Why don't US manufacturing jobs offer what they once used to?

In the 1960s, average US manufacturing workers earned about $2.00 per hour - on average. Certainly, some were higher paid and some lower, but on average they earned about $2.00 per hour. This works out to be roughly between $4200 and $4500 per year, if we consider a 26-paycheck cycle per year or bi-weekly pay periods - ((2x80) x26), or ($160x26). Minus applicable taxes and things of that nature, it is fair to say that average manufacturing workers in the US were making an OK living. Comparatively speaking, in 1914 Ford manufacturing company paid their workers on average about $5.00 per day, or about $.50 cents per hour for a 10-hour day.

in the 1960s the minimum wage was $1.60 - inflation adjusted for today, about $13 per hour. In the 1960s, the average family home cost about $12,000 or around $100,000 in today's inflation adjusted economy. According to the US Census Bureau, in the 1960s, 68 out of 100 Americans could afford to buy their own homes with their 1 income earner families. Husband/Dad worked outside the home, wife/mom worked inside the home and took care of the house and the kids. The average CEO income in the 1960s was roughly 23 times the average worker's salary or ranging from around $100,000 per year to over $300,000 per year depending on the company.

Here is a great example of the housing situation in the 1960s from www.curbed.com. Using a teacher's salary as an example, in the 1960s it was at roughly $5200 per year versus today, when teachers make on average around $75,000 in the San Francisco area.

"According to a rough calculation using federal data, the average teacher’s salary in 1959 in the Pacific region was more than $5,200 annually (just shy of the national average of $5,306). At that time, the average home in California cost $12,788. At the then-standard 5.7 percent interest rate, the mortgage would cost $59 a month, with a $2,557 down payment. If your monthly pay was $433 before taxes, $59 a month wasn’t just doable, it was also within the widely accepted definition of sustainable, defined as paying a third of your monthly income for housing. Adjusted for today’s dollars, that’s a $109,419 home paid for with a salary of $44,493."

Today's market is vastly different. Here it is again, from curbed.com.

"This housing math is brutal. With the average cost of a home in San Francisco hovering at $1.61 million, a typical 30-year mortgage—with a 20 percent down payment at today’s 4.55 percent interest rate—would require a monthly payment of $7,900 (more than double the $3,333 median monthly rent for a one-bedroom apartment last year).

Over the course of a year, that’s $94,800 in mortgage payments alone, clearly impossible on the aforementioned single teacher’s salary (of $75,000 per year) even if you somehow put away enough for a down payment (that would be $322,000, if you’re aiming for 20 percent)."

Flip forward to today. Today, with inflation adjusted numbers, only about 40% of Americans can afford to buy their homes - and usually both parents/partners are working. But what does all this have to do with manufacturing jobs in the US?

Well, that is where the process starts that ultimately decimates the US lower and lower middle and middle classes. As mentioned, in the 1960s the average CEO made roughly 23 times the salary of an average worker. Today, that number is much, MUCH higher. Roughly 400 times the average worker. BUT! The argument is that figure is not true, because CEOs are compensated not just with a salary, which is ... modest... compared to their overall pay package, they are really compensated with stock options. In other words, the better the stock price is, the more they make - the idea being that they want to build a brand that is more valuable to investors, so they have a built-in incentive for the company to make more money. That's a nice idea - except it only works one way in reality.

If a CEO has a built-in incentive into their compensation package to increase the share price by all means necessary, they will do so because, and I would argue, they no longer have the company's longevity, productivity or survival in mind because they are incentivized, very heavily, to increase their share price so they can make more money when they exercise their options. And if the ship goes down ultimately, well, they just jump to another ship. This means, their focus is no longer on the company, certainly not on the workers or the long-term survival of the company, because they don't have to care about those things. As an example, and I am not singling out this company, it's just that this is the last quarterly report I read so I am using them as an example, let's say a company makes... green farming equipment. As a pure example only. And let's say said company made roughly 10 billion dollars in 2023. Certainly, a very healthy amount of money - and that is NET income, not gross, it is their income after EBITDA. And let's say that company was in the position to reward their workers with nice bonuses, maybe hire more workers to make more products or engineers to design more efficient, maybe solar energy powered products, maybe invest in new factories for American workers in the future, or expand their US production lines and maybe open a school inside their factories, where workers can learn more techniques on how to prepare for the AI revolution that is hitting the manufacturing facilities in the US.

But this company choose to do something else. What they did, is they instead fired between 600 and 1000 American workers in the US, closed some production facilities, moved them to Mexico because it is cheaper to use foreign labor and saved a ton of money. And then the company, which had previously authorized a stock buyback process, spent roughly 800 million dollars just in 2024 to buy back stock, and increased the total authorization to over $39 BILLION, to strengthen the stock and make it go even higher in price, and will probably contemplate some sort of reverse stock split in the future to strengthen the stock even more. Why? Well, because management has a built-in incentive into their compensation packages to do so.

The CEO of this example company made $26,285,804 in total compensation in 2023. Of this total $1,591,674 was received as a salary, $5,911,159 was received as a bonus, $5,733,640 was received in stock options, $12,446,367 was awarded as stock and $602,964 came from other types of compensation. That is by my simple calculations about 68% of his salary is tied directly to the performance of the company stock. Their stock closed at over $381.00 as of yesterday.

So, to answer the question, why are US manufacturing jobs disappearing and the ones remaining not offering the same thing as they used to? Because we changed the way companies are treated by management. They are no longer proud, US giants of production and Made in America, that a CEO and upper management take a tremendous pride in leading into the 21st century to showcase American talent, American know how and American innovation that made this country the biggest economic powerhouse on the planet - now they are piggy bangs to be looted, and the workers are simply not a part of that equation. Welcome to Atlas Shrugged - the reality.