Can Our Manufacturing Really Be Gone?
Today’s New York Times contains an article titled How U.S. Lost Out on iPhone Work. This article was also cited in slashdot. I’m picking up on it because it relates to my previous writings (here and here and here). I recommend reading the entire article in the Times; the following summary and commentary can’t do it justice.
It is well known that most of Apple’s manufacturing happens overseas; while Apple is a leader in this, it is far from alone. The article begins with a report of a conversation between Steve Jobs and President Obama. Mr. Obama asks why the work that Apple has sent overseas can’t come home to the US; Mr.Jobs replies to the effect that those jobs will never come back. Apple executives and engineers are cited stating that they have no choice but to send manufacturing overseas because the results of dealing with Chinese manufacturers such as Foxconn are so superior. This article does not emphasize the lower cost of overseas manufacturing; it discusses speed, flexibility, quality, logistics capability, and the like. In fact, the claim is made that because labor is such a small part of technology manufacturing, paying American wages would add up to $65 to each iPhone’s expense and the iPhone is profitable enough that this could be absorbed. (See Friedman’s book, The World Is Flat, for a discussion of integrated manufacturing and logistics in China.)
Let’s repeat this: the claim is that manufacturing capability and flexibility are the reasons it’s profitable for Apple to manufacture the iPhone in China; cheap labor is not the primary reason. It may be that in our haste to achieve the most profit, we have allowed our manufacturing plant to atrophy and ceded the playing field to our competition. Further, “‘the challenge in setting up U.S. plants is finding a technical work force.’ said Martin Schmidt, associate provost at the Massachusetts Institute of Technology. In particular, companies say they need engineers with more than high school, but not necessarily a bachelor’s degree. Americans at that skill level are hard to find, executives contend.”
The Chinese government subsidizes costs for industrialization and fosters the training of workers with appropriate skills. What are we doing? We’re arguing about tax breaks for billionaires and unemployment insurance. Surely, the way Chinese workers are treated and currency manipulations are also factors, but we need to address educating a modern workforce and rebuilding our manufacturing capacity if we don’t want to fall further behind. Is anyone mentioning this sort of thing amid all the sound and fury surrounding the coming election?
© Charlie Wertz, January 2012
The obvious problem in American Education begins with the application of no child left behind. Some of those kids needed to be left behind to learn the basics with repeated applications, especially in elementary ed. We are a nation of some dumb mid 40 yr olds only due to the new age education, testing teachers, schools, all over monies.
We can excell again by returning to the educational basics of the two decades following the end of WW2/Korean War.
America created a lot of technologies at great expense to the citizens in taxes. The recent two decades have been all about wealthy creating super wealth, for themselves . We must change our politics by firing the entire Supreme Court field of judges. We must fire all the politicans and seek new leaders who will abide by our Constitution. This past year has shown there is no respect by our police directors for the RIGHTS of The Constitution. I fought in hostile locations to serve my nation and to protect our way of life . Today, I see my younger fellow combat veterans standing with the 99% against the greedy selfserving 1% . We are waiting for the time when the people being brutalized by the police revolt with equal force , or, the time when our Federal Govt. stands with the citizens as it should. The base greed is deep in many televangel churches, definitely in corporate board rooms.
America has not had a President who stands with the people and the Constitution since Pres. Eisenhower. Well, Jack Kennedy did, and the Labor Leader who ordered his death via the Southern two leaders of Mafia familias did the work , wrong guy, till they got Bobby.
So, let us see if y’all get it or do I die knowing you failed ? SOON Y’all.
I do not agree that the cost of labor is irrelevant to the equation. Off shore labor in electronics is constantly searching for the cheapest production. We have seen labor move from the us to Mexico and then to china. Each time the overriding factor was the price of labor.
Reblogged this on Super Bull Investor – Intelligence for the Successful Speculator.
Reply to LiberalTalkingPoints. It was the NY Times who cited the idea that paying US wages for direct labor would add $65.00 to the cost of an iPhone and Apple could absorb that; It didn’t originate with me. Modern manufacturing can be so highly automated that labor cost is no longer as significant as you might think. Sure, many corporations were originally motivated by cheap labor, but something bigger has happened since. many of our plants are vacant and possibly unusable. Chinese companies and others have grown in ways we have not. We have some catching up to do if we are to stay in the game.
I noticed this about 10 years ago, in Buffalo specifically. The ideology still exists to this day too, it’s like we still haven’t figured out that the “steel” is gone, yet we are constantly labeled as a “blue collar” community. When we were proposing MIS/IT systems to medium sized businesses in the area we were always met with “that sounds expensive” or “complex”. They couldn’t even see the ROI end of it. Perhaps though they could see if these time saving systems were implemented that they would require less employees, and people would lose jobs. In other jobs I was literally creating programs that replaced entire positions, sometimes even including myself. Buffalo is so far backwards in the IT respect that simple scripts could replace entire workflows and jobs. But, where are the positions open to create new IT infrastructure to get Buffalo back into the game? They can’t be found as Buffalo can’t get its proverbial head out of its … and come to grips that the steel is gone.