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I just don't see lower skilled jobs continuing to pay well when other countries are able make the same products or provide the same services for less. It might have worked in the past, but it doesn't seem sustainable and we simply have to adapt to the changing economy and find ways to stay ahead. It's almost as if the high cost of United States manufacturing was a bubble economy that was busted by global competition. And yes, we can do some things to help protect our manufacturing industry, but we can't rely on tariffs and protectionism exclusively. We simply need to manufacture products cheaper and better than we have in the past.
Menial jobs might have paid well in the past, but they won't in the future. I think that was luxury that too many Americans got used to and would like to go back to. But it won't get us anywhere trying to get paid higher wages for lower skilled work.
It seems to me the only way to compete with extremely low cost labor in other nations is innovation and education. I think FresnoFacts made a great statement - Americans can compete if we "choose" to. We need to put an emphasis on higher skilled jobs and accept that menial jobs will no longer pay as well as they used to. We can't just go back to manufacturing so that uneducated people can get paid more and live better lives. How is that going to help us get ahead? All it would do is allow us to live in a bubble while other nations pass us by. In the past, manufacturing helped us get ahead not just because menial jobs paid better, but because it brought about innovation. So I agree that we should look in the past to find ways to improve, but not just go back to the same economy we had back then. Try out some of the same principles, but not expect it to be the way it used to be. We need to make advancements or we'll be left behind.
U.S. manufacturing was not busted by global competition--it was busted by the U.S. removing most tariffs which allowed countries like China to dump their subsidized goods on our markets. At any time in the past of our history, we would have had the same problems we are having now if we had allowed foreign countries to sell their goods at below the cost of what the U.S. can produce them.
The previous system of reasonable protectionism worked well. I can remember driving a Toyota back in the 70's at the same time that we still had a manufacturing base in this country.
so does this mean now is the time to buy for investment???
Many already are:
House flipping, the timeless buy-low, sell-high strategy, is back.
Property researcher MDA DataQuick is seeing more houses sold within three weeks to six months of being purchased. Almost 5 percent of Sacramento County's December home sales fell into the "flipping" category.
Today's numbers rank right up there with the flipping rates of early 2005, just before the housing price bubble burst.
Home Front: Flippers back in vogue in Sacramento housing market - Sacramento News - Local and Breaking Sacramento News | Sacramento Bee (http://www.sacbee.com/topstories/story/2498388.html - broken link)
I just read an article in the latest Wired magazine that touches on what I've been talking about in this thread (in regards to new manufacturing in America and how it heavily relies upon innovation, not factories): http://www.wired.com/magazine/2010/01/ff_newrevolution
U.S. manufacturing was not busted by global competition--it was busted by the U.S. removing most tariffs which allowed countries like China to dump their subsidized goods on our markets. At any time in the past of our history, we would have had the same problems we are having now if we had allowed foreign countries to sell their goods at below the cost of what the U.S. can produce them.
The previous system of reasonable protectionism worked well. I can remember driving a Toyota back in the 70's at the same time that we still had a manufacturing base in this country.
Which could be seen as a byproduct of a global economy. The American people want cheaper products being made elsewhere, there is a demand for them. I still agree with you that we should institute more tariffs again, but that should be part of a larger plan, not the main solution. I still don't see manufacturing alone bringing us back to our prime.
One of the problems with knowledge work is that much of it is easily sent to the lowest cost location. As the rest of the world also develops high skills but at a lower cost it becomes a competitor for those jobs and that work.
For example, besides programming there are US individual tax returns outsourced to India by US CPA firms. Other knowledge work that is also being done in India now includes legal research, With Times Tight, Even Lawyers Get Outsourced - WSJ.com
or reading medical tests like X-Rays, etc.
Of course, it is not just India. Anywhere with the right skills at a lower cost for equivalent quality becomes a potential competitor for knowledge jobs because it is easy to move the workload around. Even on-shoring in the US will continue to impact higher cost regions as it already does.
I don't expect all US knowledge work to move overseas but it will impact the US either in reduced job creation or by putting downward pressure on US salaries in some of those higher paying fields.
Jobs that require face-to-face or hands-on work locally are much harder to outsource. So they are growth areas in the US. Unfortunately they many times are lower paying jobs.
I'm not a total pessimist about the US job future. But unless our work ethics and view of jobs and work change we will find ourselves facing a tough future. We have to relearn how to work hard and also how to compete, not just increase skills.
But that is something that can change quickly, we never know. If a company or its competitors can do the same for less elsewhere it changes the game.
