Rebuilding America: Really? Have we given up?

1/28/2012 6:06 PM EST

The low wages in China aren’t the only reason for companies like Apple are manufacturing in China. We tend to forget that so much of the supply chain is already in China. Paul Krugman, NY Times’ columnist and economist, makes a very good point here:

http://www.nytimes.com/2012/01/27/opinion/krugman-jobs-jobs-and-cars.html?src=recg

He notes: “Germany remains a highly successful exporter even with workers who cost, on average, $44 an hour — much more than the average cost of American workers. And this success has a lot to do with the support its small and medium-sized companies — the famed Mittelstand — provide to each other via shared suppliers and the maintenance of a skilled work force.”

In other words, as he summarizes, “The point is that successful companies don’t exist in isolation. Prosperity depends on the synergy between companies, on the cluster, not the individual entrepreneur.”

And that’s precisely why we want to examine jobs related to the “ecosystem” of technology innovations -- here at www.eetimes.com.

1/28/2012 6:47 PM EST

I agree, without a nation wide plan with integrated product development, education, technical training and local markets, we cannot build a self sustaining infrastructure. A society doesn't just happen. Our slash and burn methods no longer work.
If we want a technical competent youth, we need to institute a product ecoology where there are attainable jobs with the requisite challenges that brought most of us into technical fields.
Todays youth need skills and a reason to learn them. Germany has seen this need and have built up their society to support the need.
Then you need to stop Hollywood from portraying technical people as helpless Geeks or Evil Scientists. They need to be the Hero's as the NASA scientists were in the 1960's. We need a new technical dream.

1/29/2012 7:28 PM EST

@Junko: This is very interesting topics to deliberate on. For last to two to three years I always think on this and it intrigues me. American society is very determined and can achieve this soon. I see this happening in Engineering Design. I hope, soon happens it in other fields too. I always support this and prefer to purchase item with Made in USA logo.

1/29/2012 8:04 PM EST

It's great to talk about longer term objectives such as encouraging youth to enter the sciences, but the short term impact seems to have a higher priority in my opinion. We have a large population of unemployed that are far past their college years, and many do not currently have the ability to even consider retraining in the new technical world. And even if they did, I seriously doubt that many companies will be willing to hire them. I'm sorry to say that age discrimination is very prevalent in our current job environment. I think it really does require an ideological change among businesses, politicians, and many of us. The tragedy is that this very large group of people are the "transitional generation", and need help now. Are we to just close our eyes and ignore the survival of these people who have built our country?

1/30/2012 10:45 AM EST

What can be done? Building the kind of manufacturing ecosystem described by Krugman requires years if not decades of investment. Corporations have demonstrated that they are unwilling to invest in training employees or nurturing supply chains. Government can only do so much to create a positive environment for such investment, and there is no way it has the expertise or backing to unilaterally provide a ready to go, trained in the very latest technologies work force and system of suppliers.

At some point, corporations need to return to thinking beyond the current quarter's stock price. They can get what they need if they decide to do the hard work of providing it for themselves.

1/30/2012 1:11 PM EST

There are also culture issues. Engineers and scientists are respected in the same level as lawyers and medical doctors in China, they also paid in the same level. The social status encouraged teenagers pursue STEM as their career. But in the US, smart kids go to law schools, medical schools and banker's training schools. STEM is not valued here. The deteriorating of the manufacture industry just reflected that the society didn't think it is important.

1/30/2012 3:43 PM EST

As an engineer who has been around the block a few times I have seen a number of trends that need to be addressed both for the good of the companies and the employees. In the old days companies hired and tried to keep engineers, now the hire and fire or just contract out much of the work. This "looks good on the bottom line" but in the long run hurts the company and wears out employees (at the company or not). Companies used to have long term plans (long term for the US being 2 to 5 years), now it seems that this/next quarter goals are given the most value, the result is short term great numbers long term failure. The cost / benefit analysis has been abandoned due to many factors: economy, investors, job market, lack of foresight. What will it take? I am not sure how to get the general culture to adapt, but one thing is for sure: we had better start looking to change before it is too late. One question I do have is: IS it too late? For my future engineering offspring's sake I hope not.

