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PhreeZone

Largest factor in decline of manufacturing jobs?

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In light of the recent election results I am curious what the general opinion is on the single largest cause of the decline of manufacturing jobs in the rust belt states and the best way to address the issue. A lot of promises to bring the jobs back were made during the election but the root causes never seemed to be discussed and that is now leading to a lack of a clear policy to address those issues.

I unfortunately feel that the largest cause of the decline is tied to the automation of jobs. This means that the jobs just can not come back at all if they are able to be replaced directly by technology. If you look at an automotive plant a single robot replaced 10-15 welders plus all the other jobs that are indirectly tied to those positions. That is 10-15 positions that will never be able to be recreated even if every trade deal was reversed and huge tariffs were enacted on other goods to try to balance out any issues on those fronts. Yes a job was created to do the robotics repairs that is a much higher paying position than the welders but that is still a 90% reduction in the workforce via automation. Multiply that over an entire factory and its easy to see how Ford, Chevy and Caterpillar are able to have higher production numbers but their staffing requirements are now reduced by as much as 60% over what they used to be and the positions still around are now non-skilled labor that they feel no longer deserves the $30-45 per hour that they were paying previous generations of workers. I remember the days of driving past some of the local auto plants and the parking lots were full all the way to the fence since that was the number of workers needed at shift changes. Now those same facilities are tearing up the parking lots since they have not been needed in years but they are still sending the same number of cars per month out the door. If Automation of jobs is the largest root cause how do you address this issue?

Taking this even further the military is even looking at technologies that will be reducing the number of personnel that need to be engaged in activities due to automation. The lastest class of destroyers to launch needed 40% less crew despite being larger, faster, having better weaponry and better sensors due to all the automation that was built in. The new Gerald Ford class of aircraft carriers is looking at a 15-25% reduction of active crew over existing carriers and when we look at the drone programs most of them are flown out of domestically operated facilities when means the only people that need to deploy are maintenance crew and even that MOS does not need the same staffing levels as before. Those jobs in the military are just not going to be needed anymore moving forward. If the military thins down 10-15% while still maintaining the same levels of operational readiness what is the intent for those positions moving forward?
Yesterday is history
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Parachutemanuals.com

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I would agree, with the addition that our addiction to cheap manufactured good is a close second. US labor cannot compare against third world labor prices.

And if you think we're not addicted to cheap manufactured goods, why are storage lockers a growth business?

Wendy P.
There is nothing more dangerous than breaking a basic safety rule and getting away with it. It removes fear of the consequences and builds false confidence. (tbrown)

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PhreeZone


I unfortunately feel that the largest cause of the decline is tied to the automation of jobs. This means that the jobs just can not come back at all if they are able to be replaced directly by technology.



This. I feel for all those hoping Trump will be the great white knight to bring all those jobs back - they simply aren't coming back for primarily this reason, no matter what he, or anyone else says. This is likely to be one of the biggest issues facing America and the rest of the world over the next few years and its going to need something REALLY radical done to fix the problem. Manufacturing jobs are disappearing all over, and thats just the start. Automated driving starts putting paid to the logistics industry, the increase of AI and ML will start killing a whole load of other things around service industries amongst others.
I think there's a feeling that this is all a long way off but not so - think about it, Google as a company (for example) is less than 20 years old, and look at what they are churning out.
Never try to eat more than you can lift

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Stumpy

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I unfortunately feel that the largest cause of the decline is tied to the automation of jobs. This means that the jobs just can not come back at all if they are able to be replaced directly by technology.




This!

The big deciding voting block in this election were people who are sitting in rural areas, hoping for the good old days to return.

Without realizing the world has changed and those jobs aren't coming back.

This. I feel for all those hoping Trump will be the great white knight to bring all those jobs back - they simply aren't coming back for primarily this reason, no matter what he, or anyone else says. This is likely to be one of the biggest issues facing America and the rest of the world over the next few years and its going to need something REALLY radical done to fix the problem. Manufacturing jobs are disappearing all over, and thats just the start. Automated driving starts putting paid to the logistics industry, the increase of AI and ML will start killing a whole load of other things around service industries amongst others.
I think there's a feeling that this is all a long way off but not so - think about it, Google as a company (for example) is less than 20 years old, and look at what they are churning out.

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Where is your poll option for US companies exporting jobs overseas to third world labor willing to work in unsafe conditions unacceptable to US laws and for wages unimaginably low compared to US minimum wage?

Nike is never going to make shoes in the US when they can pay children to make them in Indonisa for $3.70 per day.

http://www.huffingtonpost.com/2013/01/15/nike-indonesia_n_2481236.html
quade -
The World's Most Boring Skydiver

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That's the second one, "cheap imports." Combined with all the advertising that gets people to thinking they need that crap, it contributes.

