Will “Buy American” Really Mean More Jobs?

Will “Buy American” Really Mean More Jobs?

An advertising executive-turned-consumer advocate recently made a short film and posted it on Youtube, and it’s getting a lot of attention. It’s also generating discussion about the ongoing “Buy American” campaign,  which has been percolating around the country for a couple of years now.

Alex Bugosky, formerly of ad agency Crispin Porter + Bugosky and named AdWeek’s Creative Director of the Decade in 2010, spent $7000 and seven months in producing the 3 ½ minute film, which he calls the Million Jobs Project. In the film he claims that if all Americans bought just one more thing out of every twenty objects they buy, a mere 5% more of their purchases, that was made in America, then that action alone would generate over a million new jobs for American workers.

It’s a compelling argument in today’s world of high unemployment and low-wage service jobs, and it really doesn’t seem to be too great of an undertaking to ask of American consumers. Just one more product, just a few extra dollars a week, a month… to generate a million new factory jobs for displaced American workers.

Yes, the U.S. Has Lost Manufacturing Jobs

According to the Bureau of Labor Statistics, 1979 was the peak of American manufacturing, with 19.6 million manufacturing jobs. Since then the number has dropped to 12 million today.   So nearly 8 million jobs have been lost since 1979, of which the majority – 6 million – have been lost since 2000.

However, it’s important to note that not all of the losses are from outsourcing jobs overseas. A significant proportion of job losses also comes from technology improvements that have improved productivity over the last decades.

From 1987 to 2007 (before the worldwide recession began), manufacturing productivity in the United States increased by 123% while employment decreased by 21%. Automation and other technology innovations were certainly a contributing factor during the time period.

But is that the only side to the story?

Consumers widely believe that Chinese products make up a significant part of the U.S. economy, but the actual statistics do not bear out that belief.

According to research from the Federal Reserve Bank of San Francisco in 2011, less than 3% of American dollars was spent on items produced in China. The study also demonstrated that for every dollar that was spent on a product imported from China, only 45% actually goes toward the cost of producing the item itself, and the remaining 55% makes up various other costs such as transportation, wholesaling and retailing activities, which are actually performed in the United States.

The Cato Institute also provided a study in 2011, which showed that 88.5% of American dollars are spent on goods and services that are produced in the United States. Of course, it must be understood that services such as haircuts and oil changes make up a large part of that 89%, along with grocery items that come from American farms.

67% of American dollars are spent on services, of which 96% are “Made in the USA”. An additional 9% of dollars go to food (90% Made in the USA), 4% to gas/fuel/energy (88% Made in the USA) and 10% to consumer durables (66% Made in the USA.)

In other words, a far lesser proportion of our dollars go to products that are Made In China than most people understand. And a far greater amount goes to products and services that are Made in America than we realize.

“Buy American” Certainly Can’t Hurt our Economy

Despite Bugosky’s claims, I did not find substantiation for the “5% = one million jobs” statistic. This fact is offered up repeatedly, in the Million Jobs Project film and in other literature, but no source for such a claim is provided.

However, on a strictly logical basis, it does make empirical sense that products that are made in the United States require Americans to make them.

That being said, there is certainly room for improvement in the buying patterns of American consumers. In many cases, it would be possible to choose an American-made product versus a foreign-made product. In an effort to test this theory, ABC Nightly News ran a series of special episodes in early 2011, in which they furnished an entire house with items that were Made in the USA. While occasionally they had trouble identifying a maker for particular items, ultimately they succeeded in their efforts.

Where You Can Buy American and Make A Difference

“Made in China” products do make up a higher proportion of U.S. consumer spending in several categories: in electronics, in household furniture, and in clothing.

We cannot compete, at least not at this time, in electronics – but the electronic picture is not as bleak as all that. Take, for example, the iPod, which costs nearly $200 retail, and is considered a “made in China” product because that is where is is assembled – yet a paper produced by the Alfred P Sloan Center clearly demonstrated that only $6 of the price of an iPod, a mere 3% of the cost, could be attributed to actual Chinese input.

