The Future of Manufacturing, GM, and American Workers (Part I)
robertreich.blogspot.com
robertreich.blogspot.com
The biggest challenge we face over the long term -- beyond the current depression -- isn't how to bring manufacturing back. It's how to improve the earnings of America's expanding army of low-wage workers who are doing personal service jobs in hotels, hospitals, big-box retail stores, restaurant chains, and all the other businesses that need bodies but not high skills. More on that to come.
Earlier in the article, Secretary Reich had noted that supermarket checkout clerks were being replaced with self-checkout machines. I'm not sure why one would expect big-box retail labor to fare better. In fact, we're starting to see how they won't fare better. Automation is coming to retail. Right now, it's mostly visible in self-checkouts. However, think about Amazon: I'm sure their warehouses use a very high level of automation to minimize labor. There was a posting on HN a while back about robots that went around a warehouse bringing the products all to one person which eliminates the labor of fetching products. Is it that outrageous to think that a store like Walmart or Target will be able to stock their shelves in an automated fashion in the future? How about a retail store where you can go around and look and play with things and then you just note the product numbers of the things you want and punch them into a computer at checkout. Then an automated system bags up all your stuff and delivers them to you. No labor needed at all.
Likewise, I yearn for the self-making bed. Roomba is already vacuuming floors and while one can argue that it isn't as good as a hotel might need, it's not hard to see that it will continue to get better. Is it that hard to see those service jobs seeing less labor as well?
The problem, in my mind, is that we simply don't need much unskilled labor anymore. Skilled labor can create things that do unskilled labor better than unskilled laborers can. If it isn't happening now, it's not hard to believe that it will in the future.
The question then becomes, how do we as a society deal with the fact that there might be some people who aren't able to be skilled laborers? What happens when the only jobs available require more skills and intellect than the unskilled jobs of today? Do we just let their salaries languish and let them be impoverished on the streets? I don't think that would be a good thing. Job retraining is definitely a possibility, but to what end?
It seems like the skills required in the world today are changing at a much faster rate than they have in the past. Where change might come after many lifetimes, today one might have to learn many new skills in a generation in order to stay relevant.
It's friday and I skipped lunch so I might not be so coherent, but it does seem like there might be a point at which all low-skilled work is automated and we possibly can't educate a portion of the population high enough that they can become part of the class that creates capital goods (rather than those that simply use capital goods like a cash register). How do you take a cash-register user and turn them into a cash-register designer/maintainer/troubleshooter? How do you take someone that stocks store shelves and make them someone that designs robots to do that task?
Hey, and instead of noting and then punching in product numbers, couldn't we just scan the numbers using the phone camera and press OK at the checkout to have the amount appear on the next phone bill? I'm sure something like that already exists.
At some point, we will not need unskilled labor. This is the point at which machines can produce everything we need at little cost, and we have more goods and services per capita than we do today.
In this post-scarcity future, socialism/welfare/etc is cheap. You want 2% of my income to prevent 100 people from starving? Eh, go ahead, I don't really care.
And then the problem becomes: as we move into this new economy, how do we parcel out this socialism? Majority rule would simply be tyranny and we can't have a functional society where there are two groups and one is 100x more wealthy than the other in a caste-like fashion. Still, those who produce need some reward and incentive. So, how would we do it?
The only thing that I can think of is land: land is the one thing that we can't actually produce with labor (despite Boston's Back Bay real estate). If the cost to produce a television is essentially nothing, there's no sense in restricting who gets one even if the design has to be done by an "upper-caste" person. However, land - and land in "cool" areas like Seattle or San Francisco - is in limited supply. Only certain people can live there. So, even if all goods and services can be provided for near $0, land can't.
To be honest, I think that this future will be kinda cool. I mean, if most/all of our material wants and needs are taken care of, we could hack away at projects we thought were interesting/fun. Our jobs could be what we find joy in - whether that be local theater or web apps. And I think that we would create value that way. Potentially not in the focused, reward-driven way that we do today, but lots of people come together around no money to do things even today. I'm not saying that we can replace our current economy like that, but at the point that we have wants and needs met for essentially $0, it seems like it would be fun. Frankly, in that kind of future, there doesn't seem to be a need to force people into things they might not like.
