12.3: Secondary Sector

Under ideal circumstances, the presence of an extractive industry helps attract lucrative manufacturing jobs in the secondary sector of the economy. Secondary sector industries take materials extracted by workers in the primary sector (iron ore, crude oil, corn, fresh fish, etc.) and manufacture them into useful products (iron pipes, gasoline, cornmeal, fish sticks, etc.) Generally, the transformation of natural resources into a finished product is called “manufacturing”, but secondary industries also include things we might not consider “manufacturing”, like oil refining and food processing.

Like extractive industries, manufacturing has great benefits and dire consequences if industrialists and local politicians manage the industries poorly. Because manufacturers convert items with little use value (like logs) into something with greater use value (like a dining room table), manufacturing activity often generates large unit profits or value added per unit. Sometimes, if labor conditions are right, a substantial portion of the profits generated by added value during the manufacturing process returns to workers in the form of high wages. For much of the 20^th century, good-paying manufacturing jobs permitted millions of American workers to enjoy a very high quality of life, even though they did not require extensive education or training. Many of those jobs have disappeared; lost to international competition, stockholder greed, and pro-business (anti-union) government policies.

Factors of Production

Land, labor, and capital traditionally constitute the main costs of building and running any business. This is especially evident for manufacturers. Together, these costs are known as the factors of production. The cost of each factor is critical to the profitability of businesses, and therefore critical in the decision-making processes that create landscapes of business and industry. The process of picking a location for a factory is known as industrial site location analysis, and it is a very lucrative career path for economic geographers. New factories can cost over a billion dollars, so it’s important not to put them in a location that undermines profitability!

Labor

Industrialists would like to hire high skilled workers that work for free, but workers need to be paid, and that pay includes wages and often includes the cost of fringe benefits like health care, retirement, etc. When workers require little training or skill to master the tasks necessary to produce a product, it is known as low-skill manufacturing. Companies need mostly low-skill laborers generally seek locations with a low cost of living because workers in such locations accept lower wages. If the cost of labor contributes a significant portion of the overall cost of producing a good, and there are no significant restrictions on the movement of that industry, those industries tend to move often in search of cheaper labor. Industries that move easily, without negative consequences to their profitability are called footloose industries. The textile industry is a good example of a footloose industry. Some industries require highly skilled workers, which raises the cost of labor and reduces the number of possible locations where such industries locate. High skill labor, like computer programming, often spurs local inflation in wages, housing costs, etc. California’s Silicon Valley is an excellent example of this process.

Figure 12-4: Lowell, MA - Textile Mill. Built upon the availability of reliable water power, transport advantages and cheap labor, New England was the first industrial heart of the United States. Wikimedia

Textile Manufacturing

In many parts of the world, the manufacture of clothing (textiles), is an important first step in the process of industrialization. Most of the first textile factories in the US were built in New England in order to take advantage of the power generated by numerous waterfalls along the region’s fall line. Gravity powered water wheels provided power to factories built next to numerous mill ponds. These factories employed inexpensive female labor (mill girls) drawn from regional farming communities. Textiling endured in New England for several generations, coming eventually to rely on cheap immigrant labor after native born workers fled textile factory jobs for better-paying jobs in other industries. Eventually, waterpower gave way to electrical power, freeing factory owners to move away from fall line cities. By the 1900s, factory owners in New England began moving factories to southern cities like Charlotte, North Carolina where land and labor were cheaper. Southern factories also were closer to cotton farms in nearby states, reducing transport costs for raw materials. Unfortunately for textile workers in the southern US, the labor and transport advantages that lured factories to the South, also led them away.