One of my commenters took substantial umbrage at my claim that the idea that saying that U. S. manufacturing jobs could be “brought back” from China, Japan, South Korea, etc. was poorly informed enough as to constitute a lie so I thought I’d explain my reasoning. What I’m presenting in this post is widely known among economists and businessmen. It’s not particularly controversial.
Let’s start by defining our terms. First, let’s talk about what a job in manufacturing in the U. S. was like in the past. A half century ago someone with a high school education only (or even less) could get a job working on a factory floor that would pay wages high enough to support a large family in a middle class lifestyle, paid all of their healthcare expenses, and, after they’d worked their entire lives at that company, paid for a graceful retirement.
Millions of those jobs no longer exist. As the graph at the top of this page illustrates, manufacturing employment in the United States peaked in the 1970s and now nearly 8 million fewer Americans are employed in manufacturing than were 40 years ago. But manufacturing output has continued to grow and is higher today than ever. The manufacturing jobs of the 1970s are gone, they aren’t coming back, and there’s nothing that anyone can do to bring them back.
BTW, it isn’t just in the United States that manufacturing jobs have peaked. Manufacturing jobs in China peaked a number of years ago.
To understand why let’s consider one example: what we used to call the “Big 3” U. S. automobile companies—GM, Ford, and Chrysler. Those three companies alone employ 300,000 fewer hourly manufacturing employees than they did in the 70s.
Prior to the automobile industry’s near-death experience in 2007, the hourly labor cost in those three companies (wages plus the cost of benefits) was around $75/hour. Today those companies have tiered payment systems. New employees are paid closer to $15/hour. Let’s talk about the old jobs rather than the new ones which clearly don’t fit the description of the “good, manufacturing jobs” I outlined above.
300,000 X $75/hour X 2,000 hours per man-year = $45 billion. That’s three times the Big 3’s combined net income. The numbers just aren’t there. You could cut their CEOs’ incomes to zero. The numbers still wouldn’t be there. You could impose tariffs on Chinese manufactured goods high enough to start a trade war. The numbers still wouldn’t be there.
Today’s good, manufacturing jobs still pay well but their numbers are not growing rapidly and their requirements are greater than they used to be. They require greater skills, those skills aren’t taught in our high schools and, importantly, they change over time.
The present state of affairs could be improved if we took some substantial steps. First, we should stop tolerating currency manipulation by our trading partners. That isn’t limited to China but includes Japan, Germany, South Korea, and many, many others.
Second, the federal government should stop subsidizing the off-shoring of jobs.
Third, we need to re-balance the emphasis in our schools away from college prep towards vocational training and to do that we’ll need to accept that some people will not go to college and that’s okay.
Fourth, American workers need to realize that learning doesn’t end in high school, college, or, indeed, ever. They will need to continue to improve their skills over their entire working lives.
Fifth, a better division of the costs of improving workers’ skills needs to be struck between the workers and their employers with government playing some role. I’m not prepared to say what that division should be or how it should be decided but I do believe that the present division with most of the onus falling on the workers isn’t working.
Among my regular commenters some have substantially more first-hand knowledge of these matters than I do and I hope they’ll join in the discussion.
They require greater skills, those skills aren’t taught in our high schools and, importantly, they change over time.
…and…
Fourth, American workers need to realize that learning doesn’t end in high school, college, or, indeed, ever. They will need to continue to improve their skills over their entire working lives.
…and…
Fifth, a better division of the costs of improving workers’ skills needs to be struck between the workers and their employers with government playing some role.
That’s all irrelevant. It doesn’t matter if American schools teach American workers the skills they need for modern jobs, because American companies will pass over Americans in favor of importing people from the Third World at every opportunity. Just as (former) IT workers about that one.
The truth is, unemployment FOR AMERICANS will continue to get worse, because that’s what our business leaders and political leaders want to happen. And until the American people get over the constant shaming our leaders heap upon us and do something about it, this will continue indefinitely.
I agree that manufacturing is not coming back, but get a little nervous with your statement about the government playing some role.
One role the government needs to do is take on the provisioning of health care. There, I said it. Yup, let’s get it over with and nationalize health insurance if only to decouple it with employment. This was a completely artificial combination put in place after the imposition of wage controls, and it has skewed salaries and employment numbers ever since.