1/30/2012 5:53 PM EST

Junko, I see a lot of great comments here. My only contribution might be, who is "giving up," in your article's header?

The individuals who are responsible for off-shoring manufacturing, and increasingly design and R&D as well, haven't "given up" at all. They are in the US, they are continuing these practices for their own (IMO) myopic reasons, and they are unabashed about it.

If there's one catchy, facile way to explain it, I'd say it's a case of corporations having to work at the microeconomic level, compared with government policies, and other topics we're addressing here, which are at the macroeconomic level.

That's what causes the disconnect.

As an aside, I'm possibly deluding myself, but I do not feel that STEM professions are undervalued here in the US. Not a bit. What I do see, though, is some in my profession who go in assuming they are, and then it becomes a self-fulfilling prophecy. If you go into a negotiation giving off this low opinion of yourself, the guy on the other side of the table is sure to take advantage.

1/30/2012 7:45 PM EST

The good jobs are not coming back because there is no longer even a hint of corporate social responsibility today as there once was. At one time, America was a nation of morally superior government and business leaders with common sense that put the greater good and long-term success above self-interest and the next election in most decisions big & small. No more. The only thing left is "show me the money". This is the mind set that is keeping us down. Successful companies like Apple are perfectly content to sit on $100B mountain of cash as opposed to adding $60 to the build (not the price) of an iphone to keep America's jobs. This is a perfect example of what has happened across the board in all industries.

1/30/2012 10:11 PM EST

You've all missed the point completely. The game is to generate revenue offshore, keep it offshore and pay no taxes, while writing off those offshore expenses against revenues in taxed countries.
So, at a 33% corporate tax rate, taxed country idiots are subsidizing the offshore expenses. including offshored jobs, by 33%. Recall the offshored money - it's tax deferred while offshore, not tax exempt, so no harm in doing so. If you must dangle a carrot (which is completely unnecessary and just a hidden tax cut), listen to the State of the Union address on how to do it.

1/31/2012 5:17 PM EST

One important thing to consider is that I think development of technology, science and the like can only flourish after a society has gained enough stability. If the social and political and even economic problems of a society aren’t addressed and controlled to a certain extent, the STEM can’t evolve. Right now the USA is going through difficult times and perhaps the American hasn’t realized that the cheese has move places and that is time to get off your comfort zone and get back to trail for the bacon.
And now that we’re getting close to elections… in the terms of this article… which candidate do you think will be better at “rebuilding America”? Obama, Romney? Who?

2/1/2012 12:22 AM EST

On top of the tax issue, there is also the "greed" issue. As long as Wall Street keeps demanding profits at the expense of the expendable workers and as long as CEOs are fed very nicely regardless of good time and bad time (most recent example is Leo A. of HP fame), jobs are not going to come back to US in sufficient quantity. Why would Steve Jobs and his lieutenants give up the fat check and create jobs for the millions of laid-off workers in US? Besides the fact that they are forbidden to do so by the financial community, I suspect that the voices inside their head would keep ringing the alarm: are you nuts, giving up the good money for humanity? Don't be a fool like what Bill Gates, giving up the fortune which was hard fought in the past!

2/1/2012 2:59 AM EST

Why are you so keen to do the step in the process where the least amount of money is to be made? Who makes more money out of iPhones, Foxconn or Apple?

2/1/2012 9:55 AM EST

The US will have an inflated cost structure (hyperinflated in some industries, like health care) as long as Washington remains in the pocket of big business. Outsourcing is caused by high costs (of which labor is a small part) in the US. This is an intractable problem, barring the collapse of the current system.

2/3/2012 2:41 PM EST

Doctors and Lawyers have it far better off than engineers do. Not only are they paid much more Engineers have to compete globally as anyone in the world can design and build something. Doctors and lawyers are protected from international competition.