Wendy P.
There is nothing more dangerous than breaking a basic safety rule and getting away with it. It removes fear of the consequences and builds false confidence. (tbrown)

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wmw999

That's the second one, "cheap imports." Combined with all the advertising that gets people to thinking they need that crap, it contributes.



Except in the poll its worded in such a way as to diminish it is US companies doing it.
quade -
The World's Most Boring Skydiver

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I would consider that to be cheap imports undercutting domestic product. This is a situation that also will never be solved because its at the root of capitalism and globalism. As an executive I am driven to provide the largest value for my share holders and that is be making the largest profit possible at the lowest cost possible. My labor costs tend to be one of the highest expenditures I have so I need to keep a tight control on those expenses. If I am the only business owner of a small shop in my local town then I will look at options such as offering a lower expense benefits package, hiring cheaper labor, not giving large raises and other cost control mechanisms since I do not want to relocate and need to stay with my business. This activity is needed and required for a capitalistic society to run. If I was going around giving out 50% raises to every employee every year I would quickly go bankrupt so I need to limit my expenditures to stay in business. If I was a larger organization that has the option to change my location and still produce the same products then I can use the free market to move to a location that is more friendly to making more money. We see this in terms of Airbus moving facilities from Europe to South Carolina to get access to the cheaper skilled labor that is provided there. The flip side is that if the labor needs are not for skilled labor then I am encouraged and expected from my shareholders to use the cheapest labor possible to maximize value. The American minimum wage automatically puts those recipients in the top 20% of all income earners in the world when 50% of the worlds population earns less than $2.50 a day. http://www.globalissues.org/article/26/poverty-facts-and-stats That is a lot of potential labor that is available for usage at a rate much lower than an American is asking for in a single hour. As a capitalist I am basically being forced to consider that as a serious option if I have the option of using it.

Not saying I like this at all but I am happy when my stocks and retirement go up since X company was able to drive down costs and had more profit this quarter even though it was only possible since they eliminated jobs either via attrition, firings or relocation. [:/]

Yesterday is history
And tomorrow is a mystery

Parachutemanuals.com

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Production costs went up due to rises in salaries and cost of equipment, etc. When a country is able to pay workers a pittance compared to the USA, I could see companies wanting to cut costs and move to that country to do business.

Sure that's not the only factor but that's the first thing that comes to mind.

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So how do you address that issue? The jobs are gone and are unlikely to return unless tariffs or VAT are added to every product produced in a country that has a lower cost of living than the US. Will you be willing to pay 45% more for every product produced in China since that is the proposed amount of the tariffs to tell the companies to move their jobs back to the US? The amount of money in your pocket does not change but every import just cost you 45% more if it comes from China or 35% more from Mexico. This will apply to everything from electronics, toys, building materials, etc. The end goal is to make domestic products cheaper than the imports but it will take years for domestic industry to get spun back up to product same or similar goods and in the mean time the consumer is the one that pays the increased costs of goods. There is also no protection to keep the domestic producers from raising their prices since now they do not suffer from the same competition to keep their prices low to fight against the cheap imports.
Yesterday is history
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Parachutemanuals.com

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As an executive I am driven to provide the largest value for my share holders and that is be making the largest profit possible at the lowest cost possible. My labor costs tend to be one of the highest expenditures I have so I need to keep a tight control on those expenses.



IMO this points to one of the biggest problems with the current form of capitalism we are practicing in the free world. These days it is all about shareholders profit over the next quarter, which means short term growth is all that is valued. The long term health of a company and its actual profitability are not drivers of the modern business model. Employees are seen as overhead costs to be put in the red column. Employees used to be considered part of the company. Now the company is comprised solely of upper management and the BOD. Everyone else is expendable. The only way to meet the growth demands of the market is through mergers, no matter how ill conceived. The long term trajectory of this model points to a few mega corporations, run by a small band of oligarchs for their sole benefit.

IMO this can't be fixed without a major change to the financial markets, which probably won't happen in our lifetimes.

- Dan G

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with the current form of capitalism we are practicing in the free world. These days it is all about shareholders profit over the next quarter, which means short term growth is all that is valued. The long term health of a company and its actual profitability are not drivers of the modern business model.



Not sure that has ever been part of the capitalistic business model. It is just even more pronounced now with the prevalence of remuneration tied to performance and the incredible growth in those remuneration packages.

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Employees used to be considered part of the company.



The rise of unions is evidence of this not being the case.

Quote

The long term trajectory of this model points to a few mega corporations, run by a small band of oligarchs for their sole benefit.



Yup, that is exactly what unregulated capitalism leads to.

