Carolinas and our Manufacturing Base

Unemployment is about 10% in the Carolinas as their regional economy has been hard hit by the recession. The economy is likely to be a key issue when voters go to the polls for the Republican Presidential primary in South Carolina, and later this year when Democrats nominate President Obama for re-election at their convention in Charlotte.

Forty years ago the Carolinas employed the highest fraction of workers in the manufacturing sector, accounting for almost 40% of all jobs. Textiles and apparel manufacturers were the largest employers with more than half of all manufacturing jobs.

When President Obama and the Republican Presidential candidates advocate policies to restore our manufacturing base shuttered steel mills and automobile manufacturing plants in the Rust Belt come to mind. No states have been more adversely impacted by globalization and foreign competition than the Carolinas. China now accounts for 40% of US imports of textiles and apparel, up from 12% two decades ago. Over the same time foreign imports have more than tripled while the US has lost 80% of jobs in the apparel and textile industries.

Today Indiana is the most manufacturing intensive state in the US, with about 19% of private sector jobs in manufacturing. The Indiana legislature is about to debate legislation that would make it the only right-to-work state in the “Rust Belt”. The lesson from the Carolinas is clear. When foreign labor and production costs are sufficiently low, as they are in textiles and apparel, neither tax incentives nor “right-to-work” laws will be enough to preserve manufacturing jobs. Our manufacturing base in the 21st century will be concentrated in industries where skilled labor and sophisticated capital equipment give us a comparative advantage.

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