I had an interesting meeting today with a business owner in town at a place called McCartney Tank and Steel. They do steel fabrication, welding, that sorta thing. You don't get much more old school, industrial revolution, "American business" than a steel fabricator, and the guy that runs McCartney Steel is a classic throwback, wizened around the eyes, barrel-chested, forearms like bands of iron, steel-toed boots, Levi's. Dirt under the fingernails. The whole nine-yards.
So it was much to my surprise when I asked him how business was going and he mentioned, offhandedly but with a hint of sadness and resignation, that he's begun outsourcing work to China. Wha...? China?!? Now, I've heard of toy manufacturers outsourcing to China; I've heard of shoemakers outsourcing to Guatemala; I've heard of textile mills outsourcing to Sri Lanka; I've even heard that telephone tech support is outsourced to India; but how does a steel fabricator outsource his product, and when he does, you have to wonder: what's left for Americans to do?
McCartney explained that it's labor costs that are killing him, hourly rates here are 10 times what they pay workers in China (and still here they're only $12-$15 an hour). But there are also benefits, health care, retirement, paid vacation, sick leave, workman's comp premiums, every item adds significantly to his expenses, and by extension to the price he ultimately has to charge his customers.
Now, don't get me wrong, Mr. McCartney is chewing his bottom lip at the very idea that his products are made in China. He's a proud American, and he held out on outsourcing for more than 5 years against the better advice of his accountants and financial advisers. To be sure, he's got a beef with American labor these days as well. The way McCartney sees it, nobody here wants to work hard but everybody feels they deserve a job. "My guys used to make a tank in 5 hours, now it takes 'em 12," he says, at once incredulous. "How do you explain that? And the Chinese tanks are top-quality product. You can't tell the difference!" So it's overseas for McCartney Tank and Steel.
"I can make a tank in China for $3800," he explains, "that it would cost me close to $10,000 to make here. The shipping cost is nothing, Shanghai to California, $900. There's just no way US production competes with that." So he's biting the bullet, and his lip, swallowing his all-American pride and producing his steel products -- I-beams and rebar and water tanks and roofing materials, the kind of stuff that made America great -- in China.
I told him when I heard Levi's finally had to face reality and move its operations overseas, that was when I knew the global economy was chewing up American productivity. We're a consumer nation now, and all our stuff is made elsewhere, because we consumers are not willing to pay the going rate to produce the stuff we used to make here.
I pointed out how sad it is that these jobs are going overseas. A worker used to be able to count on a decent paycheck, benefits, retirement, everything that goes into keeping a strong middle-class strong, but outsourcing drives wages down at home too, as companies like McCartney's try to hang onto their American ideal. McCartney agreed, but he's a businessman first, and he's gotta do what's best for his company. So while he used to have five welders, now he has one; the other four work in Shanghai, for pennies on the dollar.
When Levi's blue jeans are made in Guatemala, and McCartney steel comes from China, America has lost a little something, or a big something, depending on how you look at it. America has lost a bit of its history, a part of its soul.