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PhreeZone

So how do you address that issue? The jobs are gone and are unlikely to return unless tariffs or VAT are added to every product produced in a country that has a lower cost of living than the US. Will you be willing to pay 45% more for every product produced in China since that is the proposed amount of the tariffs to tell the companies to move their jobs back to the US? The amount of money in your pocket does not change but every import just cost you 45% more if it comes from China or 35% more from Mexico. This will apply to everything from electronics, toys, building materials, etc. The end goal is to make domestic products cheaper than the imports but it will take years for domestic industry to get spun back up to product same or similar goods and in the mean time the consumer is the one that pays the increased costs of goods. There is also no protection to keep the domestic producers from raising their prices since now they do not suffer from the same competition to keep their prices low to fight against the cheap imports.



What I would have to find a way to keep America competitive is transform the job market into areas they can gain advantages in. New technologies, etc. I'm no expert, but we've lost ground in the manufacturing sector.

Maybe more robotic manufacturing, sell robots to other countries whose average wages are lower than ours? :D

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What I would have to find a way to keep America competitive is transform the job market into areas they can gain advantages in. New technologies, etc. I'm no expert, but we've lost ground in the manufacturing sector.



We have not lost ground at all.The products being produced via US factories are some of the highest quality, have the lowest rejection rates and tend to be delivered on time at a far higher rate than overseas companies. The issue is the cost of goods being produced. No one wants to pay what it would cost to have just domestically produced products. Consumers demand cheaper products (look at the rise of Walmart) but are unwilling to pay for domestic products. I just saw an article that they are estimating the average Walmart shopper might be looking at bills being 18-22% higher in a year for the same products being purchased and it will impact the lowest 60% of income earners the hardest since they will be using more of their paycheck to afford the increased cost of goods. The impact could easily be worse then when gas was over $4.00 a gallon since everyone then at least had to purchase gas, now consumers facing larger bills might just chose not to purchase goods and that will decrease over all spending.
Yesterday is history
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Parachutemanuals.com

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DanG

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As an executive I am driven to provide the largest value for my share holders and that is be making the largest profit possible at the lowest cost possible. My labor costs tend to be one of the highest expenditures I have so I need to keep a tight control on those expenses.



IMO this points to one of the biggest problems with the current form of capitalism we are practicing in the free world. These days it is all about shareholders profit over the next quarter, which means short term growth is all that is valued. The long term health of a company and its actual profitability are not drivers of the modern business model. Employees are seen as overhead costs to be put in the red column. Employees used to be considered part of the company. Now the company is comprised solely of upper management and the BOD. Everyone else is expendable. The only way to meet the growth demands of the market is through mergers, no matter how ill conceived. The long term trajectory of this model points to a few mega corporations, run by a small band of oligarchs for their sole benefit.

IMO this can't be fixed without a major change to the financial markets, which probably won't happen in our lifetimes.



Exactly. This is parasitic. The fundamentals of accounting this model is based on is flawed as they have no direct way of calculating soft/indirect/risk costs so are dismissed.

Large corporations have this problem internally as well as different divisions/departments have different budgets. If Division A can cut their costs by 20% by shifting the burden to Division B even if Division B costs the company overall more as can't do it as efficiently, they will.

Companies used to compete with other companies, now they compete with themselves mostly.
Stupidity if left untreated is self-correcting
If ya can't be good, look good, if that fails, make 'em laugh.

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quade

Where is your poll option for US companies exporting jobs overseas to third world labor willing to work in unsafe conditions unacceptable to US laws and for wages unimaginably low compared to US minimum wage?



Don't think that the US should get involved in overseas wages, but if all imported products that wish to be sold in the US met or exceeded the basic safety and environmental standards or paid a fine/tariff for not meeting them that would certainly help. Labor costs is not the only reason manufacturing jobs moved offshore.
Stupidity if left untreated is self-correcting
If ya can't be good, look good, if that fails, make 'em laugh.

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Hi Eric,

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I unfortunately feel that the largest cause of the decline is tied to the automation of jobs.



I agree & that is how I voted.

Ever since James Watt perfected the steam engine, manual labor has been on a decline.

A number of years ago, two professors from Harvard wrote a book ( sorry, I do not remember the name of it or the author's names ) on how those mfg jobs will never return to the US.

Just think about how many people used to be on assembly lines in this country. Today, it is robots doing that laborious work; and this is simply going to continue.

If you have 25 acres and you grow tomatoes, you can hire hand-pickers for a certain cost. Now, if you can buy a machine that will pick those same tomatoes but have a 10% loss in the process, that can still be cost effective.

I have been in a number of plants of US Steel & Bethlehem Steel. Those companies failed because they would not spend the necessary money to update their equipment. Yes, I know that US Steel is still in business, but not nearly the company it once was.

There is nothing new in this concept.

Any businessman who fails to realize this will soon be out of his job.

Just my thoughts; since you did ask,

Jerry Baumchen

PS) Both candidates knew ( or should have known ) that their promises of 'bringing jobs back' was nothing but empty promises.

