Manufacturing jobs are not coming back.

Labour has always been the party of manufacturing.  By the second half of the 20^th century, factory workers had taken over from those working in ‘primary’ production  as  Labour’s main union base.  A need to rebuild manufacture is now, if speeches by  leadership candidates and trade union general secretaries  are anything to go by, seen as integral to winning back support in the Party’s ‘heartlands’.

As a recent briefing indicates, manufacturing continues to decline as a proportion of GDP – contributing just 10% compared with 27% in 1970. But also as an employer – down to 7.6% compared with the 22% in 1981 and 11% in 2003.  Labour Party activists invariably blame successive Tory governments (and often their own!) for  manufacturing’s demise, particularly the ‘monetarist’ economics of Margaret Thatcher in the 1980s.  Increased ‘outsourcing’ of production to economies with lower wages is also cited, along with the overvaluation of Sterling designed to accommodate the interests of banking and finance, meaning the economy has experienced a serious imbalance.  These arguments, along with the potentially disastrous implications  of a ‘hard Brexit’ for factory supply-chains are of course significant, but  arguably less important than other wider factors.  As society gets richer for example, people spend less of their additional income on tangible goods.  As a result, products like cars have experienced major ‘overproduction’.   Consequently , despite still making up a greater share of GDP than in the UK, all the major economies have seen manufacturing decline as a proportion.

Even so, UK manufacturing output for 2018 was still 7% higher in the UK than in 1990, (although service sector output has more than doubled during the same period).  The main reason for falls in manufacturing employment, is the large increases in productivity resulting from automation and robotics. In Q3 of 2019, productivity in  manufacturing  was 12% higher than the average across the economy  (in the IT sector alone, rates were 49% higher). In manufacturing, it’s relatively easy to replace workers by machines.  Fifty years ago the motor industry employed 500 000 people, car workers being among the best organised and the most militant within the Labour movement. Today employment  is a little over 150 000 –less if you only include jobs directly concerned with production.

As much of an issue, is why productivity increases haven’t matched those elsewhere. A common explanation is under investment by UK business and a failure to spend money on R&D. Figures show for example that the number of robots used in UK manufacturing, at 71 per 10,000 employees, is much lower than elsewhere, (531 in South Korea and 301 in Germany) . If it wasn’t for the importance of the food, beverage and tobacco sector  (which makes up 16% of total manufacturing)  manufacturing employment would be lower still. The  labour intensive nature of this industry is facilitated by the availability of low-paid, low-skilled employees – up to one third are from overseas.

In the General Election Labour promised increase investment through a ‘National Investment Bank’, and to improve ‘skills’. But would the increased productivity these might produce  lead to increased manufacturing employment? On the contrary the opposite is likely to happen. According to Oxford Economics the introduction of one robot equates with the loss of 1.6 manufacturing jobs. more in poorer areas. it estimates that by 2030, robotisation will replace another 20 million jobs worldwide.  In South Korea for example, despite almost a third of GDP being earned from manufacturing, the sector employs less than 1 in 5 of the population. Increased productivity also lowers the price of manufactured goods therefore reducing the amount the sector adds to the overall economy still further.

Rather than factory-based employment, Labour now draws most of its support from the 80% of the population working in services –  a  very different working class. It’s certainly the case that the continued fall in Labour support within the so called  ‘red wall’ has been a long term consequence of ‘deindustrialisation’  and this  has reinforced hostility towards the EU. But Labour can’t become the party of manufacturing again and has to offer other opportunities, other forms of security and set out how it can run a different economy in a different way.  Midway through the General Election campaign, in response to the actions of climate change campaigners Labour took a bold leap, promoting  a ‘Green Industrial Revolution’. During its period in opposition, it will at least be able to take some time to develop and explain how this will be organised  and how it relates to the original Green New Deal.