Industry official: U.S. manufacturing will never be the same

The Milwaukee Business Journal ^ | May 9, 2003 print edition | Rich Rovito

[Willie Green]

For education and discussion only. Not for commercial use.

Overseas competition killing low-skill jobs

The prolonged economic slump has forever changed the manufacturing sector, forcing companies to re-evaluate the way they do business as they face intense competition from around the world.

This was the message delivered to a select group of manufacturing executives invited to attend a roundtable discussion that kicked off the "Manufacturing Matters" conference May 5-6 at the Midwest Airlines Center in Milwaukee.

"This isn't just another business cycle. Nothing will ever be as it was," said Phyllis Eisen, vice president of The Manufacturing Institute, a Washington, D.C.-based arm of the National Association of Manufacturers. "This is a period of transition."

The recovery is the slowest on record, Eisen said, and has created a crisis in the manufacturing sector, with U.S. companies permanently losing business to low-cost overseas competitors.

Although there are signs of hope, such as increased factory orders, the manufacturing sector "is still hemorrhaging jobs," she said.

Wisconsin manufacturers alone have shed 88,000 jobs over the past three years.

"Some of these jobs are gone forever," Eisen said. "What's left are high-skilled jobs."

It's "fantasy" to think that low-skill jobs that have been lost to Mexico, China and other countries will ever return to the United States, she said.

"I don't know what's going to happen to poor people," she said. "If they don't have skills, they won't be part of society."

Although low-skill jobs are disappearing, manufacturing jobs that require higher-skill levels are in demand, Eisen said. The challenge is turning young people on to careers in the sector, she said.

Most students view factory jobs as "dark and dirty," unaware that manufacturers can provide family-supporting jobs, she said.

High school students are pushed by teachers and counselors to attend college, with little thought given to technical or trade schools, she said.

"The thought is that you're first-class if you go to college and you're a loser if you go to trade school," Eisen said.

Students must be allowed to see the relationship between manufacturing and technology, she said.

"I wouldn't let a kid out of eighth grade without visiting a modern manufacturing floor," Eisen said.

In order to secure the long-term health of the country's manufacturing sector, funding needs to be preserved for organizations like the Wisconsin Manufacturing Extension Partnership, Eisen said. The Madison-based organization provides small and midsize manufacturers with consulting services on advanced manufacturing technologies and business practices that are intended to boost revenue and overall efficiency. It has been battling to maintain federal and state funding.

Concerns about China

The discussion also touched on perhaps the most immediate threat -- low-cost manufacturers in China.

"China is going to be to this decade what Japan was to the 1980s, but blown up to 20 times the size," Eisen said.

The threat is heightened by China's undervalued currency, she said.

Chinese manufacturers are quoting projects at less than the cost of raw materials for U.S. manufacturers, said Paul Ericksen of the Wisconsin Supplier Development Consortium, a manufacturing group that fosters relationships between the state's suppliers and original equipment manufacturers.

"The Chinese have the power to take away our manufacturing base," he said.

It's key for small and midsize suppliers to enlist the help of original equipment manufacturers if the state's manufacturing sector is to remain viable, Ericksen said.

"If I can save 30 percent by going overseas, I have to do it out of responsibility to our shareholders," Ericksen said.

However, manufacturers that are flexible to customers' needs often are able to win orders away from companies that compete on cost alone, provided they are "ballpark competitive" when it comes to pricing, Ericksen said.

Keith Peterson of Humane Manufacturing in Baraboo said he can retool his manufacturing operation in about half an hour, which gives his company an advantage over inflexible, low-cost competitors. By running a more efficient operation, Humane Manufacturing, which makes rubber flooring from recycled products, is able to charge higher prices than its overseas competitors, he said.

State Rep. Terri McCormick (R-Appleton), who hosted the roundtable discussion, said there are also domestic threats to Wisconsin manufacturers. Other states offer incentive packages that make it attractive for manufacturers to relocate their operations. Government regulations and high business taxes also pose hardships for Wisconsin companies, she said.

"We must, as a state, be collaborators and supporters of jobs," she said.

Eisen claims the Bush administration has vowed to make manufacturing a priority, a pledge Peterson said he has heard from prior administrations with few results.

"There are more roadblocks than assistance," he said.

[fooman]

Wis-Kahn-sin. Some of this I agree with. But if the state lowered taxes, passed right to work laws, lowered regulation and gave some tax incentives -it might get some of the business moving down south.

