I’ve been thinking a lot about free trade, labor unions, American manufacturing, and free markets for the past few weeks.
You know that, on the whole, American manufacturing is still as strong as it was in 1960. We still produce roughly $20 out of every $100 of world goods. The difference? Technology and, to a lesser degree, globalization have made it possible for a single worker to generate far more output than any of our ancestors could have imaged. Our manufacturing base is as productive and strong as it ever was, it just requires a fraction of the workers. American manufacturing profits remain the same on an inflation-adjusted basis, the world still gets our goods, but it creates an illusion of decline where none exists.
That said, it is true that a handful of specific domestic industries have been tremendously hurt by globalization. What we’ve gained in aerospace engineering and defense applications, nuclear technology and pharmaceuticals, we have lost in industries that make things such as light bulbs and furniture.
A Brief History of What Has Happened to the Domestic Furniture Manufacturing Industry
Over the past decade, the domestic furniture manufacturing industry has been nearly obliterated. Although sales remain decent overall, despite a massive drop in the aftermath of the Great Recession of 2008, losses of hundreds of millions of dollars per annum are now the norm. That is a situation that cannot go on forever.
To adjust, managements of various furniture companies shut down their American factories and shipped jobs overseas. There was a great explanation I found on a message board about furniture and furniture quality. I’m going to quote verbatim:
A trained American craftsperson in the furniture business earns about $ 25.00 per hour on average, which bills out in shop time hours to around $ 60.00 per hour after benefits added such as Workers Comp, Health Insurance, 401K, Social Security and Medicare – plus Unemplyment taxes and the like that the employer must pay. In China, the workers earn .50 an hour and there are no benefits per se. So obviously, the reduction in the labor costs is massive. This is the primary reason for the move to China.
Materials. There is a huge increase in exporting American lumber to Pacific Rim countries to take advantage of the cheap labor. Exports of both solids and veneers are up 13 to 15 % per year, every year, with Vietnam becoming a very aggressive buyer of raw lumber as they challenge the Chinese for a part of the finished American furniture market share. All in all, the wood used in much of the imports is not too bad, but its not the Selects and better that are being shipped to the Pacific Rim. Finishes are like wood as well, there are expensive ones, and cheap ones (raw cost). Guess what goes on price point furniture?
Production. Speed = profits. A highly skilled woodworker can only work so fast, so in order to get pieces out the door you have to modify how they are put together if you want a volume increase. Virtually every large shop now has CNC computer-controlled cutters that require a software person to program more than a woodworker. They run unattended and only require someone to load blanks in one end and remove the output later on. Backboards on furniture have been replaced by Masonite, because its faster to cut out a piece of Masonite than to fit individual backboards, saves about an hour in time. Hinges are moving to simple screw in kitchen-style that sit on the face of the piece (15 minutes) rather than those that have to be cut in and fit (2 hours). Drawer bottoms are Luan Plywood rather than pine of poplar not so much for material costs but its so much faster to fit them that way. Wood pulls get screwed on rather than bore and wedge fit, and finishes are shot with high-speed pigmented dyes/cheap topcoats rather the hand-applied anilines. The list goes on and on and on.
Its not that these companies don’t know how to make it correctly….they do. Rather the average American consumer has refused to support traditional USA-made furniture because they simply recoil at the prices.
The author of this post then goes on to say, later:
Truth be told, you would probably recoil at what your bedroom suite would cost if you had it USA-made the proper way by American craftsmen. When you say $ 5,000 for the suite I think “Well, that about covers the bed” on high quality items. I’m not sure what all was in your suite, but add two chests, a pair of nightstands and a mirror to the mix and $ 12K to $ 15K is where you would be on properly made pieces done in America.
At the end of the day, your get what you pay for.
The Furniture Companies Can’t Be Blamed Entirely
In one sense, the domestic furniture companies can’t be blamed. The average American, who lacks even the most cursory financial education, is behaving irrationally. They don’t know how to properly amortize expenses and compare value and quality to purchase price.
I knew that time was on us when Procter & Gamble announced last year they were reshaping their entire marketing system to focus on the consumer hourglass theory. This isn’t good for society. But how can I argue with it? Free people, making free choices, chose stupidly. They bought cheap crap that didn’t last, thus forcing most of the quality furniture manufacturers out of business or overseas, and those who survived were those serving the high-end price points because the consumer base in that segment focuses on quality, longevity, and lifecycle cost, not the sticker price.
I don’t want to live in a two-class society, even though I’d be (thank God) fortunate enough to be among those who can afford the good stuff. I cannot fathom a situation in which a two-class society doesn’t eventually devolve into a form of totalitarianism or feudalism, in some manifestation or another. Then, meritocracy dies.
The domestic furniture manufacturing industry is a microcosm of what is happening the middle class. It isn’t caused by corporate America, it is caused by the choices of the middle class itself. You cannot “vote” with your dollars for cheap, inferior products and then expect the good quality folks to be around whenever you feel like it.