Companies should provide jobs and in exchange should pay compensation in the form of cash. They should have nothing to do with health insurance. The result will be transparency: a worker knows what the company is paying him with every paycheck. S/he can then move jobs as it suits.
As for the rest of your thesis, the problem isn’t that manufacturing has gone away, it’s that the “value-added” jobs that were supposed to replace them haven’t accrued to those in the lower-mid tiers of society. We can’t all be Apple iPhone designers or Hollywood directors.
As you know I agree that we should change how work visas are issued. The burden of proof should be increased and the requirements changed.
Yup, let’s get it over with and nationalize health insurance if only to decouple it with employment. This was a completely artificial combination put in place after the imposition of wage controls, and it has skewed salaries and employment numbers ever since.
Yet another horrible thing we can blame on Hitler.
Scott:
Government at some level is responsible for most education spending.
It’s hard to ignore the fact that, given what you said about jobs not coming back, that this country either has an excess of workers, or a shortage of jobs. Where I live, Lincoln, Ne. the help wanted signs are everywhere. 10.50/hr, 30 hours per week (Obamacare). Little by little, my neighbors are getting used to smaller digs, walking to work, living with relatives, you can see the decline.
I myself am a Teamster, to many a shameful word. Not to my wife and children though. She was able to stay home and be a mother to our two children on my pay and benefits, which by the way, I could never have negotiated on my own behalf.
Also, why are unions somehow different or worse than Hollywood or sports agents or C.E.O. contracts?
And while I’m at it, who the hell are you armchair guys to criticize me at all?
I would add that we need to have tax rates and structures that are not out of whack with countries with which we have free trade agreements. Part of the technological changes is that more plants are moving. A distant relative who works for CAT had his job relocated to Tuscon, which was providing tax abatement and a plant site. He and other employees moved, but are not buying a home or otherwise settling down because they believe CAT will move again once the tax abatement expires. Who knows what the future brings, but I’m sure Tuscon gave up a lot with the expectation of long-term gains to a company that is just as likely to pick-up and move again.
That anecdote starts to get a little more into government subsidizing movement, but my main observation is that this sort of fickleness was not something manufacturing was seen as capable of in the 70s. CAT’s accounts certainly must have calculated the money saved by moving was more than the relocation costs. Similarly CAT figured that there was tax savings in placing a plant with operations on either side of the Rio Grande to arbitrage the difference btw/ the Mexican VAT and the American corporate income tax.
I just finished listening to the audiobook of Phyllis Schlafly’s _Conservative Case for Trump_. She states that the recent trade deal with South Korea resulted in no growth of U.S. exports but a 40% increase in the S. Korean auto industry.
So I would suggest looking at the entire auto market globally. My guess is that the big three U.S. automakers have lost share to the foreign manufacturers. So those 300k man hours probably have gone to S. Korea and Japan. There’s no reason we can’t insist that Japan and S. Korea build those cars in the U.S. if they want access to our markets. We owe nothing to either country. Their very existence as free nations is owed to the U.S. or they would be under the thumb of the Chinese communists.
I believe competition is good. But we need jobs if we are going to have a functioning democracy. We need balance. Right now, the balance is not in our favor.
Same thing can be said of our electronics industry. Having the Chinese build all our computer parts is dangerous for national security for what should be obvious reasons. Cheap prices are good, but not at the expense of national security.
Exactly right. You know what I need? A decent handyman. You know what I don’t need? A college kid.
But aren’t we sort of avoiding a larger point? If we can make more with 12 million workers than with 18 million, does it not follow that at some point we collectively, worldwide, will be filling all demand with far fewer workers? Reductio ad absurdum we produce all we need with just one dude working.
I don’t think that issue is going to be solved by changing tax laws.
This is important too:
“Three-D printing and other emerging technologies should allow manufacturers to meet customer specifications with unmatched quality, at speeds not previously imaginable in sweatshops, and with far less human labor. Even worse, for Asia’s workers at least, is that Western companies can bring those same customizable technologies back home, and eliminate their overseas factories altogether.”
So Long to the Asian Sweatshop
PD:
I was going to mention that in the post but it was already long enough.