[CedarDave]

True, oh how true. Of course, what we need is more government welfare, more health care, longer unemployment benefits and all the things that the Democrats think will hope the poor person -- NOT! Less taxes, easier access to our natural resources, and technological and trade school education are are the only way to stem the tide, and then it will just slow it down.

Flight of skilled manufacturing jobs will continue overseas where labor is cheaper, to be replaced by low paying service jobs, many occupied by legal and illegal aliens. The remaining good jobs will be in the ever-expanding government sector which will take an ever increasing chunk of our incomes, and the voters, pushed by the Rat press and politicans will continue the expansion of the welfare-socialist state. When we cross paths with the third-world (us going down, them coming up), then just maybe, we will see some recovery. In the meantime, its just a negative downward spiral for as long as can be seen into the future.

[sleeper-has-awakened]

Chinese manufacturers are quoting projects at less than the cost of raw materials for U.S. manufacturers, said Paul Ericksen of the Wisconsin Supplier Development Consortium, a manufacturing group that fosters relationships between the state's suppliers and original equipment manufacturers.

As a former project coordinator for a Chicago manufacturer I can relate to this quote. Part of my responsibility was to bid on jobs. I saw first hand how we would lose jobs to China and Mexico. We lost jobs to China where China would come in at our material cost. Fortunately I saw the writing on the wall and began my career change.

I know most people seem to think all out free trade is great. As a person with the equivalence of a masters in metal manufacturing I'm now busy appraising real estate instead of making sure that our military is recieving high quality, high tolerance metal parts.

I have been part of companies that have gone out of business because large customers have pulled 100% of their business with no warning and sent the products to China to be manufactured.

I love to work with my hands and my brain but in hindsight regret having chosen a career in high tolerance manufacturing, I would never encourage a young person to follow that path now. Manufacturing has been dead for the past couple years, there will be no resurrection in my opinion.

[fooman]

The other thing that I would add it that we should rethink our tariff policies.

I have no problem with mexico, since they can build components that feed into our production chain and if they have a good country then there are less immigrants.

And I like ricardian trade and some competition. But we must not lose our manufacturing base and we must protect our intellectual property that is going to china.

So .....

1) import with a labor content get a 'social tax' surcharge.
2) companies that give away their intellectual property like boeing lose protection (patents , trademark etc)
3) china is fined TRIPLE damages for stolen intell property (software designs etc). If they dont pay, then we raise tariffs until the fines are paid.

[Nephi]

Republicans don't see that by supporting the exporting of good paying manufacturing jobs, through free trade globalism, that they are exporting the middle class and setting them up to be exploited by socialist Democrats.

Republicans don't see that globalism is a stepping stone to world government. World government ain't gonna be democratic.

[fooman]

I think that bi-lateral trade like the deal that we did with singapore is good. NAFTA is OK too. But WTO sux. We should pull out of that.

I bet bush realizes that if he does enough bilateral deals then we always have the option of pulling out of the WTO.

[Southack]

"It's "fantasy" to think that low-skill jobs that have been lost to Mexico, China and other countries will ever return to the United States, she said."

The jobs, no. The work, yes.

What the poor gloomsters don't see is that U.S. industry is already using over 1 million robots to weld, paint, and sort parts on the assembly line.

We have machines that wash our dishes instead of using people to hand wash them. Ditto for clothes. Our aircraft are already flying themselves. Soon, so too will our cars and buses and trains.

Instead of drawing architectural blueprints by hand, we have computers and plotters churn them out flawlessly and at high speed with very little labor cost at all.

Everyday, we automate more and more of our menial, repetitive tasks.

Thus, it isn't that we are losing jobs to Mexico and China so much as we are simply exporting jobs that we are about to automate out of existence, anyway.

I mean, when was the last time that we needed an elevator boy to take us up and down a few flights of stairs?!

When was the last time that we needed to tell an operator to connect us in a "person to person" phone call?!

You see, we've automated those jobs out of existence.

So it isn't that the U.S. has to worry about low-skilled jobs being shipped out of our country, it's that third-world countries have to start worrying about just what jobs *of theirs* that we will next automate out of existence.

Because while the U.S. is becoming more efficient and vastly mroe productive (and profitable), the rest of the world isn't keeping up.

Neither workers nor their bosses in third world nations can see that our automation trend is going to smack them down hard in the very near future. Their cheap labor is about to be obsoleted.

