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Not too long ago, the US employed more than 300 thousand workers in car manufacturing plants across the country. Over a million more were employed in auto parts manufacturing.

Since the turn of the Century, US auto’s narrative has been one of gradual decline. Automation, globalisation and changing consumer preferences drained jobs out of the sector to the tune of about 12 thousand jobs a year. The sector’s woes were exacerbated by the GFC, which saw 65 thousand workers lost their jobs between June 2008 and June 2009 alone. At its lowest, auto manufacturers employed just 120 thousand workers, a 60 per cent fall in less than a decade.

Jobs in auto factories were revered. They offered high wages and career paths, without requiring high levels of formal education. They came wrapped in identity, pride and purpose. The loss of these jobs is understandably lamented, and is a big part of the Trump Administration’s agenda.

Since the GFC, auto has been making a comeback. While it hasn’t yet returned to its peak (it was never going to), employment in the sector has grown considerably. Today, in factories spanning Detroit, Kentucky, West Virginia, Texas, Indiana and elsewhere the sector employs about 215 thousand people. There are promising signs for the future too — Toyota and Mazda for example, have announced plans to build a $1.6 billion plant in Alabama; and Fiat Chrysler are shifting production from Mexico to Michigan.

Given the macro forces at play, the sector’s ability to create 10 thousand jobs a year — for nearly a decade — is nothing short of impressive.

But… there’s a catch. To date, the increases in employment have not translated into sustained increases in production. The number of vehicles produced domestically in the US is no greater now than it was in 2009.

US motor vehicle manufacturing employment and production

Source: Bureau of Labor Statistics and Bureau of Economic Analysis

The concurrent rise in employment and fall in production seems counterintuitive. Why add workers when their labour productivity is falling?

The answer is that these workers are not being replaced like for like. Many new hires have been in lower-wage, entry level positions. This average real wage paid to an auto worker has fallen by nearly 25 per cent since 2003. In 2003, the average wage paid to an auto worker in a non-supervisory role was just over $37 an hour; it’s not quite $29 today. Moreover, conditions have been watered down considerably. This provides manufactures with more flexibility (read: temporary) to scale up, down, and move in and out of country. This is still quite a good wage in relative terms, the Federal Minimum Wage is $7.35.

US motor vehicle manufacturing real wages

Source: Bureau of Labor Statistics

In the background, Americans are buying more cars than ever before. They’re just mostly foreign. During the past 20 years, imports of passenger vehicles have grown from 32 per cent of cars sold in the US to 48 per cent. Efforts to capture more of this market have led to the Administration’s s232 investigation into auto imports and are high on the minds of the NAFTA re-negotiators.

An auto manufacturing plant is the textbook example of an optimised global value chain. Regardless of where the vehicle is finally assembled, its components will be sourced from all over the globe. Efforts that in affect attempt to shape and skew how supply chains function will ultimately increase the cost of production, which for workers in the sector, skilled or otherwise, can’t be good news.