2/3/2012 3:23 PM EST

Examine the economy as a dynamic feedback system. With the current system, we are draining wealth out of the system (through outsourcing, trade deficits, wall street fraud) and depleting assets (worker intellectual capital, the education system, and physical infrasture). It's only a matter of time before the system becomes unstable and can't recover.

If you want change, you've got to add back the lost parameters.

Create jobs (high skill and low skill) by suspending write-offs for foreign expenses and taxing imported goods. Build up intellectual capital by requiring worker training and continuing education. Rebuild the schools using modern technology (why are students still carrying around 50 lbs of textbooks ?). Cut the cost of college education, by taxing endowments over a certain limit and forcing state schools to lower costs.

2/3/2012 3:55 PM EST

The government must use the Taxation to incentivize creation and production of goods.
If it is made outside the country is should have a heavy Tax on it so that the manufactures will make it in country. Germany is a great example and so is Japan and Korea.
It is a fact that unless we bring back the Jobs we so carelessly "exported" in the last 15 years we are going to be domed both as a democracy and also as a society...

2/3/2012 6:04 PM EST

Thank you

It is one of the most basic things..
It goes back to Thomas Jefferson and Samuel Adams “Social Contract” the people give up some rights and pay taxes in return the government to protects the people.. And protect the people in my view also from Economic War or Undervalued currencies etc...

We the people have the right to life, liberty and the pursuit of happiness..
I for one do not know any person who is happy or free if he or she cannot have a decent job.
And if Jobs are exported then we basically starve our children from the opportunities we had . Shameful and short sided..
Given the fact that corporations are profit driven Government has to use its levers to "incentive's in-sourcing".

Thomas Jefferson, The Declaration of Independence, 1776
We hold these truths to be self-evident, that
1. all men are created equal, that
2. they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. That
3. to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, That
4. whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.

George :)

2/3/2012 7:00 PM EST

I see people mentioning Germany a lot, but let's not forget that US unemployment until 2008 was considerably lower than Germany's. Only during the Carter Administration, and now, would we consider 7 percent uemployment to be something to rave about. Before now, it was something to worry over.

In recent years, the unemployment rate in Germany has been as high as 12 percent, which would have been unthinkable here as something acceptable, until the past couple of years.

And manufacturing jobs aren't what had our unemployment rate down to the 3+ percent range, in recent years. So clearly, there's something missing in this facile mention of the German economy as being the answer.

Yes, no doubt taxation policies can be used to modify behavior. But let's also not forget that it was just this type of government incentives programs that precipitated the 2008 crash to begin with. And that even today, the housing market (which got the crash started) is still not recovering. That's how hopelessly it had been bloated by questionable policies.

Let's not jump from frying pan into fire, is all I'm saying. The emphasis on manufacturing is simply misplaced, if people think this is the answer. The jobs it will bring back, if manufacturing is brought back, aren't going to be as numerous as many seem to think.

2/4/2012 11:27 AM EST

"The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state."

"The rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion"

"Every tax, however, is, to the person who pays it, a badge, not of slavery, but of liberty."

On retaliatory tariffs:
"The recovery of a great foreign market will generally more than compensate the transitory inconvenience of paying dearer during a short time for some sorts of goods."

- Adam Smith, "Wealth of Nations"

2/5/2012 1:07 AM EST

Several years ago a German colleague told me he paid 56% personal tax. Sweden and other European countries have much higher rates than the US, but big money hates unions or compliance. China also has a huge vested interest to keep her people employed. Rather a billion plus people beavering away to keep manufactured goods cheap than rattling war machines or looking for the next oil rich nation to pick on. Imagine if the US spent more money on non-defence electronics. You might then be able to buy a US made camera, printer, LCD etc. Right now a PT100 lists in the US at $100, more than a much more complex printer. Don't believe me, just take one apart when the ink runs out, as they charge the same for ink as for a printer with ink. A real eye opener. Not even cheap labour, freight offsets, low tax etc justifies this. Maybe their CEOs and investors are less greedy than Westerners?