PPS) Back in the 80's I was in Warren, Ohio on a project. One afternoon I took a drive along 'rust belt row.' I saw nothing but old steel factories rusting away. I've been in steel plants where literally 100's of workers were on the shop floor. During that drive in Warren, I stopped and walked thru some of those old, rusting plants. It is very eery to see a really large production shop sitting empty & rotting away.

https://en.wikipedia.org/wiki/James_Watt

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Hi Dan,

Quote

These days it is all about shareholders profit over the next quarter, which means short term growth is all that is valued.



I agree. One only has to look at Sunbeam & what Chainsaw Al Dunlap did to it. It made a lot of money for the stockholders but it went into the tank in the process.

Jerry Baumchen

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Any businessman who fails to realize this will soon be out of his job.



Well, he may be out of a job, but since he gets a $20M golden parachute, who cares?

Until not only executive pay but executive exit packages get tied to performance there is no real incentive to perform.

- Dan G

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The major telecom I work for is acquiring another network company and their CFO is moving into the merged company CFO position.
The departing CFO cannot stop grinning at all the meetings and the merger is still pretty much a year away.
I don't doubt for a second why that is.
>:(

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Let me bring up a few other points on this also:

Tariffs only work if countries and companies think that its in their best interest to move production or change their business practices to avoid losses. In some cases that the tariffs are applied they will weigh out the risk of not moving and suffering the higher costs/lower sales in terms of our lasting the tariff. That is expected to happen in this case. No Chinese company is going to suddenly shut its doors and open a factory in Wichita Kansas to sell goods here in America. They will look at the odds of the tariff expiring before the domestic industry can catch up and produce the same items. The last super successful tariff was the steel tariffs of the mid 2000's and the chip tariffs against Japan in the 1980's. The Japanese knew that with Reagan's popularity he was going to be around for 8 years and they could not out last a 100% tariff for that long of time and eventually changed their practices to avoid dumping of chips into the US markets. The Steel tariffs have had limited success since even with the tariff its been cheaper to import steel than it was to make it domestically. AK Steel and other factories have been slow to compete and its killing off the cities they are based in due to their decline.

In this case there is a real split in terms of the belief that the administration would be able to apply the tariffs for more than 2 years so most companies will not be able to move manufacturing back domestically that fast so they will sit it out and wait to see if they need to move or not. The other issue is that China could introduce tariffs against US products that they import and that would kill off demand for the production of those products domestically. Heavy equipment is something that the Chinese import a lot of and if the cost on that suddenly jumps the trickle down is that US factories might need to shut down due to losing that export option. How ironic is it that by trying to increase US jobs you can end up killing them off instead?


Another industry that is going to be in for a hard time in the next 20 years is going to be the transportation sector. As we look at automated cars for personal use there is a second sector that is dumping even more money into the development of it and that is automated trucking. Lots of those jobs are going to be at risk as soon as the first certified delivery system is put out there at an affordable price. No longer are truckers going to be able to make 60-80k a year because some computer and a couple of thousand dollars worth of retrofitting will be able to take a portion of their jobs. That entire portion of the workforce is going to find themselves in this same situation as technology catches up and makes their jobs more able to be replaced. What will be done to replace those jobs as they get automated?



My solution to this is to spend more education dollars on STEM education and to raise the education level of the population as a whole. Lots of manual labor jobs just are not going to be coming back and those that are going to be around are going to need skilled trades such as machinists, certified welders and others. Offer free skilled trade training for the top 25 areas of labor need for all citizens with additional incentives to pursue advanced college degrees in STEM focused areas. From that higher educated work force will you get the ideas and skills that will lead to the next generation of innovation here in the US.

Life time earnings by education level (40 years of working):

Non-HS Graduate: $973k
HS Grad: $1,300K
Some College : $1,547k
College Degree: $2,268K
Masters Degree $2,671k
Doctoral Degree: $3,252k
Post Doctoral: $3,648k

If you get a college degree you are more likely to make almost double that a HS grad.
Yesterday is history
And tomorrow is a mystery

Parachutemanuals.com

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The current global flow of manufactured goods is based on low oil prices and fast communications via the Internet.
As soon as the USA starts paying $4.00 per gallon of gasoline (like Canadians are already paying) global flow of manufactured goods will slow.
Sadly, that probably won't happen within my lifetime. Meanwhile skilled workers (welders, tool and die makers, etc.) are retiring. It will be a major struggle to train new generations of skilled workers with only a handful of mentors.

High-tech goods have a life-cycle. They might be invented in Silicon Valley and the first generation might be built in North America, but as soon as they start sub-contracting manufacturing to Third World countries, price drops dramatically (because of low wages) and the Third Workd nation learns how to build that level of technology. Eventually all the proud TE are manufactured in the Third World, while brighter First World engineers are forced to invent a product that is shinier .... and the cycle repeats.

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