December 6th, 2012

My Update Portrait

Fall Into the Gap

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A winner is someone who recognizes his God-given talents, works his tail off to develop them into skills, and uses these skills to accomplish his goals. - Larry Bird

When I was training for computer networking skills, I also became A+ certified in computer maintenance and repair. During the course of the classes, several people dropped out. This was because they discovered how low the compensation was for trained computer technicians and felt that it wasn’t worth pursuing.

[How this relates to American manufacturing]

Manufacturing companies are complaining that they are having a difficult time finding people that can match the technical skills and training they need to run the machinery. At first glance, this would seem to be a golden opportunity for the unemployed to retrain into these skills so they can become employable again.

Throughout the campaign, President Obama lamented the so-called skills gap and referenced a study claiming that nearly 80 percent of manufacturers have jobs they can’t fill. Mitt Romney made similar claims. The National Association of Manufacturers estimates that there are roughly 600,000 jobs available for whoever has the right set of advanced skills.

The reasons cited for losing so many manufacturing jobs include a classic one (automation) and a more current one (outsourcing) and the existing problem (training):

Nearly six million factory jobs, almost a third of the entire manufacturing industry, have disappeared since 2000. And while many of these jobs were lost to competition with low-wage countries, even more vanished because of computer-driven machinery that can do the work of 10, or in some cases, 100 workers. Those jobs are not coming back, but many believe that the industry’s future (and, to some extent, the future of the American economy) lies in training a new generation for highly skilled manufacturing jobs — the ones that require people who know how to run the computer that runs the machine.

The article in the New York Times describes the dilemma that these job prospects face. Union roles are being reduced and starting pay for many of these jobs start at about $10 per hour. If the employee gets an associate’s degree, this amount can go up to $15 per hour and possibly up to $18 per hour after several years of good service.

This is hardly a career path for someone who would want to maintain a middle class lifestyle and support a family. It especially seems so when pursuit of a career at McDonalds is almost as financially attractive as seeking a technical specialization that would have to be kept up to date. And this is also a far cry from the type of career path that is going to approach closing the income gap that is widening in America.

It looks as if the solution to this problem would be an old tried and true one. Put the onus on the companies to do training on the job to get current employees or new employees up to speed on these machines in manufacturing. Yet, this solution has become impractical as well. Per the article:

This is partly because advanced manufacturing is really complicated. Running these machines requires a basic understanding of metallurgy, physics, chemistry, pneumatics, electrical wiring and computer code. It also requires a worker with the ability to figure out what’s going on when the machine isn’t working properly. And aspiring workers often need to spend a considerable amount of time and money taking classes like Goldenberg’s to even be considered. Every one of Goldenberg’s students, he says, will probably have a job for as long as he or she wants one.

The income gap isn’t the only problem in this case. Once again, the Science, Technology, Engineering and Mathematics (STEM) gap appears to be much to blame for America falling behind and losing our ability to remain competitive internationally in manufacturing. With all the austerity measures being proposed to resolve our national debt, hijacking education would be just another step in gutting the value of our American society.


The return of manufacturing to the USA: trend or plan all along?

I've been reading quite a bit about how the multi-nationals are figuring out that there is a cost (in time and quality) associated with factory outsourcing.

This fascinating article in The Atlantic Magazine references this new trend as 'in-sourcing'. It cites how GE took existing US factories, backwards engineered the appliances and figured out a way, lo and behold, that produced a product that was significantly cheaper than Chinese imports.

Quotes contributed to GE CEO Jeffery Immelt:

In the midst of this revival, Immelt made a startling assertion. Writing in Harvard Business Review in March, he declared that outsourcing is “quickly becoming mostly outdated as a business model for GE Appliances.” Just four years after he tried to sell Appliance Park, believing it to be a relic of an era GE had transcended, he’s spending some $800 million to bring the place back to life. “I don’t do that because I run a charity,” he said at a public event in September. “I do that because I think we can do it here and make more money.”

Immelt hasn’t just changed course; he’s pirouetted.

What has happened? Just five years ago, not to mention 10 or 20 years ago, the unchallenged logic of the global economy was that you couldn’t manufacture much besides a fast-food hamburger in the United States. Now the CEO of America’s leading industrial manufacturing company says it’s not Appliance Park that’s obsolete—it’s offshoring that is

Today I read news that some Macs will be assembled in the US. Not quite the same as what GE is doing, but I do see a trend.

In my opinions the current levels of American in-sourcing are not at the Silver Bullet level necessary for "economy saving" trends.

But to see something 'made in USA' in a manner cheaper than Foxconn can (once transportation, Quality control and delay costs are factored in) would have an interesting effect on the Tea Party "USA! USA!" crowd. Blue collars are going to remember fairly quickly that unions were organized for, and by the blue collars.

Insourcing has a place. although not yet clear if it portents market longevity. As history points out concepts like outsourcing evolve, explode as the 'new norm', yet ultimately burning out in a relatively short time. Whether firms in manufacturing, transportation and IT industries can sustain labor over a prolonged period of time is a trend worth monitoring.

OH, and In before Union Wank
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