Here in the Fresno/Clovis area, Pelco (a commerical security system company founded here, you see their cameras and systems in casinos, government buildings, etc.) announced layoffs yesterday of 100 out of 1800 local employees due to the US recession. BUT it also announced it is opening a new operation in China due to increased product demand there and to get around China's 30% import duty on the products.
That raises the question if those laid-off will be rehired in the future or will some of the products simply be imported from China when demand picks up in the US. The company says they will rehire but we will have to see, it is all about what makes the most sense to their bottom line at that time.
As incomes go up in Asia that also increases demand for goods and services in the US.
Take a look at your shoes. Right now I am wearing a pair of Nike shoes. 15 years ago they were made in Hong Kong, 10 years ago they were probably made in South Korea and presently they are made in China. 10 years from now they might be made in India, Vietnam or Laos. Nike Shoes sell for somewhere around $60+. But the factory girl in China is probably not paid much more than $5 or 6 a day. Nike's cost of the contract for making the shoe in China is probably not more than $5 or 6. Of the $60 price, the retailer probably gets more than manufacturer. So the Sports Authority is probably buying the shoe from the wholesaler for $50 and the wholesaler is probably getting it from Nike for $40. If you were a really big retailer like Costco, you probably get to bypass the wholesaler completely and buy directly from Nike. Nike itself is probably clearing $34 off the sale of every shoe. But it probably has to pay a percentage to all of the stars who hawk its goods. Micheal Jordan is probably getting a couple of dollars for every Air Jordan sold. Tiger Woods is getting paid a percentage of all of the Nike Golf stuff etc. Nike also spends a fair amount on advertising. Lets say that Nike gets $25 for every shoe that it sells.
The reason I don't believe in trying to save manufacturing jobs is first, they pay very poorly and second, they have very little market power. If the workers in the Chinese plant demand a pay raise, then the contract manufacturer will just move the work to a country with cheaper labor.
If the contract manufacturer decides to go into business for himself against Nike, well take a look at the results.
If you go to Big 5, you can find generic knockoff shoe that was likely made by the same or similiar contract manufacturer that made your Nike shoe. Big 5 will sell this shoe for $15, pay the wholesaler $11 and the wholesaler will pay the Chinese contract manufacturer $6 for the shoe.
Yet despite the fact that Nike is asking $60 to a 100 and Big 5 is selling generic shoes for $15. The shoe market in both the US and increasingly in places like China is being taken over by the big powerful US brands.
You were arguing that we need to learn how to compete, but I think in many respects we have it down. The real issue is that companies in the third world have to figure out how to compete in the high value sectors.
Every time a Nike shoe is sold in Brazil or France or anywhere in the world, the majority of the money from that sale is showing up in Beaverton Oregon, not in China.
If you look at most goods that are currently being sold, the Nike business model predominates. The majority of parts in your Apple Ipod or I-Phone are not assembled in the US, but the majority of money made from that product is coming back to the US, where these things are branded, designed and sold. GM has the largest share of the auto market in China.
People can assert that US MBA's don't add value, but somehow they have persuaded the majority of the teens in the world that they need to spend 10 times as much for a name brand good as the generic alternative. That creates a lot of work in the US. This is why HP has a huge facility in Roseville and Intel has a huge facility in Folsom.
Now there is some knowledge work that can be outsourced to abroad. While IIT is a wonderful school, most universities in asia aren't that great. Even with grads of IIT the problem India and China faces is that grads are leaking out of India and China and into the US.
As incomes go up in Asia, that increase demand for goods and services produced by these really strong US brands. The majority of value chain is going to be captured here.
The reason I so strongly favor free trade is that I think the game is rigged completely in favor of the US.
I just read an article in the latest Wired magazine that touches on what I've been talking about in this thread (in regards to new manufacturing in America and how it heavily relies upon innovation, not factories): In the Next Industrial Revolution, Atoms Are the New Bits | Magazine
Pretty interesting perspective.
It was an interesting article. Thank you!
For unskilled manufacturing we are never going to be the low cost provider. The US spends a lot of money educating its population. It looks likely that we are going to do something about extending healthcare to an even larger share of the population. For work that requires no greater skills than someone in Haiti or Pakistan possess, I see nothing to keep it from fleeing to those types of countries. They just have a huge cost advantage in really unskilled activities.
Manufacturing jobs don't exactly pay poorly. Ten years ago Apple had an assembly line here that paid $13 hr to start. Not a great wage, but certainly not bad (for ten years ago).
