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Economic Research

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Volume 13, Number 3
Third Quarter 2011


Made in the South: A Bad News, Good News Story

The Southeast has become home to a number of auto assembly plants in recent years, as foreign automakers, drawn by low costs and relatively flexible labor regulations, set up shop in the region. But the influx comes after years of decline in southeastern manufacturing, especially in its textile and apparel sector.

In "Made In the South: A Bad News, Good News Story," featured in the third-quarter issue of EconSouth, staff writer Charles Davidson explores the ongoing transformation in the region's manufacturing sector as it shifts to more sophisticated, technologically-based processes.

Despite the decline in factory jobs nationally and across the region, manufacturing output has remained relatively stable. This is largely due to productivity gains in the region, which allow manufacturers to do more with less. The increase in productivity has been accompanied by higher wages, Davidson notes.

And although factory jobs make up a smaller share of overall employment than they used to, the industry is still an important driver of economic activity, especially in small towns and rural areas.

As factories shift away from low-wage, low-skill work, they will demand more highly skilled workers. In a region with below-average rates of education, this will be a challenge.

However, other, more favorable trends could boost manufacturing in the region, Davidson writes. For one, shipping costs make it more-cost effective to build bulky, durable goods closer to home. And rising labor costs overseas are narrowing the gap with China and other developing countries. As a result, U.S.-based companies will be more likely to open plants stateside.

"Nonetheless, the region is unlikely to reverse the drastic loss of manufacturing jobs," Davidson concludes. "Rather, the Southeast will probably continue to see fewer, but higher paying and more sophisticated, production jobs."

To learn more about manufacturing in the Southeast, read the full story in the third-quarter of EconSouth, available in print or online.