Hey, is anybody home?
President Obama was in Wisconsin yesterday celebrating the "onshoring" of 100 manufacturing jobs that returned to Milwaukee-based Master Lock. That’s nice. But it hardly matters. The Master Lock move is a slight counter-cyclical uptick against an inexorable current of offshore momentum.
The larger question at issue is a two-part question really: does manufacturing really matter and if so what should we do about it? Manufacturing today employs about 12 percent of the nation’s workforce; down from 30 percent in the 1970s. According to The American Prospect: “In October 2009, more people were officially unemployed (15.7 million) than were working in manufacturing.” The economic forces that fueled the post-war boom, built the middle class, and strengthened the union movement have waned—and we mostly seem to wring our hands about it, or cheerlead for minor miracles.
The revelation that Apple builds its new generation of personal electronic devices using exploited labor in China says more about China than Apple. That’s the way labor works in China. Virtually any personal electronics device sold by any manufacturer in the world is steeped in the same pedigree.
In 1959, manufacturing accounted for 28 percent of GNP; in 2008, it accounted for 11.5 percent. It has fallen since 2008 of course, then in the past year or so has shown a slight uptick. But it’s not enough to get all hot and bothered about. And it doesn’t mean manufacturing is dead, either. As Master Lock points out, rising wages in China, logistical costs, and the increased cost of fuel for shipping brought a few jobs back. Master Lock's total job count remains 30 percent lower than its late 1980s peak, while production capacity has grown significantly.
The future of high-end, technologically advanced manufacturing, while it may grow market share, won’t grow jobs counts by any appreciable measure because of technology, electronics, and robotics. The future of manufacturing in the U.S. is a few men and women controlling vast arrays of automated processes. Knowledge-driven jobs that propel the production line—jobs Robert Reich calls symbolic-analytic work—establish machine design, control, intercommunication, sourcing, logistics and quality control. These are good jobs; jobs that require higher education, specialized training and, to varying degrees, graduate degrees. Manufacturing in the future may support a decent number of these jobs, but never, in anyone’s wildest dreams, will it require the army of middle-class aspirants who made careers out of the shop floor. Those days are over, period.
The crisis we face now is that lower skilled, less educated workers aren’t needed anywhere. Not in manufacturing, not in assembly, because we not longer support assembly, not anywhere, except in low-paying service jobs that will never support upwardly mobile families. The army of surplus and/or underemployed workers, some 18 to 25 million of them, is effectively dead in the water. Given their weakness in educational fundamentals, these folks are never destined to become machine control engineers. Recent trends would seem to indicate that, should they enroll in occupationally-driven job training up to and including two-year degrees, they should choose health care aide and specialist positions, because while health care accounts for 17 percent of the nation’s economic output, it’s steady growth will require far more semi-skilled workers than will manufacturing.
In economics, weakness begets weakness. So while manufacturing shifted offshore, so did its parts streams. Now parts sourcing is far more Asia-centric than not, and we’re talking worldwide. The New York Times reports that, contrary to popular conception, R&D is increasingly heading to Asia. U.S. automobile manufacturing is an exception to that trend because we still retain a modicum of parts manufacturing around our domestic auto industry. Certainly, that merits a shout-out to the Obama administration for perhaps its best-executed intervention in the shock-and-awe phase of the meltdown. And its serves as a cautionary tale to illustrating the effects of new kinds of critical mass in offshoring.
It isn’t just Apple. We should be clear about that. Dow Chemical’s CEO Andrew N. Liveris said, in a September 2011 New York Times article, China offers him little short of the moon to locate manufacturing and research there:
“I get tax incentives, and I get incentives to go to certain locations where they offer us utilities, infrastructure and land. I get access to human capital. I get all sorts of support to help train that human capital.”
Yet that’s only part of the story. “We put things overseas,” Mr. Liveris says, “because markets were growing there and we wanted to be close to them.” That’s exactly what Apple said.
So what do we do about it? One of the worst, and most facile arguments against a national manufacturing policy is the one that says the government should not pick winners and losers. Would that include agriculture, where federal corn and soybeans subsidies dwarf the entire output of all other vegetative food production? How about aerospace, where defense contracts to Boeing represent the last vestiges of a system where defense contracts meant life or death to contractors. Speaking of contractors, about the government no-bid security contractors in Iraq and Afghanistan? Even in cancer research, the winner of an NIH grant prospers while 20 losing grant apps denote projects that go moribund. This list is endless.
There is no mistaking; the government picks winners and losers every day. And it should begin to pick some winners in high-end manufacturing, knowing full well that job growth in the sector will have a miniscule effect on macroeconomics.
Any job that’s even slightly routine is disappearing from the U.S. But this doesn’t mean we are left with fewer jobs. It means only that we have fewer routine jobs, including traditional manufacturing. When the U.S. economy gets back on track, many routine jobs won’t be returning—but new jobs will take their place. A quarter of all Americans now work in jobs that weren’t listed in the Census Bureau’s occupation codes in 1967. Technophobes, neo-Luddites and anti-globalists be warned: You’re on the wrong side of history. You see only the loss of old jobs. You’re overlooking all the new ones.
That’s quite a shot across the bow to pessimists. But nowhere does Reich offer a glimpse into where the massive numbers of jobs that we did to make a dent in low-income worker unemployment are going to come from. This economy—and any economy I can see on the horizon—simply doesn’t need them. And the answer is not merely, as Reich posits, to increase the wages of hotel workers, chambermaids and janitors. Increasing those wages requires, if you can believe it, a rising tide to lift all the boats, and hard-core unionization. Sadly, neither is in the cards, and trickle-down economics seems to refer in this epoch to the dynamic that misery trickles down, not money.
So, if you want to “fix” manufacturing: less cheerleading, more pro-active government policy, picking winners based on hard data and leveraged strengths, but don’t ever expect a manufacturing renaissance to counter the chronic and structural joblessness of a burgeoning new underclass.