Siemens Transportation manufactures light rail (trolleys) for the North America market, and some export. They pay rather well and have good benefits.
These are the kind of jobs we need in this country, and these are the jobs that are leaving.
Manufacturing jobs don't exactly pay poorly. Ten years ago Apple had an assembly line here that paid $13 hr to start. Not a great wage, but certainly not bad (for ten years ago).
Siemens Transportation manufactures light rail (trolleys) for the North America market, and some export. They pay rather well and have good benefits.
These are the kind of jobs we need in this country, and these are the jobs that are leaving.
You answered your own question in your reply.
Apple no longer has an assembly plant in Elk Grove. Why pay a US employee $13 an hour when a contract manufacturer can do the same work in China using labor that is paid $6 a day?
Light rail is a different example. It functions along the military industrial complex model, sort of like how the F-22 fighter program worked (where even though the Pentagon didn't want the F-22, congress kept fighting to build the program to "save" jobs). Its primary product is sold to the government. Siemens probably could make it much cheaper in Eastern Europe than the US, but by making the light rail vehicle in the US and sourcing the parts to different US manufactures, its easier to buy votes for transportation authorization requests in Congress.
There are some goods that the government is the primary purchaser of, but most goods are bought by people who care more about the cost of the good than where exactly its manufactured. When you are trying to buy votes in congress, then protectionism might work, but otherwise I think its a bad strategy.
Since about 1970, the regions of the country most dependent on manufacturing like the midwest have had some of worst economies. Detroit, Pittsburgh, Allentown, Cleveland and Cincinnati were all dependent on manufacturing and look at how those communities have fared since 1970.
The places where manufacturing did work generally was in industries where there was a lot of knowledge placed into the good. Name brand drugs are still manufactured in the US by the big drug companies. Some of the high value parts of computer goods like the chips made by Intel and Motorola are still made in the US. The US exports a lot of movies and entertainment goods, where again it the value added in the US that matters. There are plenty of attractive teenage girls who can sing or dance, but people world wide are listening Miley Cyrus and Brittney Spears before her. We are really good at making someone famous world wide.
I didn't ask a question, and I'm fully aware the jobs are going overseas.
I don't know what to say about protectionism other than we should look out for our own best interests as much as other countries do. You can't refer to the current mess we have as "free trade" when damn near every country we "free trade" with has restrictions set up to encourage companies to manufacture within their borders, or to protect their domestic manufacturers. China and Japan are both excellent examples of countries that do both.
Take a better look at where drugs are manufactured. Not too long ago I got a very bad cut across my foot in a very dirty environment, so I was prescribed antibiotics. The name "INDIA" was stamped on one side of these pills. When the pharmaceutical companies were pressuring the Bush Administration to do something about Americans ordering prescription drugs from overseas pharmacies, the pharmaceutical companies attempted to make the same claim (that the drugs were manufacture in the US). One of our senators burned the executives by noting that the information provided for over 100 different drugs noted that the drugs may be made overseas.
So, where this, my post, and other posts fits in is that we have a shortage of worthwhile jobs. In fact, we have a shortage of mediocre jobs at that. We have a system in place which aids big business in undercutting Americans by assisting outsourcing and increasing the number of H1B visas, minority-owned benefits given to foreign competition which is hell-bent on doing business in the US, but not with American workers. These companies have become H1B visa mills to aid bringing citizens from their respective countries to work here. All in the name of "free trade." At the same time India doesn't want Americans working there unless they are there to assist them with competing with the US or other Western economies. We also have domestic companies lobbying to legislate double standards in "free trade." The pharmaceutical companies are among the best examples of this. They have flat out made it clear that they feel they have the right to have drugs manufacture overseas, but Americans shouldn't have the right to buy their products directly from overseas pharmacies. The textbook companies are starting to do the same thing. They are having books printed in China, Indonesia and India, charging $20 in those markets, but they don't want Americans to have the ability to buy the same book from India because they feel Americans should pay $100 for the same book.
And while the US has Hollywood, those DVDs sold overseas are not manufactured in the US. And really, nobody in the US benefits by how much Brittany Spears makes unless they own stock in the entertainment industry or they are selling $6000 shoes in some upscale shoe store.
It also doesn't matter how well American companies are doing if Americans are unemployed. If I don't have a job, I don't have money to buy their junk.
So, now that the unskilled, and skilled jobs are outsourced overseas, and foreigners have been insourced with H1B visas, where do you suggest all of us find employment?
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