New Manufacturing Increasingly Going to Lower Income Towns. This is a Good Thing.


The U.S. manufacturing boom, which started slowly since the implementation of tariffs on steel, aluminum, some China imports, and sped along by new laws favoring domestic supply chains, has had a positive impact on lower income counties nationwide. This is good news. More often than not, these were the old factory towns that were decimated by what some academics have referred to as “the China shock.”

According to a study by the Brookings Institution and the Massachusetts Institute of Technology, since 2021, a group of counties with low employment rates for prime-age workers and a median household income of less than $75,000 have accounted for 16% of the $525 billion in announced investments. 

The report mainly credits three laws signed by President Biden: the Infrastructure Investment and Jobs Act, the CHIPS and Science Act, and the Inflation Reduction Act for bringing in new investments and does not discuss the Section 301 and 232 tariffs which also led to new investments. 

“The Trump administration’s tariffs and Biden’s Inflation Reduction Act are directing investment in U.S. industries and that is good for income distribution, and good for minority workers in low income counties,” said Jeff Ferry, chief economist at CPA. “The Brookings study highlights the bonuses for locating in these counties but there are other factors involved too, notably that they have lower costs overall and more land area than northern manufacturing towns.”

The three laws mentioned by Brookings each provide for production tax credits for manufacturers, among other benefits dependent on location.  For instance, the Inflation Reduction Act has tax credits that include bonuses of at least 10 percent if an investment is made in a “low-income community”.

As of 2022, there were 1,071 U.S. counties that fell into this low-income category – representing 13% of the U.S. population. The study found those counties received nearly $82 billion of announced investments, double their share of gross domestic product and 1.2 times their share of the population.

The previous three years of data indicate that after decades of economic divergence, strategic sector investment patterns are including more places that have historically been left out of economic growth. Employment-distressed communities are receiving an outsized share of strategic sector investments compared to their share of economic activity, population, and overall private investment from the last few years and investment in the last decade. And the map is not yet finished: There are hundreds of distressed counties with assets similar to those that have attracted investment and have not yet been targeted. This suggests that the benefits of a national industrial strategy can reach people and communities that have historically been excluded from economic opportunity—a trend that bodes well for the entire country.

In 2001, the U.S. had 17.1 million manufacturing jobs. By 2022, that total had fallen by 24% to reach 12.97 million manufacturing jobs. If employment in the manufacturing sector grew at the same pace as the rest of the economy since 2001, there would be 7.1 million more manufacturing jobs than exist today.

Impacts of China & Free Trade Agreements on Domestic Manufacturing

Map of Job Loss Due to China Shock in Core Based Statistical Areas (CBSAs)

The map above shows job loss due to the China trade deficit in all communities across the United States. Darker shades of red indicate a greater percentage of job loss due to China. While all communities suffered some job loss due to increasingly unbalanced trade with China, the areas that suffered the most are located along the West Coast and Southwest as well as the Upper Midwest and Northeastern regions of the U.S.

CPA analysis conducted in the fall of last year finds that the trade deficit with China accounts for nearly half (47.9%) of the manufacturing job loss. Our model estimates the number of jobs in each metropolitan/micropolitan area displaced by imports including jobs dependent on those manufacturing industries.  

“China is a unique threat because it is both a national security and an economic threat, but any and all low-wage nations bent on industrial expansion are a danger to the U.S. high-wage society,” said Ferry.  “Paul Samuelson’s economics made that clear in the 1940s. But economists chose to ignore it in their blind obsession with free trade. If we want to rebuild American prosperity, we need a certain amount of insulation combined with investment in valuable manufacturing industries.”

Free trade agreements (FTA) have also had an outsized impact on lower income communities, especially those in the south that had benefited for a time from factories leaving the more expensive northeast before leaving for Asia, and more recently – Mexico. (Mexico is now our No. 1 source of imported goods, surpassing China last year.)

A 2022 report by the International Trade Commission said the effect of outsourcing manufacturing on minority workers was worse than non-minority workers. 

“In the face of trade shocks, Black and other Nonwhite workers fare worse than their White counterparts… import competition had a large and disproportionately negative effect on wages of minority workers,” that report said. 

Offshoring disproportionally hurts people without college degrees. Those that live in micropolitan regions located further away from industrial hubs and services centers are the hardest hit. 

These communities also lose important benefactors, such as local corporate donors and philanthropists who fund local sports teams and educational institutions. The loss of manufacturing is always seen as the first step to urban decay, no matter how large the city. 

In the race for cheap production that U.S. companies have found themselves in, they claim to seek lower prices to help the consumer. The ITC said that big transnational corporations like Walmart were winners in free trade agreements, like NAFTA and the Korea-U.S. FTA while blue collar workers were not. Despite having lower priced consumer goods, their wages were stagnant and their upward mobility was curbed.

A CPA Job Quality Index report in 2021 showed that Black Americans and Hispanic Americans suffer from far worse job quality than the total workforce, as measured by the weekly wages of all U.S. production and nonsupervisory employees. These disparities are due to the decline of high quality jobs in the manufacturing sector and the rise of low quality, low-wage, low-hour service jobs. 

The 2021 study builds on work CPA did in partnership with Cornell academics in 2019 to extend Job Quality Index analysis to three U.S. minority groups. It showed how the hollowing out of blue collar manufacturing labor disproportionately hurt minority groups, or forced them into public service jobs. 

Manufacturing workers have no say in their jobs being stripped away, yet they suffer directly.

The loss of manufacturing impacts the country as a whole, including solid middle class and upper income counties. 

Jobs in the computer and electronic industry account for the largest share of job losses in manufacturing since 2001. Some 1.2 million jobs of the 3.4 million manufacturing jobs lost, a CPA study showed. The computer and electronic industry was largely concentrated in major metropolitan areas from the 1980s onward, be it Texas Instruments in Dallas or the long defunct Wang Laboratories in Boston (which was the big funder of Boston’s Wang Center, the city’s largest theater. It is now the Boch Center – named after a family that owns a string of car dealerships in the state.)  

Other hard hit sectors in other parts of the country like Cedar Rapids, IA include manufacturing sub-sectors like electrical equipment, machinery, metal products, and furniture. These sectors were based broadly throughout the entire country and often in small cities where they were the dominant employer.

All metropolitan areas have had some degree of job loss due to outsourcing manufacturing labor and our reliance on imports. But some have been impacted more than others. A total of 74 of the 927 metro areas CPA looked at for its 2023 study would have 10,000 more manufacturing jobs if the U.S. had a more balanced trade with China, Mexico and the European Union.

“Mexico will continue to put downward pressure on the U.S. auto industry in particular,” said Ferry.  “That means  they will increase Mexican production for all of North America, impacting U.S. auto industry wages and likely increasing unemployment in that sector of the economy here.”


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