Where the Jobs Are and Why

In the State of the Union, President Obama emphasized manufacturing, committing his administration to “bring jobs back home”. Perhaps coincidentally, the last two weeks have given us an amazing run of revealing articles about manufacturing: what gets made where and why, who gets a job making it, and how they are treated.

The New York Times focused two articles (Wednesday and January 21) on Apple’s manufacturing in China. This American Life centered an episode on Mike Daisey, whose recently-opened one-man show “The Agony and the Ecstasy of Steve Jobs” includes much material from his interviews with the iPhone assembly workers in Shenzhen. The current issue of Atlantic includes “Making it in America“, an article that starts with two South Carolina factory workers and goes all the way up the chain to the global pressures on their CEO.

These articles became the raw material for insightful comment from Paul Krugman, the New Yorker’s Nicholas Thompson, Slate’s Matt Yglesias, MSNBC’s Chris Hayes, Alternet’s Robert Cruickshank, Foreign Policy’s Clyde Prestowitz,  and many others.

Background. Instead of trying to reproduce all those ideas, I’m going to assume that you’ve either picked up the buzz or are willing to chase some of the links I’ve provided. Doubtlessly you know the general picture: While America continues to create market-dominating companies like Apple or Google, the number of American jobs they provide doesn’t compare with market-dominating American companies of the past like General Electric or Ford.

The reason why is simple: While much of the design and management happens in America, most of the physical products are manufactured in low-wage economies like China. Those factories that remain in America are highly automated, so that our manufacturing employment plummets even as our manufacturing output continues to rise. America still makes a lot of stuff, it’s just not made by people.

The following graphs come by way of the bonddad blog:

Why? The most interesting fact to glean from the articles is that it’s not just the wages. Yes, workers in Shenzhen are cheap, but two other factors are also important.

First, what the NYT article calls “flexibility”. That’s a euphemism for domination. Chinese workers are completely under the thumb of employers like Foxconn, which assembles products for Apple and most of Apple’s competitors.

Almost every commenting article repeated the story of Foxconn workers being rousted out of their dorms in the middle of the night to make a last-minute change to the iPhone. Try to imagine doing that in an American factory.

“Flexibility” also isn’t inhibited by worker safety. If the factory managers come up with a new process, nobody has to analyze it or approve it. They just do it. If it later turns out that workers have been inhaling disabling neurotoxins — one of Mike Daisey’s examples — that’s a shame.

Second,

“The entire supply chain is in China now,” said another former high-ranking Apple executive. “You need a thousand rubber gaskets? That’s the factory next door. You need a million screws? That factory is a block away. You need that screw made a little bit different? It will take three hours.”

The overall result is that Apple gets exactly the product it wants faster — not just cheaper — than if it manufactured in America.

Everything we’ve been told is wrong. Again and again, I’ve read about “the death of distance”. It’s not supposed to matter where things are done now. But in fact it does. Once industries get clustered in a particular place, it’s not easy to move them.

And once they’ve moved away, it’s not easy to move them back. It’s not just the supply chain. Worker skill is a chicken-and-egg problem. No company is going to open a factory someplace where they can’t find the skilled workers they need, but no worker is going to get training on the off-chance that a factory will open someplace that doesn’t have any working factories now.

Free-market economists have encouraged us to look at every job in every factory as an individual issue. If Mexicans or Indonesians can do a job cheaper, move it there. We weren’t supposed to ask what all those individual decisions added up to. That would be “industrial policy“, which was supposed to be bad, because government shouldn’t pick winners and losers.

But the Chinese did worry about the big picture, and now they have all the manufacturing jobs. Prestowitz says:

Asia didn’t always have these supply chains. They were initially all in the United States. Asia got them because its governments and corporations worked hand in glove to get them. There is no reason why the United States government can’t work hand in glove with corporations to get at least some of them back. It’s not rocket science.

Ignorance is Bliss. Bliss has market value. The NYT and Mike Daisey have done a great job cataloging worker abuses in the Foxconn plants in Shenzhen. It’s obvious how to fix this: Consumers put pressure on Apple (and its rivals, who are no better); Apple puts pressure on Foxconn; and Foxconn changes how it treats its workers.

Why doesn’t that happen? Again, it’s not because there’s not enough money. The NYT says:

various academics and manufacturing analysts estimate that because labor is such a small part of technology manufacturing, paying American wages would add up to $65 to each iPhone’s expense. Since Apple’s profits are often hundreds of dollars per phone, building domestically, in theory, would still give the company a healthy reward.

Cruickshank (a self-confessed Apple fan) comments, “I would personally pay $65 more per iPhone if I knew it was going to American workers.”

Lots of people would, I imagine. But picture how that would work: Apple offers an alternative all-American iPhone or even a no-workers-abused Chinese iPhone, and sells it right next to the current iPhone for a bit more money.