2/5/2012 7:59 AM EST

This article is not about the US but its where we're at as well. This is the real reality show:

http://www.raspberrypi.org/archives/509

2/5/2012 5:05 PM EST

From raspberrypi.org (thanks LOBo):

"it’s really, really tax inefficient for an electronics company to do its manufacturing in Britain, and it’s one of the reasons that so much of our manufacturing goes overseas."

Substitute Britain for US and same applies. Tax policy is the main problem.

2/8/2012 9:33 AM EST

The big job creator: Apps!

http://www.geekwire.com/2012/study-app-economy-created-466000-jobs-2007

2/8/2012 10:18 AM EST

Here's a link to the report cited in the story above:

http://www.technet.org/wp-content/uploads/2012/02/TechNet-App-Economy-Jobs-Study.pdf

2/8/2012 10:26 AM EST

Germany is actually a great example of a high value exporting nation. Everyone thinks of well known brands like BMW but what they don't typically know is the strength across the board. Consumer to them is not so important, but they are world leaders in the machines that equip manufacturing growth (outside Germany). Who cares if Germany are world leaders in machines that print newspapers ? Add many more sectors and you have a powerhouse.

2/8/2012 12:44 PM EST

There are different cases here. Germany is different from the Apple case. In Apple's case, very few jobs were sent to China. Prior to using China Apple had highly automated plants making its machines in California. Robots (and their makers and maintainers) lost their jobs to cheap assembly in China, partly on price, largely on agility to make different products or changes, and then eventually on supply chain. If those jobs come back to the USA it will not be as assembly jobs in the 10s of thousands. It will be when some robotics company makes agile assembly lines which create a few hundred really well paid jobs. The larger process is the increasing efficiency of production, currently detoured through south China but probably not staying there for very long.

The larger question of what business the USA is in and how we structure our society to be mutually supportive and fulfilling is not going to be solved by targetting low wage assembly jobs in developing countries. It will be much more about what we do with the high end jobs, and how we educate people for them, and deal with the fact that such industries naturally have an elite structure which tends to be winner take most and will not directly employ many.

2/8/2012 10:10 PM EST

My assertion is that we don't want them to come back. If there continues to be a path to financial security in low-skill manufacturing, then our children will continue to drop out of high school and take that path. NPR did a story recently on the dichotemy of jobs in modern factories. There were still a few low-skill positions, but the future was in NC mill programming and similar high-skill positions. I have a ten-year old nephew who has very good spacial imaging skills. I would much rather see him develop those skills rather than take a job pushing a button on an assembly line.

Larry M.

2/12/2012 11:40 PM EST

Hate to be blatantly blunt and redundant, But until the powers that be and the market figures out the "Get laid or get paid" (GLGP) problem facing many STEMs professions and businesses, most smart students and businesses are going to shriek and flee towards careers in fields like finance, medical, legal, and business that have successfully solved the GLGP problem. You do not hear them continually sniveling for students or money.

2/13/2012 5:44 AM EST

The seeds of destruction were laid long ago. With the moon shot "dream".

America wasted a whole generation of brilliant and passionate men and women on satisfying some politicians' ego.

With it were wasted a few billion dollars of tax payers money, which could have gone into better education and research in the universities.

And don't talk about spin offs from the space program. Those same driven folks would have invented the "spin off" technology anyway.
The moon shot was the pyramids of USA.

2/21/2012 11:36 PM EST

Another aspect of America’s drift away from its manufacturing base is the internal “brain drain” in the core industries. I got my MBA from Wharton in the 80’s. Even then many of the most talented MBAs avoided manufacturing based companies to find their fortunes in banking, consulting and other non-manufacturing industries. These were the folk that could have really helped us preserve American manufacturing. I went on to work at Data I/O, Tektronix and Impulse C. We saved a few jobs and maybe made a few American manufacturing jobs…. but it sure would have been great to have those “A” MBAs in the manufacturing trenches with the rest of us.