Posts Tagged ‘Manufacturing Jobs’

General Motors pivots toward China

March 6, 2014

This video, which has been making the rounds of the Internet for nearly two years, is deeply flawed, as well as possibly out of date.  But the producer, whoever he is, makes a good point.  The managements of General Motors and other big corporations headquartered in the United States are not especially American in their orientation.  They go wherever profit takes them.

I remember reading about some Silicon Valley entrepreneurs, fantasizing about the possibility of creating their own nation on an uninhabited island, free of annoyance by the pesky U.S. government and American public.

This is not the case with the management of Chinese corporations.  They are closely aligned with the Chinese government and the goal of making China a rich and powerful nation.  This makes for an unbalanced relationship.

There are many economic reasons, including cheap labor, for U.S. companies to manufacture in China.  One of the reasons is that China is now the world’s largest market for automobiles, and no car manufacturer can afford to ignore the Chinese market.  And the Chinese government, like the governments of many other countries, does not allow foreign companies to sell products in their country unless they have local manufacturing content, and, more importantly, they share their manufacturing know-how.

When I reported on Eastman Kodak Co. and Xerox Corp. for the Rochester, N.Y., newspaper in the 1980s and 1990s, corporate executives explained that this was the reason they set up manufacturing plants in Mexico, Japan and other countries.

The government of the United States, which is the OPEC of consumption, was in a better position than any other to impose such requirements.  But this was not done.

The U.S. government operated under the theory that unrestricted free trade was best for everybody, and if other governments were so foolish as to hurt themselves by restricting trade, that was a problem for them, not for us.

The problem with such arguments is that when manufacturing goes away, the skills and knowledge needed to make things – the so-called human capital – goes away with them.

Instead of the U.S. government imposing domestic content requirements on foreign manufacturers, some of our state governments offer them economic incentives, tax abatements and an anti-union legislation.

To be clear, I don’t think government policy is the only reason, or even the main reason, why auto companies operate where they do, or whether they succeed or fail.  But it is a fact that the governments of most other industrial countries are pro-active in promoting domestic industry.  The U.S. government doesn’t take an interest in the success of its manufacturers until they are on the verge of bankruptcy.

Hat tip to Don Montana for the video.

Re-shoring: the U.S. manufacturing comeback

August 12, 2013

Last year about a third of U.S. corporations with manufacturing in China told the Boston Consulting Group that they are bringing or plan to bring operations back to the United States.

The trend is called “re-shoring,” and all indications are that it is real.  What’s driving it, according to an article in the Paris Tech Review, are falling U.S. energy costs due to hydrofracking for natural gas, closeness to world’s largest consumer market, a shorter supply chain and, especially, U.S. expertise in automation technology.

Manufacturing Employment

Click to enlarge

There’s the catch.  Automation lowers the cost of U.S. labor compared to other countries, but it also eliminates jobs.  Professor Tim Leunig of the London School of Economics estimated that if 10 percent of the Chinese electronics industry relocated to the United States, it would eliminate 300,000 Chinese jobs but only create 40,000 American jobs.

This doesn’t mean that re-shoring is of no benefit.   It is of great benefit.  The hollowing out of the U.S. manufacturing economy has reached a limit.  Manufacturing jobs are increasing only modestly, but they are no longer declining.

The mere fact that more wealth is being generated in the United States should be of benefit for all American workers, whether they work for suppliers and subcontractors of the manufacturing companies, for providers of goods and services who benefit from a bigger consumer market, or for local governments that benefit from an increased tax base.  But to the extent that the U.S. work force consists of temporary, part-time, low-wage workers, the wealth won’t be spread around.

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What Washington should be concerned about

March 25, 2013

Total-New-US-Jobs-By-Decade

Not-in-Labor-Force-Demographics

315-Million

While I’ve been writing about Social Security and minimum wage, employment and unemployment are much more important questions.  These charts are from a web site called Jobenomics by a blogger named Chuck Vollmer.  I think his information is reliable, with the caveat that his “can work – not working” category includes a lot of us retirees who are well past our prime working years (and many of whom do unpaid volunteer work).

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