I have a client that’s in the apparel business. Management, marketing, sales, and warehousing are in the U. S. All manufacturing is done by vendors in China.
Their designers create their designs using LCPM software, the designs are transmitted to China, and the completed garments arrive days or weeks later.
In the foreseeable future China will be cut out of the picture. Rather than transmitting their designs to China they’ll go to a “lights out” facility in the U. S. It has the potential of reducing the cost, reducing the delivery time of finished goods, and improving the quality.
What it won’t do is increase the number of people in the U. S. sitting at sewing machines.
Michael:
You’ve already got two. 😉
My take? We solve today’s problem today and tomorrow’s problem tomorrow. We don’t have one guy doing everything today so we don’t need to solve that problem today.
I did not call anything you said a lie or you a liar. I apologize if it came across that way. Manufacturing has gone and is never returning is a trope of conventional wisdom, but I am neither conventional nor wise.
In the 1990’s, it was becoming possible for clothing manufacturers (possibly others) to produce small run styles/models. It was possible for some of them to provide customized sizes for individual women.
(Women’s sizing is not as easy as men’s, and many more women are walking around wearing ill-fitting clothes than most men can possibly imagine. With offshoring, it has gotten worse because of the various ways the exact same item can be cut from cloth. Ask any woman if she would pay a little more to have well fitting clothes. If you know her well enough, ask her about crotch problems.)
By the mid 2000’s, robotic abilities have become superior to any human, and they are being pursued for jobs that Americans cannot be eliminated from doing by any other means. Precision machining has been around for a while, but with additive manufacturing, it should be possible to combine these with robotics and computers to revolutionize manufacturing.
The jobs will not be the same as the 1970’s. When Henry Ford began his assembly line, the jobs were not the same as those 30 years prior. At the start of the Industrial Revolution, I seriously doubt that anybody envisioned that the steam engine would one day lead to a factory with an assembly line manufacturing a non-steam, self-propelled vehicle that was affordable for many of the working people.
The next 20 years should be the beginning of a manufacturing revolution to rival Ford’s assembly line and vertical integration, and there is no way that this will ever occur in any backward assed 3rd world or infantilized 1st world country.
For some reason, it stalled in the 1990’s. Financialization was a part of it, but there are other factors you have mentioned. The Intellectual Property laws are in dire need of updating.
As to the trade wars, bring it on. The US is the world’s largest market, and any country that wants to forego selling their products here can go for it. I am sure China can make up the difference by selling their poisonous dog food and corrosive sheetrock in Venezuela.
Finally, why does the US need China to produce substandard, dangerous, and deadly products. American workers are quite capable of doing this, thank you very much, or the US could simply declare the factory site to be Chinese sovereign territory and let the formerly illegal aliens work in these now Chinese factories.
@Dave Schuler
What it won’t do is increase the number of people in the U. S. sitting at sewing machines.
By increasing the number of robotic sewing machines in the US, you will inadvertently increase the number of jobs. Somebody needs to manufacture the sewing machine. Somebody needs to service the sewing machine. Somebody needs to service the sewing machine facility. Somebody needs to service the sewing machine repairman’s repair truck, and so on.
In addition, innovative products and uses for the machinery will occur.
Ask any woman if she would pay a little more to have well fitting clothes. If you know her well enough, ask her about crotch problems.
“Vickie, I’d like to speak to you about your crotch.”
***>>>SMACK<<<***
We may be saying the same thing in different ways. The old jobs won’t be back and it’s foolish to think they will. The new jobs will require more skills and different skills. The guy who worked on the Ford assembly line in 1975 wouldn’t be able to make heads or tails out of the robotic sewing machines. Preparing for the jobs of the 1970s is foolish.
It is also possible that there will be more jobs in secondary production. That’s been the source of growth in the past. But the way must be open to them. Increasingly, that’s been a failure.
@Dave Schuler
… worked on the Ford assembly line in 1975 wouldn’t be able to make heads or tails out of the robotic sewing machines. …
A lot of skills are transferable. It just takes some imagination and determination. The work will not be the same, and the workplace will not be the same. Some jobs will be better, but there will be more opportunities.
If the barriers were broken down, you would see a lot of small shops creating limited run products for niche markets, and they would sell them through an online marketplace like Amazon or something similar.
