These last 18 months have been grueling, maddening, and full of complete nonsense for most people. The magic phrase that kept riling people up is manufacturing jobs. Many presidential candidates have promised to bring them back. These promises seem to assuage the fears of the blue collar worker population. I cannot question whether or not they are sincere. However, it is evident to me that these promises were mostly exercises in posturing and pandering to a disenchanted electorate. The problem is not these ill-advised promises. The problem is that those jobs are not coming back.
They are not coming back because it would not make economic sense to bring them back. The manufacturing landscape has changed tremendously. I completely sympathize with our blue collar workers. Anyone in their shoes will experience the same anguish and terrifying uncertainty. The path until the last twenty years was clear. You finish high school, and you go to work. You work for 30 years, retire with a nice pension, and travel in your RV if that kind of thing appeals to you. In the process, you marry your high school sweetheart and raise a family. The picture I just painted is no longer workable. We went to bed in our grandfathers economy and woke up in the touchscreen economy. So what is the solution you asked? Well before we get to the possible solution, let’s look at the five reasons manufacturing jobs are not coming back:
Reason 1 – Access to knowledge
Access to knowledge has always served as a competitive advantage for advanced economies. As knowledge moved from the few to a larger population, the monopolistic manufacturing systems crumbled. The giant American steel manufacturers now face vigorous competition from places like China, India, and other emerging economies. The worse part is that this picture is going to improve as more and more countries gain the production knowledge and join in the race to the bottom. Ceteris paribus, the question then becomes who can produce this item at the lowest possible cost. Whoever has the answer is the winner.
Reason 2 – Cost
In the basic economic model, a lower cost means higher profits. One of the fathers of modern economics posited long time ago that if your cost of producing goods is much higher than what it would cost you to buy those same goods from your neighbor, you’ll be an idiot to produce those goods yourself. Our investors and entrepreneurs do not invest their hard-earned money out of the goodness of their hearts. They are in the investment game to make money. They take steps to ensure that their investments present a reasonable expectation of return. One hour of labor in the manufacturing sector in the US is equal to several days of work in other parts of the world. This puts the American worker at a disadvantage, and it stands reason that the manufacturers will move their factories to these places where their labor cost is a tiny fraction of what they have to pay in the US. The manufacturers even went a step further. Instead of just moving their operation, they also took advantage of advances in technology.
Reason 3 – Technology and Automation
Among all the reasons manufacturing jobs are not coming back, automation is probably the biggest. Robots can now accomplish the high majority of the jobs available in factories. The most important point here is that robots don’t make mistakes that we have come to expect from humans. Robots don’t have hangovers, they don’t take bathroom breaks, they don’t call in sick, they don’t get married, and they don’t ask for promotions. And they don’t ultimately threaten to go on strike every few years. From the employers’ perspective, a robot is a model employee. As humans, we are frankly horrible at performing repetitive tasks with the same level of consistency. Even if manufacturing jobs come back, there will be a lot less of them, which does not solve our problem. We don’t just want to buy goods at the lowest possible price. We also want to make high wages manufacturing those goods. Did someone say “have your cake and eat it too?”
Reason 4 – Walmart
The primary selling point of this retail empire is every day low prices. That sounds awesome. It does wonders for your pocketbook. You can get the biggest bang for your buck. This works until you realize that for the company to achieve its spectacular success, somebody, somewhere, has to take a pay cut. And that someone is not you. It’s the manufacturer of the product you want to buy as cheaply as possible. And that manufacturer happens to be your employer. As he/she still need to turn a profit, the only way he can accomplish that is to cut cost in the most aggressive fashion. This can mean fewer workers, or moving operations to a more favorable environment. More often than not, it’s the latter solution that companies adopt. Now we are in a real pickle. The contract with our grandfathers’ economy has come undone. The 30-year single employer-worker is dead. Welcome to the new, improved, shorter life cycle, and technology-driven economy.
Reason 5 – The 2-year life cycle
No one can argue that he/she wanted to be able to speak to a pocket computer (Phone) and not expect some changes in the way we do business. Our lives are now overrun with gadgets. And we love them. These gadgets are on a very short life cycle. Every year, Apple and its slew of competitors release new devices. And we are expected to trade our recently acquired best friends for their bigger and better siblings. This is not an entirely bad proposition. The only trouble is that the company needs to recover the cost of developing and manufacturing the new device within two years. This will be impossible to do if companies produced their devices in the US. The only way to make it work is to charge more for the devices. I highly doubt that you or anyone you know is ready to buy an iPhone for $3000. To make matters worse, our technology best friends are not the only ones on a shorter life cycle. Today’s worker is also on a shorter life cycle. The average worker today changes job every five years or so. But that’s a story for another day.
To go back to the question at the beginning of this article if manufacturing jobs are not coming back what is our blue collar workers to do? Politicians cannot afford to tell you what you should do. It is highly unpopular, and it’s suicide for them to do so. But I will tell you. Go back to college. I know you may not want to do this. Here is why I am telling you to do something you did not want to do in the first place. Yesterday’s jobs are gone. Today’s jobs did not exist 20 years ago. Tomorrow’s jobs have not yet been created. The key to navigating the shifting sands of modern life is learning. Technology companies are hurting for qualified workers. Millions of highly paid jobs are going unfilled because there is no one to perform them. Your responsibility as a 21st-century worker is to adapt to the new norms by updating your skills continuously. Your high school diploma is not going to cut it anymore. I see bringing manufacturing jobs back as a futile attempt to roll back time. Perhaps I am wrong to think that to turn back time is a pointless exercise. Just remember what the visionary Mr. Ford said when asked about the model T.