Maybe that's too hippy.
They won't be satisfied with 2% because 0.02%/person of your income is a huge income disparity.
http://www.ascentofhumanity.com/chapter7-2.php
He starts from the thesis(previously established) that money earning interest is the source of our massive wealth inequality problem - interest ultimately favors a concentration of wealth on one person, and it also favors destructive practices that make a large sum of money immediately and earn interest exceeding the value of a sustainable solution.
From there he points to multiple alternatives that might bring us towards an equal economy without top-down planning.
If GM and Chrysler were let go, maybe the world would see a wave of auto startups once again. After all there would be unused car plants as well. And I bet GM engineers are on average less incompetent than GM management. They might have some crazy ideas that would work well in the market and would never have been approved inside GM. Maybe that's just wishful thinking :-)
On one hand, we've seen this before with Conrail. Huge success. And even with Chrysler 30 years ago. On the other, if the company can't turn around, when does a politician decide that, despite sunk cost, we need to abandon support and liquidate.
My reason for posting, though, is I think the way you're casting the auto business is way off mark.
A full 10% of our GDP is tied to the auto industry thru the huge amounts of suppliers. If GM and Chrysler were "let go" as you put it, the world wouldn't see anything but a massive depression for a good long period.
Furthermore, nearly every significant supplier (say, over $10MM in annual sales) is supplying at least a couple automakers if not most of them. They've all pushed hard to diversify. And most of them are in peril after 3-5 years of tough times at the "Big 3." If Chrysler and GM are let to fail, huge swaths will go under, and Ford, Toyota, Honda, Nissan, etc, will no longer be able to get the parts they need. That could very well be the economic "stiff breeze" needed to blow over a few of the remaining global automakers that are themselves teetering.
And even after we pull out of that mess, I find it unlikely we'll see any 'startups' in the auto biz. It's just got too many working parts. Product development, manufacturing, marketing, sales and service are all multi-multi-million dollar problems.
Finally, the "last century blue collar jobs" you mention is pretty far off base as well. If you're talking unskilled labor, then you mean simple assembly tasks. But a lot of the simple assembly has been automated. But I'll grant you that by and large, assembly is "last century blue collar." Thing is, most of the workers (by far) aren't doing assembly. And it's not just the "car designers" either, which are really quite a small bunch.
What you're missing is the huge middle. The machinists and fabricators. People programming CNC machines. People fixing those same machines.
And you're missing the huge corporate structures. The AR and AP clerks, the IT staffs, the sales and marketing. The HUGE numbers of engineers designing each hinge, each screw, each spring.
This industry is vital to our nations economy. No question about it. The Midwest would be ground zero, but the depression would spread globally.
However, I disagree about the suppliers problem. It's absurd to assume that the world's auto industry would basically cease to exist if GM was liquidated. At the end of the day the strongest manufacturers would survive, maybe by bailing out their own suppliers. Auto makers are not systemically important in the same way that banks are.
It's funny that you mention the 1979 bailout of Chrysler. Is that the success you're hoping for? Bailing out an auto maker only to bail them out again 30 years later? I think that's a very good example showing why no auto maker should ever be bailed out. It just keeps a rotten corporate culture alive.
I do _not_ think that the auto industry or manufacturing in general is obsolete, quite the contrary. There are huge technological challenges coming up, the most important one being energy/fuel efficiency. This is a high tech sector that nobody should want to see fail. There are many related services that are also at stake, which do not fall into the unskilled labour category either.
But bailing out rotten companies is no way to achieve anything. Don't forget that the troubles at GM and Chrysler were not caused by the current financial crisis. They have been ailing for a long time.
I agree that auto startups are unlikely. But a little more creative thinking on the part of the US government wouldn't hurt. Are wholesale bailouts of rotten behemoths really the only way to rebuild the US auto industry? I can't believe that.
Secondly, in my younger years I worked as a software developer at a Tier 1 automotive supplier. I've got a lot of friends in the business.
I wasn't being an alarmist. Many of these companies are on the brink. On top of that, there aren't many "strong" auto companies to "bail out" the suppliers.
Right now the forecast is a pitiful 9MM autos sold this year. At this rate, we're going to have serious problems, even Toyota may face bankruptcy.