To me it is perfectly clear, and I could go on and on about it. In my head, all the pieces are present, and combined, they would be astounding. Unfortunately, something seems to be blocking them. Maybe you all are right, and I just need to take my meds.
If you want to provide a home for displaced workers, displaced for any number of reasons and similar to the past 120 years, you need growth. The vast majority of policies implemented by the “do something” crowd retard growth. All efforts need to be directed for a period of time to growth. Not at global warming, building transgender bathrooms, funding roads and bridges for your crony friends to bid on, not free education or day care. Immigration needs to be slowed. Currency relationships reset.
Expanding the public sector at the expense of the private sector is to redirect resources to less robust uses.
Granting monopoly power and rents is anti-growth. Bailing out banks, funding dis economic solar or car companies is anti-growth.
Bribing public sector workers is anti-growth.
Regulatory burden without serious cost benefit is anti-growth.
Politician and academic spawned schemes almost always are anti-growth, especially when siphoning off private dollars through taxation.
Quick fixes like more and free and education are anti-growth.
And so forth. I have had an opportunity to hear what Clinton had to say in the debate. The same tired old prescriptions. Just Lucy pulling the football away yet again. If you want more of the same, she’s your gal. I don’t know if Trump can do better. But I’m absolutely sure Clinton is a four year sentence of more of the same crap sandwich for the Average Joe.
I don’t think they care about that in NY and CA, the big urban centers, academia, and especially the national and state government centers. I just returned from visiting a golf community outside Atlanta. We drove through a small town clearly down on its luck. Empty and dilapidated stores and other small businesses. Crap ass restaraunts. But you know what they had that were brand spanking new; Taj Mahals in the flesh? A new post office and new police station. Vital spending priorities there.
Hillary would be proud.
I think I disagree. We are it seems on a path to larger scale, longer term unemployment. if the end game is some version of one working person (simplifying, obviously) then maybe we should focus less on efforts to prop up employment and more on adapting to a world where fewer people are needed to work.
Clinton has the usual Democratic b.s., Guarneri repeats a list of his prescriptions which have failed in the past, and Trump is very busy with his top priority, calling beauty queens fat.
Meanwhile as a civilization we are shifting manufacturing (and services, too) to slaves, near-slaves and robots. The slaves, near-slaves and robots undercut American workers, then in the fulness of time the robots will undercut the slaves and near-slaves. I’m not saying it’s inevitable, but it is logical. Human capabilities are essentially stable while machine capabilities increase. As robots become more capable they often also become cheaper, further reducing the need and the economic logic of employing humans.
So, if it is likely that in the next 20 or 30 years we’re going to see more and more gainfully employed robots and fewer employed humans, why should we spend the time sailing again and again through the Scylla and Charybdis of busted economic theories in a vain effort to boost what will at best be short-term employment gains? Why don’t we plan for the future, educate for the future, lay down infrastructure for future needs? And why aren’t we starting to walk the sociology and politics forward, because this is a paradigm shift, a revolution.
We have political parties that between them have not a single rational idea for how to cope with steadily-declining workforce participation. Conservatives have the same crap that fails every goddamn time they try it, and Liberals only want to slice up the existing pie. Nostalgic fantasy and naked greed on one side, tired spoils politics on the other. Do we really need another round of this?
It also depends on the timeframe. Whatever problem massive technological unemployment brings, it won’t be within the next 25 years or even the next 50 years. And there are straightforward solutions to the problems we actually have now that would mitigate the effects.
The short version of what we’re doing now is that we’re protecting some jobs and not others. If we’re not willing to protect all jobs or remove the protections from the jobs that we’re protecting now, tax the those that are protected to re-train those who aren’t.
If we’re not willing to do that, either, basically we just don’t give a damn, so let’s just acknowledge that.
It’s already here. It’s already happening. We are already sending tons of jobs to be done by people working at marginal survival rates of pay. And we are already replacing humans with machines.
You’ve essentially made the case yourself, many times, when you point out that infrastructure jobs are no longer labor-intensive. Of course not. Some of the jobs went to foreign factories which create pre-fab elements, and some of the jobs went to machines. If this were 1950 we could create jobs overnight by announcing another dam or road or bridge. And now we cannot do that. We have lost a power we once had. So no, it is not 25 or 50 years down the road, it’s right now.
