employees a turkey at Thanksgiving. This is why the sudden desertion of its biggest employer caused such shock, especially since the hard-working staff were helping United Technologies – Carrier’s corporate parent – increase annual sales to $59 billion. One senior executive even boasted earlier this year that profit margins in this division had doubled over the past five years.
Unsurprisingly, the staff feel upset and betrayed. Typical was a woman in her fifties who told me she was devastated, left fearful for the future after more than 20 years working at the plant. ‘It felt wrong, so wrong,’ she said. ‘I love my job, working along lots of friends. Now I have no idea what I am going to do when my time comes.’
Some jobs in sales and marketing will stay, with extra white-collar staff being hired, but this offers little hope to those leaving assembly lines. I found Tammy Moorman, 43, working in Corn Coast Comics, a new games shop set up by one of the laid-off workers. She used to earn $16 an hour working for United Technologies, with plenty of overtime; now she earns $7.25 minimum wage in the store. ‘I’m a geek so I like this job,’ she said with a smile.
‘But I don’t have money to get by, let alone to buy things I might like in life. I have downgraded my house, my new car is a pile of crap. I worked all those years and had good health insurance. Now I feel like I have to grovel. I don’t like having to take things off the state.’
Her friend Jessica Batiz, 32, a divorced mother of three young children, left the firm in April and now lives on unemployment benefits. Her weekly income has collapsed from $700 to $140, forcing her to move 26 miles away to the city of Fort Wayne to find work. ‘I live in public housing and rely on food stamps. This comes out of other people’s pockets, so I don’t like relying on it,’ she told me. ‘I want to earn my own money and find a safe, dependable job.’
These two women, struggling after losing manufacturing jobs while reluctant to rely on handouts, highlight both the pain caused by disruptive capitalism and admirable pride in self-reliance that is so evident across much of America. Unsurprisingly, they support Trump’s protectionist stance. ‘I think he was right,’ said Moorman.’ I would like him to stop all these businesses going out the country. If he does not succeed, we’re just going to see the economy go down and down.’
Trump tapped into a nerve with his pledge to stop bosses from shifting jobs abroad, especially to Mexico, during his campaign. He railed against firms ‘moving our jobs, our wealth and our industries to Mexico and overseas’ and repeatedly condemned the North American Free Trade Agreement. Corporate icons such as Apple, Boeing and Ford were attacked and special tariffs threatened but Carrier became the core target as Trump insisted he would save 1,400 condemned jobs, a move intended to save $65m annually. His deal, greased with tax incentives, saved some 800 posts.
Yet these job losses reflect a wider trend seen across the country – and indeed, in other advanced economies. In 1979 there were almost 20 million Americans employed in manufacturing. This number slipped over subsequent years, then crashed after the turn of this century with manufacturing jobs seeing their fastest fall in history over the first decade. By 2010, there were just 11.5 million people working in the sector, since when there has been a small recovery before numbers began sliding again.
There is some truth in Trump’s claim American jobs are being ‘stolen’ abroad. But not much. For these figures reveal only tiny part of an astonishing story. Take that first decade of the century, so destructive for traditional jobs in manufacturing. For every one job lost to competition abroad, more than seven were lost to productivity improvements at home. The problem is not free trade, nor foreigners – it is more efficient American workers, aided by rapid technological advance and robots.
Greg Hayes, chairman of United Technologies, highlighted this with a story he told about his grandfather in a speech on globalisation. ‘He worked on a manual lathe, building parts for the Apollo space mission. It would take him a week to build a single complex machine part,’ he said. ‘Today that part goes on a five-axis milling machine and it probably takes about an hour. And the quality is equal to what a master machinist like my grandfather could have done.’
He underlined the issue by pointing to a new Pratt & Whitney aircraft engine made by the multinational in Connecticut: ‘This is the most complex commercial engine we’ve ever designed and built. And it will take us about 50% less time to build this engine than the last engine we introduced almost 30 years ago. Because of technology, innovation and process improvement, the number of jobs we need to build engines and the nature of those jobs has changed dramatically.’
