Monday, October 25, 2010


Jobs, Jobs, Jobs!

Where will they come from?

The standard answer to the fiscal crisis is more and better jobs. That is certainly true as far as it goes, because more jobs means more income per household, and hence more consumer spending, which boosts the economy directly. The problem is, where do we generate the jobs?

It is easily demonstrated that many of our job losses are in occupations that are either defunct or totally taken over by cheaper foreign sources. In product after product foreign manufacturers are able to under-price their US equivalents with little or no loss in quality. Our out-sourcing of manufacturing jobs has been enormously successful in reducing prices to the consumer, yet equally successful in forming a large ex-consumer crowd of the unemployed in the US.

The second standard answer has been to say this out sourcing is good because we can revert to a service economy and continue to grow our GDP. Well, the service sector is not hiring, it is not growing, it is not paying well, and it is unable to absorb the ever growing work population of the nation. Thus we are caught in a trap: fewer and fewer manufacturing jobs; less and less hiring; and a lessening need for service jobs since the consumer is not buying, because he is broke or ultracautious.

Then, too, any product you can name can be produced overseas considerably cheaper than in the US: whole store chains in the US are now stocked primarily with Chinese made items. I would cite Lowes, Target, Sears, K-Mart, and Home Depot as major examples.

Innovations that lead to new products are quickly put into the product engineering cycles for eventual production in China or elsewhere. Fine, you say, we can concentrate on being the great product innovators and let the grubby jobs in manufacturing go to China. The problem with that is there are simply too few positions for inventive people being created, and the rest of the work force is totally left out, except for low-paying sales and service positions or fast food chain hash slingers and waiters.

Most of the raw materials we use are imported now, which places us at a disadvantage in price and in jobs that develop and exploit metals and other elements used in major products. Our labor costs are driven by union demands for ever increasing benefits on top of better and better salaries. One analysis put the differential labor cost of producing an auto in the US versus in Japan at about $2,000 higher for us, which tells the key story of why Toyota, Honda, Hyundai, and quite a few others can outsell our car manufacturers, and their margins are growing.

We also came to automation of car production much later than in Japan, which puts us in the double bind of less productivity per man and greater cost per man relative to Asian producers. One reason for this is after WWII, Japan had to create their manufacturing industries from scratch, thus they were able to create more modern and efficient manufacturing facilities, rather than making do with older plants as we did for too long.

The other reason was enormous resistance from the US unions to the use of automation that impacted their workers. We have become a second rate producer of autos, and it shows up in ever-lessening sales worldwide. Yet, foreign car makers can set up highly automated assembly plants in the US and fend off excessive unionization costs. Toyota has ten such plants in the US.

Electronics production has been captured by Japan, Taiwan, South Korea and China, as has battery production, an essential for portable electronics, and a rising essential for hybrid or all-electric autos, such as the Toyota Prius hybrid or the GM Volt. Clothing manufacturing has long been outsourced to Asian companies, with only a few US sources left. Industry after industry in the US has been superseded by foreign competition.

We have even outsourced our call centers to places like India; no longer can you contact a manufacturer directly, you must argue your way through that Indian call center first.

For a while we had quite a monopoly on software development and production, but that too is eroding as more and more foreign companies are entering the business with competitive PC software products at lower prices. Of course, few PCs themselves or their components are made in the US any more either.

We are going to have to reemphasize trade studies as opposed to college degrees for our youth. There will be a persistent and growing need for repairmen of all stripes, and they command decent salaries and benefits. This includes computer and electronics maintenance and repair, plumbing, electricians, HVAC, auto repair, aircraft maintenance, and a host of other service professions that require training and skill development and apprenticeships. Retraining for such service technician jobs is likewise useful for the jobless at any level.

Professions that are still in demand include most forms of engineering, medical doctors, nursing, software development, data management and accounting, at least partially because students have not found these professions attractive recently relative to lawyer, economist, liberal arts, and therapist types of degrees, thus boosting the demand for more technically degreed people. The other reason for this demand is simply the growth in need for ever better, more complex, high-tech products, for which top engineering skills are required. Automation engineering and robotics should be popular and well-rewarded professions for some time to come.

For many years, professionals had the attitude that they would work for one or two companies in their entire working careers, or perhaps three different employers if necessary, or else they expected sooner or later to branch out on their own. This attitude is being forced to change. Today, because of the boom-bust nature of our economy, layoffs are far more prevalent and likely, which means that one will have to shop for jobs almost continuously, as well as enhancing their capabilities substantially over time in order to compete for the openings that do exist.

It is not unusual today to find professionals that have worked for four, five or even six companies in their careers, which has been more or less normal for aeronautical, electronics, and mechanical engineers and technicians in defense work for quite a long time, for example. You must be prepared to go where the work is, and where the latest large contract has been landed, and by which company. It is the old journeyman concept in more modern form.

It is apparent that we are not going to create as many large-scale system programs as in the past, especially during the Cold War, which has seriously impacted the professions of major systems engineering and project management. This can be verified by examining the far reduced employment levels and backlogs in space, ship and aircraft-related programs today in companies such as Lockheed-Martin, Boeing, Raytheon, and Northrop-Grumman.

The bottom line, then, seems to be that we will be faced with high unemployment levels in both journeyman professional and technician positions for some time to come, and there doesn’t appear to be any employment sectors that stand out as saviors for the millions of unemployed today, and for some time to come.

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