And about Chrysler... they were bailed out, invented the mini-van, and, by acquiring Jeep via AMC,ignited an SUV market.
That's a corporate success story. It's been 30 years, there's been titanic shifts in the global market.
Robots aren't going to stay confined to manufacturing plants. CAT is heavily invested in robotic trucks. One of the coolest videos that I've seen that's been posted to this site showed a robotic fulfillment center. There was one just today (admittedly, kind of silly) about a robotic garbage man. This is only going to continue.
Then there are the jobs that aren't necessarily disappearing, but that aren't growing, either. Software is letting accounting and finance departments ramp up their productivity per worker. A company can these days grow in complexity and revenues but only needs to staff at replacement levels to keep up with the increased work load. And, as it becomes more and more obvious that there are very real benefits to offloading to service providers rather than maintaining your own data centers, ops teams, and IT departments, companies will.
This isn't surprising. This whole community is formed around the idea that these days, starting a viable business is completely in the power of small teams of smart people. We've talked about the real jobs that are coming along with these companies as they become established, but I would bet that they're running at a level of productivity that shames companies of their size from just 10 years ago.
It's a real question: where are the new jobs coming from? For the next few years, we'll have a nice little bubble in the healthcare industry as the Baby Boomer wave crests, but that's hardly sustainable.
I think the real question is, how are we going to restructure to deal with high levels of unemployment, so that we stay stable and productive? How do we incentivize the smart and capable to keep pushing us forward without completely dropping everyone else?
Consider the factory robots from the article: they automate a bunch of people out of a job and just a few people now do what 100 did before. But now the machine shops that make the parts to build that automation have more work to do, they need to buy more CNC machine tools to keep up and (a few) more people to run them. So the CNC tool supplier sells more machinery and now needs more sales reps, field installers & repair personnel. The company importing the CNC machines from Japan hires more people to handle increased demand, etc.
You have to look at the entire value chain of a process to see the ripple effects and even then it's only visible in hindsight.
I think its kind of naive to just point to a shifting supply chain as if that addresses the problem.
The real issue - social issue at least, is how will the people support themselves. As more an more jobs are automated away, it becomes unfeasible for everyone to rely on a paycheck to feed themselves. I am not seeing a Welfare State heavily taxing profits to provide for an increasingly unemployed population. There will be plenty of suffering from the ones whose services are not needed anymore.
For this reason, it is increasingly important for common people to own their means of production. The only job you cannot be laid off is the self employed one. This is more and more an strategic issue for the household economy to have at least one bread winner working on their own venture.
Seems like this century will be very entrepreneurial, or won't be at all,
Dramatically increased entrepreneurialism certainly counts as restructuring.
I have been thinking a lot lately about the rights to "Life, Freedom and Pursue of Happiness". In particular, I don't think the founders meant the right to Life to mean "right to not being killed by direct unjustified violent action". If you have the right to Life, you should have the right to the means to stay alive and healthy.
My critic to the Welfare State idea is not that we should not care for our own people. It has more to do with keeping the citizenship disempowered. If you cannot provide yourself with basic needs by your own means and work, because the barriers of entry are so high... then the only option left is to have someone bail you out of the mess.
As techies, I feel we are very vulnerable. Think Spolsky's Development Abstraction Layer (http://www.joelonsoftware.com/articles/DevelopmentAbstractio...). We can fall in a comfort zone by being productive within a larger organization that extracts economic benefits from our creations... but once we become severed from that infrastructure, many of us become helpless.
How is is economical to built a fleet of fuel guzzling ships that weigh approx 120,000 tons and deliver goods in what are essentially disposable 8000 pound tin cans?
Fuel oil is artificially cheap. This explains everything.
The steel in one container ship would be enough to create 240 million square feet of domestic manufacturing space with wages and profit benefits that go along with it.
Call that 240 twenty thousand square foot manufacturing spaces in every single state in the USA.
There are approx 4500 container ships in service and over 600 on order being built
Anyone want to play with these numbers, maybe figure out how much oil they are burning to get their cargo around?
4500 ships * 240 million feet of manufacturing space = one Trillion square feet of manufacturing space!!!