Production trickles back to U.S.; jobs don’t follow

Wal-Mart leads but process slow

7/20/2016

Wal-Mart Stores Inc. has been good to America’s Great Horned Owl. Not the real bird — the plastic one.

As part of a much-hyped effort to bring factory jobs back to the United States, Wal-Mart persuaded tiny Dalen Products of Knoxville, Tenn., to shift production of the garden scarecrow back home from China. 

Not many jobs followed.

That’s often been the story of Wal-Mart’s campaign. As the world’s biggest buyer of thousands of factory items, from hunting rifles to bicycles, it’s in as good a position as any company to influence U.S. manufacturing, though the retailer is blamed for sending hundreds of thousands of jobs overseas since the 1990s.

So when Wal-Mart announced in 2013 it would spend an extra $250 billion over 10 years on domestically produced goods, it estimated the shift would create 250,000 manufacturing jobs. The return so far is a fraction of that.

“If you bring back a plant you aren’t going to bring back 100 or 200 people, you will want to automate it so it costs less,” said Gregory Daco, head of U.S. macroeconomics at Oxford Economics. “If you do that, there is really no direct benefit for potential employees.”

Something like that happened with the owls. Dalen made a fixed-headed version at its Knoxville assembly line, but it shifted production of the swivel-headed bird to China in 1997. A prior effort to bring it back stalled because the firm couldn’t find a way to do it without raising the price, said Nancy Taylor, director of sales and marketing at Dalen.

Then, in mid-2013, Wal-Mart said it would buy more owls if Dalen could make them in the United States. With a bigger contract, Dalen could negotiate a better deal for its raw materials. Add in the savings on shipping costs and the math started to make sense, except for labor costs.

In China, Dalen had several dozen employees assembling and hand-painting the owls, and it couldn’t afford to do that in the United States.

The Knoxville employees re-engineered the assembly line, Ms. Taylor said. Now, Dalen is making hundreds of thousands more owls with only a couple of extra employees. But Ms. Taylor said many Dalen staff who used to have a four-month summer layoff now work year-round.

In Wal-Mart’s case, it adds up to about 7,000. That’s how many factory jobs its made-in-America program has created so far, according to an estimate by the Reshoring Initiative, an industry group that supports the return of manufacturing. Wal-Mart said it doesn’t track the number of jobs, but it’s likely to be significantly higher than the Reshoring Initiative’s estimate, which only includes companies that have publicly announced their extra hiring.

For the individuals and communities affected, even a few dozen jobs have an effect, said Cindi Marsiglio, Wal-Mart’s vice president of U.S. manufacturing. She said she’s confident Wal-Mart will meet its job-creation goals.

The United States has lost about 5 million manufacturing jobs since trade with China accelerated around the turn of the century, so Wal-Mart’s efforts are a drop in the ocean. Still, the retailer is on top of this particular league. In second place is Ford with 3,000 jobs returned over six years, according to the Reshoring Initiative, followed by General Electric and General Motors with 2,000 each.