Manufacturing is coming back to the US but the jobs are still being lost to automation.
It’s an exciting time to be alive my friends. We got augmented reality games on our phones, AI-virus software searching for vulnerabilities and burritos at Burger King. Times are a changing. Years ago, when US workers were frustrated by waves and waves of outsourcing to China and India, former
GE (GE) CEO Jack Welch called outsourcing a temporary problem. His thesis was that eventually that cheap labor overseas wouldn’t be so cheap anymore. The middle class would rise up in these developing nations and then the cost of labor would increase. The increase would cancel out the benefit of manufacturing overseas and the phenomena would reverse itself.
Looks like old Jack was right. But you have to throw in another reason, the cost of energy. When you’re running a sweat shop in Jakarta, your costs not only include the labor but the cost of powering all that heavy machinery. To make the energy, lots of factories overseas burn nat gas. The US enjoys a distinct advantage in the pricing of natural gas stateside. The cost of LNG in Asia is 3x the cost of LNG here. Add to that increased labor and boom, welcome back to Oklahoma. Congrats, the jobs are back!
One small problem. Well, you know how minimum wage hikes are ushering in the era of Megatron at McDonald’s? Looks like the same thing is happening to new factory jobs here in the US. You’re not stamping widgets out anymore, your factory job is going to be taking care of robots. And those robots can do the job thousands. Take the recent LA Times story about Michigan electric toothbrush maker Ranir. Ranir just brought back one –fifth of their toothbrush production from China to their facility in Grand Rapids. They make 13,000 toothbrush heads a day for retailers like Wal-Mart (WMT), Target (TGT), and Walgreens (WBA). How many jobs were created? How many American workers get paid to manufacture these 13,000 toothbrushes?
Four. Not four thousand, not four hundred. Four. You can increase your production and bring manufacturing back to the US all you want and it doesn’t amount to jack squat.
Look at this sweet chart from Five Thirty Eight showing the rise in manufacturing output versus manufacturing jobs. In 2015, while domestic manufacturing output rose, manufacturing jobs were lost. So you can go ahead and wine all you want. You can blame China. You can blame Nike (NKE). You can blame whoever you want. The fact of the matter is, if you want a job, learn how to fix robots. Until they figure out how to fix themselves then you’re dunzo too.
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