Now everyone who buys the original feels like a scumbag. Worse, as you stand there dithering about whether workers’ rights or American jobs are worth $65 to you, you’re not having the retail experience the Apple Store is trying to create. The whole joy of Apple products is that they are magic. Picturing the real process that creates them breaks the spell.

Up and down the supply chain, everyone is happier not knowing the extent to which they benefit from the mistreatment of Chinese workers. The market — which just wants to make consumers happy — has been very efficient at providing that ignorance.

“Until now,” you might be thinking. Yes, the recent publicity has brought attention back to the responsibility we shoulder when we buy things: Everyone in the supply chain justifies their actions by claiming that they just want to please the consumer. So when you plunk down your Visa, you’re signing your name to the whole process. If enough of us now decide we want to deal with that responsibility, surely the market will provide some way for us to do it. Won’t it?

Here’s the problem: The market responds to consumers’ true desires, the ones that motivate our purchases, not the desires we claim to have or wish we had. And in our heart-of-hearts, don’t we really just want this responsibility to go away? Don’t we want the Apple Store to go back to being a high-tech Eden, where everything appears by magic?

If that’s what we really want, that’s what the market will provide. Some tiny improvements will happen in the factories, and each link of the chain will exaggerate that change, until the nerd at the Genius Bar can swear up-and-down that it’s all fine now. The workers in Shenzhen are all happy little Oompa-Loompas.

The mechanisms are already in place. Apple already has a shiny code of conduct for its suppliers. Foxconn already has a statement of workers’ rights that satisfies Apple. Supervisors on the factory floor already claim they adhere to that statement. And still workers are maimed or die or commit suicide. The NYT covers it:

“We’ve spent years telling Apple there are serious problems and recommending changes,” said a consultant at BSR — also known as Business for Social Responsibility — which has been twice retained by Apple to provide advice on labor issues. “They don’t want to pre-empt problems, they just want to avoid embarrassments.”

And like all global manufacturers, Apple is constantly squeezing its suppliers’ profit margins.

“You can set all the rules you want, but they’re meaningless if you don’t give suppliers enough profit to treat workers well,” said one former Apple executive with firsthand knowledge of the supplier responsibility group. “If you squeeze margins, you’re forcing them to cut safety.”

How exactly is that going to stop?

Degrees of moral separation. Atlantic’s Making It In America by Adam Davidson starts by comparing Maddy and Luke, two workers making fuel injectors in a Standard Motor Parts factory in South Carolina. Both are dedicated and hard-working, but Luke is skilled and Maddy is not.

Luke’s job, the article claims, is relatively secure, but Maddy will be let go as soon as machinery costs drop far enough to make replacing her worthwhile. In the meantime, machine costs put a lid on her wages, and she has nowhere to go.

A decade ago, a smart, hard-working Level 1 might have persuaded management to provide on-the-job training in Level-2 skills. But these days, the gap between a Level 1 and a 2 is so wide that it doesn’t make financial sense for Standard to spend years training someone who might not be able to pick up the skills or might take that training to a competing factory.

But Standard is profitable, so Davidson raises the same question Apple faces: Why couldn’t the company charge a little more or make a little less money and show some loyalty to its people and to America?

(NYT quotes an Apple executive saying: “We don’t have an obligation to solve America’s problems.” To which Foreign Policy’s Clyde Prestowitz replies: “Apple’s products still have a large U.S. government R&D content and I’ll bet that the guy who says Apple has no obligation to help Uncle Sam does strongly believe that Uncle Sam has an obligation to stop foreign pirating of Apple’s intellectual property and to maintain the deployments of the U.S. Seventh Fleet and of the 100,000 U.S. troops in the Asia-Pacific region that make it safe for Apple to use supply chains that stretch through a number of countries such as China and Japan between which there are long standing and bitter animosities.”)

So Davidson talks to the guy he thinks could make that decision: Standard’s CEO Larry Sills, grandson of the founder.

It turns out that Sills doesn’t believe he has the power to do Maddy any favors. Sills sees himself as the slave of two masters: the consumer, who looks for price and quality, but doesn’t seem to know or care how the auto parts are made; and the stockholder, who likewise just wants earnings to rise and doesn’t seem to care how it happens.

Once again, we’re seeing one of the major structural problems of the modern economy: We all live many degrees of separation away from the moral consequences of our decisions.

If you had to go down to a Shenzhen-style sweatshop to buy your iPhone, or if owning mutual fund shares meant that you occasionally had to fire somebody like Maddy face-to-face, you might think twice about it. But instead you are wowed at the Apple Store and every month you get a nice clean IRA statement in the mail.

You’re happier that way, and the Powers That Be are happier. And that’s why nothing changes.

Post a comment or leave a trackback: Trackback URL.