However, nearly 40% of U.S. spending on clothing goes to Chinese products, and this is one category where American firms absolutely can compete. American-made clothing is becoming quite accessible, thanks to entrepreneurs who are working hard to provide high-quality, high-fashion clothing at a reasonable price.

What You Can Do

American-made products may be a bit more expensive, but they also tend to be of higher quality than their cheaper Chinese-made counterparts, and they tend to last longer.  A recent Consumer Reports survey found that over half of Americans would not mind paying up to 10% more for an American-made product, and 25% would pay up to 20% more.

It would be beneficial to pretty much everyone if a consumer stopped and thought a moment before buying. More mindful purchasing, like the more mindful “buy local” trend that is growing among food shoppers, can prevent the binge, impulse-buying that most people practice.

We can all slow down and think about our purchases, and actually make a conscious effort to look at where our potential purchases are produced. If we choose not to buy those that aren’t made in America, then we can make an impact, however small, on the economy.

And that small impact, multiplied by 130 million Americans, can turn into a big impact.

Will our purchases create a million new American jobs? That’s hard to say. But we should all try anyway.

Where to Look

It can be confusing, though, with current product labeling, to determine if something is truly “made in the USA”. The FTC only requires cars, textiles, woolens and fur products to fully reveal their full origins.

Fortunately, with popular interest in this sort of disclosure growing, there are plenty of websites that compile lists of Made in America manufacturers of various types of products.

americansworking.com
www.madeinusa.org
www.stillmadeinusa.com
www.madeinamericaforever.com

Karin Hernandez has been interested in personal finance since she began reading Money magazine in high school. Over the years, she has traded stocks, IPOs, options, futures and forex. She became a freelance financial writer in 2012, and currently writes stock market analysis for The Motley Fool and Seeking Alpha, as well as financial blog posts and articles for numerous private clients. She now totally believes that dividend-growth companies are the best way to invest.

5 Responses to “Will “Buy American” Really Mean More Jobs?”

  1. Chris Romans says:

    This was a really interesting article. We don’t often hear any details behind the “Buy American” campaigns, and I found this article to be really compelling because of the reliance on statistics to back up the information provided. Aside from potential job creation and product durability, is there really any incentive that consumers have to purchase American made products? I’ve never fully understood the whole “Buy American” thing, and still do not. While I am a US citizen, my buying plans emphasize what is good for my wallet. I’m sure many people can relate to this thought process, and in a lot of ways it is the basis of capitalism in general. Companies have opportunities to exploit cheap labor overseas. Why should they not? Maybe we lose some jobs on our shores, but this may be a sign that government regulations need to change to allow for employees to be paid less. I mean, simple warehouse jobs in my area range in pay between 12 and 20 dollars an hour for entry level floor work. That is ridiculously high for manual labor, and it ultimately effects the cost of products at the end of the line.

    At the end of the day, the whole “Made in the USA” thing irks me just because their is little transparency regarding where things are made. Sure, there are tags placed on products, but they are often misleading. I see this all the time where I work.

  2. James says:

    Great article about buying American. Frequently I’ve heard that buying American creates more jobs and helps America out. I’ll definitively take a look at the websites at the end and try to buy American more.

  3. Arthur says:

    Well its disappointing that we cannot compete in every category but I’ll definitively do my best to buy more American made clothing!

  4. Karin Hernandez says:

    I tried really hard to find substantiation for the “5% = 1 million jobs” and was unable, which was really disappointing. I do believe that Buying American can bring SOME jobs back, but I am not sure to what extent. And the more that we do try to Buy American, the more American entrepreneurs will try to provide things for us to buy – so the circle goes.

  5. efpierce says:

    I used to think that buying American would mean more jobs here, but have since found that to be false. I still believe in shopping a lot more than most, but that is mainly to keep the economy moving which is something that more people should be doing.

Trackbacks/Pingbacks

  1. Will "Buy American" Really Mean More Jobs? « Economics Info - […] Source […]

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>