As Hayes says, the jobs carried out by people such as his grandfather have gone. Now it is less about fitting parts and conveyer belts, more about pressing buttons and computers. Yet the US will produce four times more factory output this year than in the 1940s when it had similar number of manufacturing workers. A report by Brookings Institution think tank found that it takes about one quarter of the number of jobs to generate the same level of manufacturing output as in 1980. And there is steadily rising demand for workers in advanced manufacturing roles across the US – growing almost 5% each year, for instance, in the Indianapolis area.
This shows the dynamism of capitalism. Yet it causes huge churn and uncertainty in communities, with losers as well as winners. One economist estimates that over this president’s four-year term more than 100 million private sector jobs will be destroyed – yet even more will be created. He worked out that in the two hours Trump spent flying down to Indianapolis to save 800 jobs, another 6,000 disappeared.
Protectionism and White House bullying will not spark a Rust Belt revival so it is pointless to grandstand about globalisation, especially as it slashes poverty around the planet. Even in Huntington, as one industrial giant causes waves by moving jobs to Mexico, I found the beneficial swirl of foreign trade was clearly evident. When I met the mayor, Brooks Fetters he showed me a display of products made in the town that included a shiny black body panel for a Corvette Stingray. This is a classic American sports car – but the carbon fibre part was made by a Japanese firm.
Other foreign investors in this small Mid-West community hail from Brazil, Canada, France and Germany. The Vatican newspaper is printed here. Huntington has negligible 3.3% unemployment, fighting hard to win jobs after this rate hit 14.6% eight years ago. Yet Fetters is under no illusions about intensity of competition to keep these firms.
‘They are not here to pay taxes, they are not here to provide jobs, they are not here to be philanthropic. They are here to make money – and if they do this, then it’s good for our community since they do pay taxes, they are incredibly philanthropic and are really good employers.’
The mayor, a thoughtful character who used to run a funeral business, fears the pace of change is increasing with many of the items showcased in his office unlikely to be on the market in the near future – and he accepts families often struggle with ‘change fatigue’. Fetters said workers in north-east Indiana now earned 78% of the average national wage, compared with near-parity four decades ago. ‘There has been a decline in real dollars they can spend – and this is amplified by the rapid rise in health costs.’
This trend is accelerated when traditional manufacturers move to places such as Mexico to slash costs. Many workers at the United Technologies plant have skills that are not transferable to more technologically-advanced plants, while firms willing to hire them tend to pay significantly less and with fewer benefits. ‘These folks are having a hard time getting work,’ said one source at a local staffing firm. ‘They have to be willing to accept a pay cut, take any shift and do hot and dirty work.’
She added firms were crying out for skilled staff but the industrial environment was difficult for those who may have left school years ago without higher qualifications to work on assembly lines. Some end up serving fried chicken in fast food outlets. ‘It is a little bit bleak right now. If you do not have the specialised skills, you are simply not going to make a very good standard of living.’
The legacy is two-fold. First, it hurts the wider community. Art Easterday, owner of the Blue Collar Bar, told me that since opening in 2006 he had seen a steady annual decrease in trade of about 10% until this year. And second, these falling living standards lead to discontent with distant elites, seen with the rise of populist politicians such as Trump and veteran left-winger Bernie Sanders. ‘For the last 25 years I have been praying for somebody like Trump to change our politics,’ said Easterday, 53. ‘Just not Trump.’
Chuck Jones was head of United Steelworkers Local 1999 representing Carrier staff. He started working as a teenager for Rexnard, another manufacturer that took fire from Trump for shifting 300 jobs at a bearings factory in Indianapolis to Mexico and where his members are paid $25 an hour. ‘Our people earn a decent living for a working-class person. You are never going to be rich but you can have a modest house, a decent car, see your kids get good education and take a vacation every couple of years. So you work hard, put the hours in and take overtime to do a bit more for your family’, he said.