We don't need hundreds of impoverished Mexican women weaving baskets and blankets for us any longer because we've got machines that can do it better, fast, and cheaper here, for instance.

By the time a big ballgame is over, our machines have already made the T-shirts with the winning scores on them, and our vendors are selling them to the crowds as they exit the stadium. So much for cheap foreign labor competing in the T-shirt business.

Ride a roller coaster and a picture of your own scream is waiting for you when you exit the ride, all courtesy of automation.

So contrary to the picture that the gloomsters are all painting, it isn't that we are exporting jobs away...it's that we are obsoleting low-wage job after job.

And in their place we are creating high-wage, high-skilled positions, the likes of which the world has never before seen.

[Willie Green]

Republicans don't see that by supporting the exporting of good paying manufacturing jobs, through free trade globalism, that they are exporting the middle class and setting them up to be exploited by socialist Democrats.

Precisely.
Dubya's waging of "free" trade Shock and Awe on the American Middle Class is going to cost him reelection.
Phoney backdrops at his pep rallies that say "Made in USA" aren't gonna help him one iota.

[fooman]

Or to the extent that we do need labor intense help for some components, it can feed into the automated parts of the production chain...

[Willie Green]

Thus, it isn't that we are losing jobs to Mexico and China so much as we are simply exporting jobs that we are about to automate out of existence, anyway.

So instead of automating them, it's cheaper to export them.
And BOTH the low-tech and high-tech positions are lost, leaving the domestic manufacturing sector to collapse.

Thanks a lot, Dubya. </sarcasm>

[gitmo]

Perhaps we could educate our children, so few Americans would need to accept low skill jobs.

[philetus]

US High Tech Jobs Going Abroad
... high-tech production work abroad, US companies are increasingly shipping sophisticated software development and other engineering jobs overseas because they can ...
www.larta.org/pl/NewsArticles/HighTechJobs_4-24-00.htm cached


Foreign Workers taking US Jobs!
... H-1B workers and out-sourcing engineers jobs overseas, along with ... workers and of outsourcing jobs to cheaper locations is necessary for US companies to compete ...
www.reformpartyofcalifornia.org/inthenews/foreignworkers.html cached

[free from tyranny]

Roadblocks? They are more like search and seizures for American business. Manufacturing is not the only victim of rapidly accelerating hostility both domestic and abroad to American based operations. Manufacturing is the most vunerable because it is most collabrative of all business endeavors. The decline of manufacturing is a harbinger of a greater decline in American business. Just look at the outsourcing( antiseptic version ) of backroom banking and telecommunications work to India.

Part of China's success in attracting business to their corner of the world is due to the creation of SEZ's ( Special Economic Zones). These are places with great flexibilty for business managers.

It is time to try the same in several of our states. Our SEZ's will include tort reform, common sense pollution control, low corporate taxes, common sense labor regs. and a desire to see American businesses, our businesses succeed.

[boris]

Strangely, the word "union" does not appear in this thread. The U.S. priced itself out of competition with world markets by allowing unions (illegal monopolies on a commodity: labor) to become entrenched. They even had to pass a law to legalize them!

--Boris

[Willie Green]

Perhaps we could educate our children, so few Americans would need to accept low skill jobs.

There's always going to be a low-skilled workforce and the need for low-skill employment. If not for entry-level training purposes, then simply because of the normal distribution. Pursuing some idealistic theory that "everybody is above average" is a pipe dream. I'd rather have people who are unfortunate enough to fall on the lower half of the normal distribution capable of earning a living in the private sector than dependent on welfare handouts from the government. Dubya's trade and immigration policies undermine that objective.

[fooman]

They have a lot of this in the South. BMW, Mercedes, Honda, Nissan, Michelin, Toyota and lots of others think so.

[fooman]

I mentioned right to work laws early in the thread. The southeast has these.

[RLK]

"This isn't just another business cycle. Nothing will ever be as it was," said Phyllis Eisen, vice president of The Manufacturing Institute, a Washington, D.C.-based arm of the National Association of Manufacturers. "This is a period of transition."

--------------------

The transition is our decline into a gutted third world country.

[Willie Green]

Strangely, the word "union" does not appear in this thread.

Why would it?
Last I looked, something like 80~85% of the manufacturing sector employment was non-union.
If you want to discuss labor unions, you should do it on a thread about government employees and public school teachers. That's where the labor unions are actively growing. But in manufacturing? Nah, you're living 20~30~40 years in the past. Different set of problems now. Times have changed.