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Supporting American Manufacturing

The surprising positive effects of buying American Made products.

It’s wonderful that the “buy local” message has been growing over the past few years and that more and more people understand the reasons behind the slogan. Independent retailers are increasingly using the “buy local’ argument in their marketing and advertising – and for good reason. The economic benefit to a local economy is almost always greater when consumers purchase something from a local retailer than from a national chain.

As the importance of buying local is finding its voice in mainstream culture, we shouldn’t forget another important part of that message; buying American Made. What does it mean to buy something that is made locally as well as bought locally? Even more benefits to the community and the country as a whole.

A great example is in the furniture industry. When you are in the market for a new bedroom set and it comes down to a choice between something made locally and something imported, consider the beneficial impact that a locally manufactured product has on the community. You’d be surprised at how significantly your choice benefits the local economy through something called the “multiplier effect.” This effect is all the secondary economic activity triggered by your locally made purchase. When you place an order with a furniture company operated in your area, you are facilitating a string of economic activity that extends both before and after the purchase also known as “downstream and upstream.” In the case of a local manufacturer, most of that downstream effect is felt in the local community.

Many people are not aware that manufacturing has the highest multiplier effect on our economy compared to that of any other sector. This is because manufacturing has direct and substantial links to other sectors of the economy that work in this same upstream downstream model. For example, each bedroom set produced stimulates many other industries prior to the purchase, including the forest landowner, logger, sawmill, engineered wood material plant, dimension/ rough mill plant, furniture manufacturer, woodworking machinery, equipment manufacturers/suppliers, and a host of related suppliers. The upstream effects include the transportation of goods, financing, and wholesale/retail trade sectors that deliver goods to the consumer.

According to the National Association of Manufacturers, every $1.00 of manufactured product sales supports an additional $1.37 in other sectors of the economy. Local communities value the multiplier effect and its impact on economic development, and this is the major reason why civic leaders seek manufacturing plants as the best way to create jobs and increase their tax base. And what about that other bedroom set you were considering, made offshore, imported, and sold directly to a US retailer? It would only result in a multiplier of .50 cents and would leave out many of the downstream effects. This is the major reason why the loss of manufacturing has led to a serious decline in our economy. In terms of jobs, manufacturing has a huge employment multiplier effect. The Economic Policy Institute estimates that 100 furniture manufacturing jobs in the US support 97 jobs in the supplier sector, 77 re-spending jobs – jobs supported by the expenditure of the 100 paychecks associated with the furniture manufacturing jobs – and 4 state, local, and federal jobs.

As we have all witnessed, furniture being made in the US has declined at an alarming rate. Open any popular furniture catalog and you will notice that the majority of items for sale are made in China. China has come to dominate the furniture industry in a relatively short period of time by offering unbeatable labor and production costs and therefore unbeatable prices. From 2000 to 2009, China’s share of the world export market for furniture soared from 7.5 percent to 25.9 percent. During the past decade, China’s share of the U.S. case goods market has been as high as 70%. While this seems to be on a never ending climb, there is good news for American manufacturing on the horizon. It may not be obvious yet, but the U.S. manufacturing sector may soon have a chance to rebuild. China’s developing middle class and increase in wages are not only helping its citizens move into a more financially stable future, they are bringing manufacturing back to the US. China’s overwhelming manufacturing cost advantage over the U.S. is shrinking fast. Within five years, rising Chinese wages, higher U.S. productivity, a weaker dollar, and other factors will virtually close the cost gap between the U.S. and China for many goods consumed in North America. This renaissance in manufacturing can power a long term recovery in employment and the economy at large. In addition, it will lessen the negative environmental impact that off shore furniture manufacturing has created, by producing more furniture in a country with stricter standards and stronger regulation, and finally, may even be the platform for a more rational, long term, sustainable, and growing economy — not one based on speculative bubbles like Internet stocks, out of control credit markets or speculative real estate. There are so many great reasons to buy items both made and sold locally, hopefully these messages will continue to penetrate our collective mainstream consciousness.

Written by:  Glynis Price, Manager of the Copeland Furniture Company Store in Bradford Vermont.
Source material: Made in America, Again – Why Manufacturing will Return to the U.S., Boston Consulting Group

Updated Employment Multipliers for the US Economy 2003, Economic Policy Institute

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