Now 66, he argues with immense passion that this erosion of traditional industrial jobs corrodes communities and families. Certainly the opioid epidemic scarring America is hitting these parts hard. ‘When they lose these jobs some end up unemployed, others take two jobs such as in a fast food place on the minimum wage and a warehouse for $11. Then they can’t meet their bills so the car goes when it breaks down and they can’t afford to get it fixed, then the house payments. Maybe they turn to drugs or alcohol. Some give up hope and kill themselves. There is less paid in taxes and to local businesses, neighbourhoods deteriorate, house prices fall, there is more crime.’
Jones has since retired after his year in the national spotlight and now campaigns with Good Jobs Nation alongside Sanders to make the president keep his pledge of ‘more jobs, better wages’ for American workers. He believes Trump should simply sign an executive order to stop any state and federal contracts going to companies moving production out of America. United Technologies, for instance, makes more than $5 billion each year in sales to government bodies.
He blames corporate greed, not global competition, for this outsourcing of jobs that he sees as so catastrophic for the industrial working class. ‘They are not going to reduce their prices. It is just going to enhance executive and shareholder profitability. We are seeing our tax dollars reward profitable corporations for destroying American jobs out of greed.’
These are valid arguments. They underline the need to curb excessive boardroom pay, stem corporate tax dodging and stop business dollars from dictating policy in Washington at a time when many workers are seeing real earnings fall. Hayes took home $13.4m last year while his United Technologies predecessor left three years ago with an obscene $195m in company stock and pension benefits. US chief executives saw pay rise almost 20% last year, helped by a buoyant stock market, and are now paid 335 times more than the average American worker.
Yet the core issue is one of skills and helping people handle change. ‘I’m not anti-globalisation. We want free trade although there has to be a level playing field,’ said Robert James, the new president of United Steelworkers 1999 and a long-term Carrier employee who told me he has seen ex-colleagues end up flipping burgers. ‘But the lesson for Americans, especially young workers, is that education and training is vital. You can’t come out of high school these days and go into manufacturing jobs on $20 an hour.’
Similar issues exist across the West. Hayes, heading a firm employing 200,000 people worldwide, warns the global economy has a surfeit of lower-skilled people while facing a shortage of up to forty million higher-skilled workers by 2020. He says eight in ten mid-level jobs now require digital skills – and that 61% of American adults do not have a post-high school degree. He wants to see higher education made tax deductible. ‘Give education the gravitas it deserves,’ he argues.
Analysts argue these are largely generational and educational problems. Robert Shapiro, a former economic adviser to President Bill Clinton and senior policy fellow at Georgetown Center for Business and Public Policy, wants to see more creative solutions such as tax breaks for firms hiring workers in areas of high unemployment and government paying for workers to improve digital and technology skills. ‘Just as we provide public education to ensure everyone has skills to lead a decent life, now we have to provide them with more skills later in life,’ he said.
Globalisation may be a highly disruptive force but ultimately it is part of the solution. Business has to be efficient to thrive and survive. This is why even as Trump vowed not to eat Oreo cookies after Nabisco moved jobs abroad, reporters found products bearing his brand were produced in at least 12 countries including Bangladesh, China, Germany, Honduras, India, Vietnam and – inevitably – Mexico. The US is a post-industrial nation, one that has seen manufacturing jobs as a proportion of its workforce slide since they peaked in 1943 during World War Two mobilisation.
Some economists argue the president should not bully individual firms but focus on ensuring maximum benefits from international trade filter through to consumers. They say that while wages may be flat, dollars are going further as energy, food, clothing, cars and electrical goods have fallen in price. ‘Overall living standards for the average person here are higher than they’ve ever been in history,’ said Mark Perry, professor of economics and finance at the University of Michigan. And he believes Americans should thank China’s rapid industrialisation for ensuring their purchasing power on durable goods almost tripled in just over two decades.
Such are the complexities over globalisation and modern manufacturing. Trump’s stance is economically illiterate as well as hypocritical. Not least since for all the fuss over the Carrier jobs, Huntington shows that even a small town in the middle of America can compete in the international marketplace to win cherished industrial jobs. Yet this does not soften the anguish for those losing well-paid work, the anger of traditional communities facing permanent revolution, let alone the political challenges for countries when confronted by simplistic populism.