I think it almost takes a religious suspension of disbelief to assume that X jobs lost to machines will be replaced by X jobs done by humans. We are after all building machines so that they will do a better and more economical job than humans do. So no matter how optimistic you want to be, humans are quite clearly in competition with machines. That’s why we keep obsessing over education and training, because we need to be better, faster, smarter than machines, while simultaneously being cheaper than a Malaysian.
I don’t think that circle can be squared. I don’t believe you can create a free human who is better, faster, smarter and cheaper than both machines and slaves.
And if that circle cannot be squared, then the more rational approach is to perhaps embrace the future and see if we can’t do a better job of adapting to it than anyone else. Let’s design and create the machines. Let’s look at ways to adapt society. Rather than fighting the last war, lets win the next one.
We’ve been replacing humans with machines for more than 200 years. It didn’t result in massive permanent technological employment then and it probably won’t now, either. The biggest difference now is political.
If weavers had been as politically mobilized as physicians are now, we’d be paying ten times as much for our clothes and they’d all be handmade.
“If weavers had been as politically mobilized as physicians are now”
Especially those weavers who had to train many years after high school and work nights, weekends and holidays the rest of their lives.
“We’ve been replacing humans with machines for more than 200 years. It didn’t result in massive permanent technological employment then and it probably won’t now, either.”
Fallacy of composition? Retrospective determinism? Look at your own chart. Manufacturing out put kept going up. Employment down. Put another way, we have had politics forever. (I wonder if the Romans assumed their empire would last forever?)
Steve
You keep saying that, but you never offer anything to back it up beyond, “Hasn’t happened yet.” Which is what Joe Neanderthal was saying about the Sapiens family in the next cave right before he went extinct. And you supply your own refutation in the shape of the graph above which clearly shows that somehow we are producing more with a lot fewer people. I assume that’s not wizardry but technology.
1) Job X, which required an average fellow, is made obsolete by technology.
2) But we add Job Y, which requires an above average fellow.
3) Then Job Y is made obsolete by technology.
4) But we add Job Z which requires a fairly extraordinary fellow.
Unless this is Lake Wobegon, that’s not gonna work for long. And by your own oft-cited example of infrastructure jobs, some jobs clearly do go obsolete. We don’t hire 100 guys to dig a ditch. Job X is gone.
At the same time we get:
1) Function X used to be performed by six guys making 10 dollars.
2) The end product of Function X is no longer worth paying six guys 10 dollars.
3) So now Function X is performed by two guys making 5 dollars.
4) Life costs 6 dollars.
Machines and slaves. That’s where all “our” jobs have gone, to machines and people making no money. And you know who I think is to blame? No one. Because in the long run this may be a good thing. I’m a workaholic, I have no idea what the hell I’d do with myself if I didn’t work, but that’s my personal programming, it doesn’t make it right or sensible or necessary. This work-or-starve paradigm isn’t the only possible way to organize a civilization. Let’s face it, most people do not love their work. Give a recent high school grad a choice between 40 years working for Roto-Rooter or 40 years playing video games, and see what they choose.
What if we actually get the future we seem to be trying to bring about: a world where most human labor is unnecessary to produce not only all we need, but all we want. Are we sure that’s worse than a future that’s like the past, with billions of people beavering away endlessly doing things they hate doing? Maybe that’s the future we should be educating for and investing in.
Because that’s all that’s necessary. The burden of proof is on you. You’ve got to prove that we already have mass technological employment (at an official unemployment rate of 4%?) or that we soon will. Good luck. Arguing as you do that it might is not enough to support massive reforms.
BTW, I presume you’re aware that the median income in the U. S.—that the median meaning half of the people make more and half less—is $52,000. That isn’t “no money”. Real median income (i.e. income adjusted for inflation) is higher now than it was in 1960 or 1980 (but not in 2000). If $52,000/year is no money and caused by technological unemployment, what was it caused by in 1960?
We have problems but not technological unemployment. Our problems are immigration, off-shoring, a mal-educated urban population, and occupational licensing, just to name a few.
What has actually happened over the years is that fewer people are employed at low wages in primary production while many, many more people are employed at higher wages in secondary production. TastyBits described that process quite deftly earlier in this thread.