Comments

  • Kim Cooper  On January 30, 2012 at 4:06 pm

    If someone in China opened a competing factory that offered better wages or better conditions or more safety, could that help solve the problem?
    What you describe is all part of “the race to the bottom”: the problem is if one company increases their profit by screwing the workers, then they all have to do it too in order to compete. The piece we need to remove is the stock market, which values companies almost solely on the increasing percentage of profit it makes, forcing them into this race to the bottom. The stock markets have also lost their original purpose, which was to help small businesses get enough money to start and grow. It hardly does that at all any more.

    • weeklysift  On January 30, 2012 at 4:25 pm

      A company with an actual human owner, rather than a faceless sea of stockholders, would at least eliminate some of the moral distance. That owner would know that he or she had chosen to treat workers well or badly, and couldn’t pass the responsibility off on someone else.

  • Allison  On January 31, 2012 at 11:43 am

    On a meta “media analysis” level, it is interesting to note that Adam Davidson works with This American Life, so it’s probably not a coincidence that they’re both talking about similar issues. (His story about the American factory workers also ran on the Planet Money podcast.) But by doing so in different media, it creates a “buzz” about the topic.

  • xine  On January 31, 2012 at 12:16 pm

    All through this article, I was thinking of our food supply- that we’re all happier not knowing what’s in our Chicken Nuggets, or what conditions our bacon lived in, or how our burger was killed. The “eat local” movement has combat some of that, but we still don’t want to know if our salad greens were picked by a 10 year old illegal alien…

  • macduff40  On January 31, 2012 at 12:26 pm

    Where the Jobs Are and Why

    This is a great overview of this issue.

    But I have lay blame on legislators, past and present, who enabled the outsourcing of jobs and entire factories while adding insult to injury by allowing tax credits as well. Whatever their reasons, they all acted in my view in a traitor like fashion. They should never be forgiven, and those that remain in ‘service’ should be voted out of office by all thinking adults for now and forever. Did you hear that Obama, Gingrich, Romney, et al.?

    Vote 3rd party this November. Those that continue to support the corruption by voting for an encumbent D or R are indeed voting for the true spoilers.

    ed

    • Kim Cooper  On February 6, 2012 at 5:47 pm

      Voting third party is not a good or realistic solution when the Republicons and Democrats are so far apart. Voting for a third party increases the chance that Republicans win. They are so heinous that it doesn’t make any sense to do that. Winner-take-all systems ALWAYS end up as a two-party system. There have been more than two Presidential candidates on my ballot for as long as I have been voting (1971) and none has ever been close to upsetting the two-party system.
      If you think the Dems and Repubs are alike, you haven’t been paying attention. Yes, the Dems are wimpy and the Repubs are sociopaths, so the Repubs run roughshod over the Dems. But if they win, the Repubs will run roughshod over all of us AGAIN. Do you forget Bush already?

  • samuraiartguy  On February 1, 2012 at 2:00 am

    I read the original Times story, and have been following the commentary that’s followed, including calls to boycott apple products. But Apple is just the most prominent and successful company manufacturing in China. And they do rather make the case that laying their hands on 20,000 semi skilled assemblers and 2,000 mid-level engineers is nearly impossible in the ‘States.

    I wrote this on my Facebook wall in commenting on this c|Net item:
    http://news.cnet.com/8301-13924_3-57367030-64/wont-buy-apple-products-anymore-then-dont-stop-there/

    “In the wake of some calls for an Apple boycott, it’s worth noting that human-intensive mass production has faced problems with abysmal working conditions in just about every major industrial economy.” – Brooke Crothers

    Seriously, if you want to boycott Chinese manufactures, you can’t set foot in not only an Apple Store, bit Best Buy, Walmart, Target, Lowes, Home Depot, and just about ALL clothing retailers. Welcome to globalism. Apple is being singled out due to their success and high media profile and legendary internal secrecy. And other than Intel’s primary chip fabs, just about ALL computers and consumer electronics, either the gutz or the gizmos themselves, are made in Asia – Taiwan, China, South Korea, Singapore, India.

    This is an issue not just for Apple fans, but for all of Western Civilization.

    It’s still a helluva story. Also, remember that just about ALL computers and consumer electronics worldwide are manufactured in Asia at Foxconn or places like it, or worse. But as always, raising consciousness is the first step towards any kind of meaningful change.

    • weeklysift  On February 1, 2012 at 8:37 am

      I tried not to demonize Apple, pointing out twice that its competitors also use Foxconn and are no better. The difficulty of rallying consumer moral pressure shows up in the Standard Motor Parts story as well. Apple symbolizes a system with systemic problems; it’s not the root cause.

Trackbacks

  • By Obligations « The Weekly Sift on January 30, 2012 at 1:45 pm

    […] Where the Jobs Are and Why. Suddenly in the last two weeks, we’ve seen an amazing run of articles about manufacturing, sparking lots of insightful commentary. Fulfilling the President’s pledge to bring manufacturing jobs home will be even more complicated than it looks. […]

  • By Authority and Belief « The Weekly Sift on February 6, 2012 at 1:32 pm

    […] week’s most popular post. Where the Jobs Are and Why had had 190 […]

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: