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Comment by AnthonyMouse | Hacker News Reader

You can't pay an American worker 20 times as much to make the same product in the same number of hours. The only way to be competitive at 20 times the pay is for each worker to produce 20 times the output, i.e. automation. So what we have is a choice between fewer American manufacturing jobs (automation) or no American manufacturing jobs (outsourcing). People don't want to hear that, but those are the alternatives.

And given that, automation is clearly the right answer. Some manufacturing jobs is better than no manufacturing jobs, and more local manufacturing creates more local non-manufacturing jobs in sales, transportation, administration, etc.

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Hmmm I don't know about that. Growing up my father was a tool maker (worked for Molex), that means he figured out how to make the molds people designed. That sounds easy to some, but understanding how to cut different materials the right way is a pretty unique skill.

Anyways, he basically trained his replacement(s) before they laid off a large portion of his machine shop. He trained probably 15 - 20 Chinese over the course of a few years. In the end, as expected, they laid him off. Fast forward 10 years and they had to bring a lot of the tool making back.

Turns out the Chinese either had worse quality control or poorer skill, but they simply couldn't produce at the same level. You only need a few molds for a production line, but each needs to be near perfect. The Chinese couldn't do it. And even when they did / could, the intellectual property was often stolen, so competitors would pop up and customers would get pissed.

You're correct automation is needed. However, so is high quality standards, higher education, higher moral codes / higher pay to keep people honest. The fact is, you can't really find skilled labor elsewhere easily (they want the same as the US wages). That's why the US's number one export is education, and probably why every company still fights over software engineers and really every STEM field.

Unfortunately for manufacturing, the fight is over. When they tried to bring the tool making back there were very few people still doing it. Every single one of my dad's friends (including my dad) had moved on to other jobs. The fact is, all that tribal knowledgewas passed down from master to apprentice was lost. After they laid off the masters, there was/is no one left to really continue.

Personally, I view this as a loss of critical mass and now our skills are likely no better than anywhere else, at least for tool making.

I think this is a warning for every business. Sometimes it's worth paying the price to keep talent. Companies like Google, Apple, et al, know this. Hopefully, that will keep tech and a lot of the other large US companies from losing their way.

>the Chinese either had worse quality control or poorer skill, but they simply couldn't produce at the same level. ... The Chinese couldn't do it.

It seems that China's workers can make Macbooks and iPhones with high precision and low tolerances according to Apple's specifications. Were the Molex molds more complicated than that?

In other words, if those specific 15-20 Chinese workers failed, maybe choosing a different set of 20 Chinese employees (or partner manufacturer) would have given the quality desired?

I think that stands to reason, unless the OP wants to argue it's an innate defect of the Chinese as a race - which, to be clear, I don't think anyone is arguing.

In outsourcing situations where you replace a highly-skilled and highly-paid worker with a low paid one in another country, you often get predictably bad results. Is it a cultural difference? Is it because of the compensation? Or just the attitudes of the companies involved on both sides and the kind of people they hire? I think like any complex issue, there's no one answer, but that last point sounds particularly convincing.

I'm arguing that due to networking effects, having decades of tribal knowledge is worth the cost to keep it. Starting anew elsewhere, even with smart people can sometimes take decades to build that knowledge.

Look at SF, every company competes in that market for software engineers because that's where the talent is.

It's actually a concept explored by the book "The Talent Code", and even explains why so many people from puerto rico (by population) are so amazing at baseball. Everyone plays, everyone looks up to it, and everyone makes everyone else better.

This whole discussion is setting off my BS detectors (your comments specifically, dad with HS degree vs 'the Chinese', etc), and to be honest, the whole tribal knowledge thing may be much more wishful thinking than an actual true effect...

Do the esteemed downvoters care to substantiate their position with anything other than "my daddy said so" anecdotes?

> Look at SF, every company competes in that market for software engineers because that's where the talent is.

No, they bring the "talent" (God, I hate this word and what it carries) from everywhere across the country and abroad. They is no tesseract fuelled talent generator device hidden below SF.

Not a generator per se but a lure. It is a cycle where one feeds the other. People made great things and they needed talent. Talent goes there to hopefully be great those who came before. Repeat ad nauseam.

I think it reflects badly on management planning - that they did first order accounting and found savings, but missed second or higher order effects that affected the accounting in significant ways.

Don't know what to tell you.

All I can say, is my dad recieved a hell of an offer to return (and so did his buddies). The people he trained all had PhD's from various universities around the globe and were supposedly excellent material science engineers. My dad had a high school education, but was trained/worked for decades in this particular field.

The molds that make every component in a MacBook need to be better than those assembling them. The skill to plug in a keyboard or even run a machine to make a keyboard, is not the same as designing or creating the molds of the keyboard. Apple does all of that (to my knowledge) in the U.S. The reason is likely security of their IP and that they have a critical mass of skilled people here, able to out perform elsewhere. Also, it's easy to ship designs anywhere, not so much material goods.

This is super interesting... apparently we have also the lost ability to find specialized welders for many naval vessels... starting salaries are around $300K for the right folks in the US. hell of an offer indeed

Only plastic parts really needs a mold to be produced. Metallic parts are produced on machining machines where the real knownledge sits in the ISO programmer head.

And plastic parts are more and more reserved for low end product, whereas high end products are all made of metal (think about a plane architecture being made of plastic instead of aluminium: this will not happen soon).

So to be honest about your dad situation: from an industrial point of view I think the people outsourcing your dad's job in China were right: they did loose the know-how on keyboards molds and they do face a problem regarding keyboard quality nowadays, but that value gained in outsourcing low end parts was invested in machining technologies with very local jobs garanteed for a long industrial time.

I'm sorry about your dad situation in that systemic change, and I'm glad he managed to move to another field, but what's at stake here is really what a was proposed in a parent comment: 'manual' labour being replaced with automation (and human tragedies involved unfortunately...).

>think about a plane architecture being made of plastic instead of aluminium: this will not happen soon

Actually the trend is towards carbon fiber (reinforced plastic) laid out on a mold https://www.youtube.com/watch?v=wUp9Yl6-QBM

You're right, but that's merely a trend, mainly seen in fablabs and r&d department.

The heavy-duty first-range aeronautic suppliers are all into machining and assembling aluminium (and other metals) parts for boeing/airbus.

I don't know the OP but I think his father is biased. The story is repeated a lot (The Chinese/Indians/Other-Race are cheaper but can't produce the same!) even for Software developers (Indians). In most cases (at least for the software engineering) the problem turns out that the other-race pay was low, and thus attracted low talent. The company probably wanted to cut costs and picked cheap foreign workers that didn't perform.

Tool and die making is the height of machining skill, it takes a very good machinist, the right machine, and the right environment. This story doesn't seem unreasonable.

Cleveland Oh. was the tool & die capitol of the world those jobs started to leave in the 80's and NAFTA and the Great Recession took the rest especially the small ones in Western Pa. As for Molex the Koch's bought them in 2013 but, I haven't followed where or what they have done with Molex. I have used Molex machines in production they were so well made. When I was a kid Cleveland made everything I remember the pride I felt seeing a dump truck the size of 2 houses ( Euc) roll out of the factory back then. It wasn't my fathers generation Silent (Korea) that sent those jobs out of the country it was the generation that followed them !

That doesn't necessarily make the father biased/racist; but I think you're right about the economic incentives at play. Many of the problems I've encountered with Chinese manufacturing can be traced back to stateside managers/purchasers wanting to relentlessly drive the price down, yet still exert the same kind of QC effort (or less) than they did with their former in-house manufacturing. They (mgmt) failed to recognize a lot of informal QC that might otherwise be lumped in with "work-ethic." They also probably laid off the experienced QC and put a jr level engineer/recent grad "in charge", but with little/no authority to do anything. Meanwhile on the Chinese side, the workers work hard, usually with every effort focused on speed. I remember one specific case where an assembler kept ruining chassis because they wouldn't replace worn screwdrivers for the assemblers. They caused lots of rework simply because the Chinese shop manager was too tight to accept that screwdrivers are consumables.

tl;dr Don't rush to blame the workers, they're usually just doing what they've been told to do.

I think that there may be some truth to that narrative. I suspect that Chinese/Indian/Other-Race workers that are skilled at an in demand profession simply shop their work where they are paid commensurate with their skill (Probably not cheap.)

I think there's a lot of truth to that. I've had nothing but bad experiences walking into companies that outsource software to India for cost reasons, and yet I know a number of exceptionally talented Indian software engineers. The difference, of course, is that the talented guys know their worth, and will demand at least above-average compensation. The outsource shops hire down to a price and get pretty much who you'd expect with that practise.

The issue has nothing to do with ethnicity per se, and everything to do with management dreams of hordes of top-notch foreign talent just dying to do high quality work for pennies on the dollar, which in my experience simply doesn't exist.

100% agree. I've had generally negative experiences with work that's been outsourced to Indian shops, but nothing but positive experiences with Indian engineers I've worked with outside that context.

> The company probably wanted to cut costs and picked cheap foreign workers that didn't perform.

The majority of the time, that's the only reason why they're relocating the work. If you have to pay foreign workers equivalent to Americans to get equivalent work, then offshoring is pointless.

> If you have to pay foreign workers equivalent to Americans to get equivalent work, then offshoring is pointless.

Not really Google and MS provide their Indian employees working in India above average market rates which are still lower than what the average American gets.

Some other US based companies directly or indirectly pay their Indian employees average or below average Indian IT salary so the best and brightest dont go there.

It's not a racist thing and your reading it that way reflects a high level of ignorance.

You don't take anyone from anywhere drop them in front of a master tradesman for 12 weeks and have a master tradesman pop out in a few days. The output there is a guy who can probably run the machine and have a limited ability to consistently churn out stuff without understanding the process fully. That's not a reflection of pay, race or talent.

That's usually a big part of the design of the outsourcing arrangement. You train for minimum viable capability. You then just fine the suppliers and eventually you'll get what you need, even if they waste half of the work produced. I've done these with domestic and foreign contractors. It's always the same story. The difference here is that the quality required for tools is higher than end products, and the supplier cannot make money without the high skilled people.

And that high level of difficult to learn skills if tended and protected can yield dividends for generations. Or, one generation can outsource everything including decades of hard learned secrets for a short term boost in earnings by selling for the same price but paying 1/10th the wages so they can cash out millions in stock options.

But then ten years later the workers you trained have now formed their own company and they are the ones making the huge profits, and there's nothing you can do because your country doesn't even have any skills in the field anymore. Now spread this across tens and hundreds of industries.

Sure, we still have software development and other super high tech stuff, but China is figuring much of this out very quickly as well.

I think we'll find out soon enough which country had the better strategy.

Agreed.

The defining quote of this idea came from the Morris Chang, CEO of TSMC:

"You Americans measure profitability by a ratio. There’s a problem with that. No banks accept deposits denominated in ratios. The way we measure profitability is in ‘tons of money’. You use the return on assets ratio if cash is scarce. But if there is actually a lot of cash, then that is causing you to economize on something that is abundant."

Source: https://www.forbes.com/sites/stevedenning/2011/11/18/clayton...

Awesome article. Thank you.

Not really. The fundamental problem in the economy is the focus on the short term rather than the long term. The economy focuses on the short term because Wall Street focuses on the short term and will invest in firms with similar short term focus.

Ratio-based investment isn't fundamentally short or long term, and the article doesn't persuasively make that argument. The entire point of selling off your assets to improve profit-to-asset ratios is to improve the performance of your assets, so that they can be put in investments which offer better profits. Whether the new investments are short-term investments or long-term investments is a matter of investor preference, not financial science.

In fact, the argument to be made is that companies which "sell off" their human capital are actually in violation of RONA principles, because the company is not ultimately made of dollars and cents but of people and products, and since the company can't really extract more value out of its highly specialized human capital (I.e. by reassigning it to more productive work), it should not reassign that capital elsewhere.

Investment bankers and programmers tend to make the same error: you are less competitive at manipulating your abstraction (whether that be money or high-level languages) if you do not understand how it abstracts away reality. Otherwise, you will constantly be dealing with leaky abstractions.

I think we're arguing the same thing.

The management people give no shits about the organization as an entity. Their short term outlook is driven by the dumb KPIs that stand in front of their excessive (vs. base) incentive compensation.

You're both right, but you specifically phrase this as a training and institutional knowledge problem, without mentioning nationality. You get to the heart of the problem, without the nationality red herring that tends to attract nativists and racists, to the confusion of everyone.

If it's that easy to move highly skilled positions to the Far East, how do you explain Germany's prowess in high-end manufacturing? Surely all those jobs should have moved to China by now? It's been two generations since Deng opened the country up to foreign manufacturers.

Germans may think beyond next quarters earnings.

Its because most of these companies are small and largely family owned. i.e. the owners understand the product, and moving it to china means they would need to move to china as well.

In many ways the difference is that headquarters is next or on top of the factory instead of in a different state.

Its because most of these companies are small and largely family owned

Sorry I have to question this .. Bosch, Mercedes, BMW? There are a few notables such as Krupps that were once upon a time family owned but increasingly these companies are owned by global conglomerates.

Yes, these companies do outsource many functions to poorer countries but their centre of gravity is very certainly in Germany.

Germany also has an amazing pluralistic educational system. Nobody gets left behind. All state-funded, which I guess follows from the high taxes they pay ... "it takes money to make money", as the man says.

Some is moving to Eastern Europe. Daimler make transmissions and other components in Romania.

When I say "high-end manufacturing" I'm not really talking about cars. More along the lines of industries that require very, very tight tolerances and exotic materials like tooling or optics.

Forget about high end manufacturing.

I play harmonica, and German made Hohner's are considered to be the best. The only quality competitor is Seydel(Again a German company), or Suzuki(Japanese). I think its the overall culture and seasoning to quality and workmanship your ordinary citizens are used to.

The real deal isn't just High end manufacturing.

I know of a relative of mine who used to buy Grundig and Braun radio/taperecorders/stereos in the 80's. The design and quality still comes across way ahead of its times.

Quality shows in everything you build.

Volumes may be profitable for a while. But with lack of quality you won't be able to build BMW's and Airbus's. The kind of manufacturing that has a future.

There's also the question of how the transition is implemented.

My [relative] is [in a tech role] for [large insurer]). They recently laid off all of their in-house tech staff save for her, in favor of outsourcing, and are leaving him to train and guide the entirety of the new staff. Meanwhile, they did absolutely nothing to keep his morale/loyalty, nor to ensure he was incentivized to do this task well. So, unsurprisingly, he's counting the days to retirement and letting the clusterf*s mount.

I'm sure there was a way to handle this that wasn't ludicrously inept; the result, however, will be laid at the feet of the foreign workers that have little training and no access to the now-lost institutional knowledge.

It's not that a specific person, company or whatever failed. It is systematic - the Chinese or anyone else do not have market for high quality molds (or other tools). The end customers want cheap stuff, the manufacturers that make cheap stuff conversely do want cheap tools... turtles all the way down. That means that the molds/whatever are sitting somewhere in the middle, they have to be cheap too and there are corners being cut to make the target price with being good enough.

I think the point is that to get the same quality, you have to look more deeply than just the wages of the given workers. Once you hit that quality, the those workers then step onto the same track of skilled wage growth.

Consider the opportunity cost on the Chinese factory if they crossed Apple. Apple can take the hit and move to another source, leaving the entire factory out a major customer. Even then, counterfeit iPhones are everywhere in China [1][2]. Compare and contrast with the shenanigans Kickstarters have with contract renegging, stolen IP, and plain old fraud [3].

[1]: http://mashable.com/2016/06/17/apple-china-knockoffs/#j5Nyhh...

[2]: http://www.businessinsider.com/inside-fake-chinese-apple-sto...

[3]: https://qz.com/771727/chinas-factories-in-shenzhen-can-copy-...

> Were the Molex molds more complicated than that?

Probably not, and therefore the manufacturer was looking for rock-bottom prices, and thereby got what they paid for.

> It seems that China workers can make Macbooks and iPhones with high precision and low tolerances

thought I read it somewhere that china is literally the only country in the world right now that can do that at scale and change specs as rapidly as apple wants them to.

As far as my (admittedly limited) experience goes, I'd say you're right. I'm currently learning about the intricacies of manufacturing in China through a trial-by-fire of manufacturing some components for our company's first product overseas. We've been told time and time again by advisors, investors, and friends in the industry that it's less money but a whole lot more work.

On the surface, you have to manage extra things like shipping and imports. Under the hood, quality control and partner selection are MUCH more in-depth and difficult processes. If you're not working with someone who already has relationships built, and/or if you're not willing to be very hands-on with the process, from what I've been told you're unlikely to get high-quality, low-cost parts.

I can definitely imagine someone who is used to dealing with manufacturing in the US having a lot of issues adjusting to the way business is done in China if they didn't know what they were getting themselves into.

> It seems that China's workers can make Macbooks and iPhones with high precision and low tolerances according to Apple's specifications.

Isn't Apple's high-precision manufacturing highly automated to a level of expense that no one else would try? IIRC, they have acres of automated CNC mills churning out MacBook cases.

Apple's manufacturing operation is so unique that it's not generalizable.

Yes, the Japanese CNC machine manufacturers Apple uses have entire factories dedicated to Apple-bound products.

Source: http://atomicdelights.com/blog/why-your-next-iphone-wont-be-...

Sure. That capability was built and scaled from the iPod up.

Foxconn didn't start building millions of iPhones. They started with thousands of other products. Same thing happened with Dell. They financed factories for Asus to build laptops and walked away from nearly new plants in the US not long ago for mostly tax and accounting reasons.

> Turns out the Chinese either had worse quality control or poorer skill, but they simply couldn't produce at the same level.

China can, actually.

We've had molds made for the smallworks.com products in both China and locally (Austin, TX)

These molds, due to the desire to interface with LEGO products, have to produce products that are both "higly cosmetic" as well as dealing with the extreme tolerances of LEGO's system.

It's about 1/3 the price to make the molds in China. Due to shipping and import duties, it's about the same price to run production in the US as in China.

Thanks for pointing this out gonzo, when I checked out injection molded plastics and assembly in the Austin, TX area, I saw no reason to head overseas. I went into this thinking China would likely be my only affordable option but I was pleasantly surprised at how things balanced out in the end.

I can only respond with second hand accounts about moving tools (wrenches, sockets, etc.) production overseas. Much of the quality has worsened (Craftsman, and your knockoff Kobalt, etc) but most people will not pay for Snap-on or SK tools, or Weha, Knipex and will buy the cheaper tools because for the weekend mechanic, having something that will last 20 years+ of daily beating isn't an issue.

Craftsman quality went to shit before Apex moved production overseas. There's also a pretty big gap in price between Snap-On and Craftsman, a gap that companies like S-K and Wright seem to occupy. Of course S-K suffers because they don't have a great distribution network (something Craftsman and Snap-On do) and their quality just isn't where it was pre-bankruptcy.

Thing is, Craftsman quality went to shit because Sears decided to compete solely on price. Apex/Danaher are plenty capable of turning out high quality tools in both their American and overseas plants (they own Armstrong, GearWrench, and Xcelite). They're also capable of producing shit tools for Sears. Turns out though that other companies (ex: Harbor Freight) can product comparable, if not superior, products for a lower cost.

Tip: look at used tool places or yard sales, especially yard sales run by veterans.

You'll find random brands you've never heard of that are "made in USA" and built to military spec. I think most military tools are required to be made domestically. The quality is amazing and prices low.

Maybe they trained them insufficiently on purpose. I do not see how someone can willingly train anyone they know will get their job as soon as they are ready.

> However, so is high quality standards, higher education, higher moral codes / higher pay to keep people honest.

So many presuppositions here that don't really support a future of a specialized American worker.

China has weak to nonexistent intellectual property LAWS, and their Antitrust law was enacted just in 2008!

Improvements in the general economy still result in a plethora of skilled workers across the entire planet, or in much greater quantity than the market needs.

Today? Yes it is possible to renege on free trade treaties and close borders to pretend the uniqueness of a highly skilled American is inherent to quality goods, but these are not absolutes and can't be extrapolated into these impending economic dilemmas.

Counter-example. I was literally in some Chinese factories two weeks ago, one that makes molds for metal and a separate one that makes molds for plastics. Everything was automated. Even the major machines on the floor (5-axis metal CNCs, high powered laser cutters, etc.) all had digital interfaces. Some were Japanese, some were French, others were Chinese. There were entire rooms of people creating and updating models and validating injection flows using capable CAM software, apparently written in China and presumably with modeling algorithm implementations by Chinese mathematicians and programmers.

China can’t even make a ball-point pen: http://www.ejinsight.com/20160121-what-ball-pen-tells-us-abo...

Or even ball-bearings: http://www.popularmechanics.com/technology/a20837/german-chi...

Most of China’s industrial robots are made by Germany, the US, and Japan. The Chinese are hopeless at precision engineering.

The ball-point pen example had to be retired a few months ago: http://www.chinadaily.com.cn/china/2017-01/10/content_279140...

I don't know if you are trolling or its your genuine world view. Although, I won't be surprised at all if it is. To say the Chinese is hopeless at precision engineering shows how narrow minded your world view is. The article you linked makes a huge assumption on why the Chinese import the ball bearings instead of manufactoring it themselves. A simple explanation why they don't import these bearings is because its not economically sound to do so. When the cost of importing a goods or service is cheaper than producing it yourself, you choose to import. Econ 101. And to transform that assumption to generalize a whole country's industry simply ignorant. All that article does is confirm your own internal bias.

I have a funny little story about outsourcing failures from my parents. Beechcraft for years has been trying to find ways get their costs down. They've been warring with the unions for years on everything: healthcare and wages mostly. So, when they started outsourcing to Mexico parts of aircraft like the wiring harness and the fuel bladders. As a result there's some bad blood between them and the Salina Kansas community. The union had no real way to force them to stay, so the jobs went. When Beechcraft setup the plants they offered above average wages (daily payment too) to workers in Mexico and even gave them their own tools (that was normal but any replacement tools for workers in the US had to be bought by the workers from the company at least as I remember with my mom complaining years having to buy hers when she use to work for them as well) but despite all that most workers in the Mexican plant would quit the first day and sometimes leave with not only their own tools but any other equipment they could find. So Beechcraft hired US contractors at a much higher price than former US employees to do the same work in Mexico (how does this work exactly? I really would love to talk with a former Beechcraft executive as to how they computed the financial numbers for this little venture someday.) and even then the quality of the fuel bladders and wiring harnesses were terrible. Most of the fuel bladders leaked and so they often had to be fixed at the Mexican plant (no plants state-side to do fixes were available). Last I heard from my dad who still works for them that they were trying to bring back some of that work to the US but in Arkansas. Frankly, I'll be surprised even then they'll get viable QA setup so long as they focus purely on the cost side of things.

There is a lot more complexity here than that. For example G&E moved some manufacturing back to the US back in 2013:

http://www.npr.org/sections/parallels/2014/01/22/265080779/a...

Another article covering the same trend around the same time:

http://www.economist.com/news/special-report/21569570-growin...

And from the Atlantic:

https://www.theatlantic.com/magazine/archive/2012/12/the-ins...

Bottom line is that shorter supply chains, better/cheaper infrastructure, and better quality control has made bigger companies re-evaluate "overall" cost of production and the maintenance tails therein.

And, contrary to popular belief, America is not so far out of the race as to not have a chance.

Edit: One more from Forbes...

https://www.forbes.com/sites/johnmcquaid/2012/12/06/why-appl...

Completely agree that there are advantages to manufacturing here, but if they actually outweighed the pre-automation labor cost, more companies would be doing it.

And a lot of the companies still manufacturing here are using automation.

GE literally has an industrial automation company: http://www.geautomation.com/

Looks to me like all of those articles are about the Louisville, Kentucky GE Plant where they negotiated lower pay for their workers.

I'd say that's an example, not a trend. Companies have been looking at overall cost of production for a long time. That's how they've calculated margins and filed a 10-K for the past 50 years.

The bottom line is until overseas workers demand increased standards of living or US consumers show a willingness to pay a higher price for locally manufactured goods, this trend will continue.

My question is, what does the end-game look like for a fully automated economy? You're either an entrepreneur with a fully automated supply chain, manufacturing, marketing, sales, and finance organization producing a good that is highly demanded by other fully automated businesses, or you starve?

You probably could be given charity and live on a compound provided as humanitarian assistance by the automator oligarchs.

"Managing the human problem"

Automation lowers costs. That means either things cost less so you can make a living working fewer hours at lower wages, or companies are more profitable and we can tax them to pay for social assistance programs.

Or bigger executive bonuses.

So, the next step should be to tax executives and their bonuses accordingly.

I perceive a bleak future.

I was suprised to learn that the main reason Coal Miners are out of work is because of mining automation.

I perceive a world where people just stop buying. Yes--the wealthy will still buy their toys, but their will be a time where so much missery/homelessness; they won't be able to enjoy the luxuries of wealth. Even right now--I feel weird eating in a resturant while a guy outside is hungry.

I feel we will need to open up federal, state, and county land; and allow free camping. (They have made it literally a crime to be homeless.)

I feel a Basic Income will need to be seriously looked into.

I hope we never turn into a country that just overlooks the misery around them. Some days, I feel we have crossed that line.

> I feel we will need to open up federal, state, and county land; and allow free camping.

I agree, I predict within the next 10 years or so we're going to start seeing some trend of people moving out into the wilderness due to downright necessity.

The GE move was the most widely publicized/covered one that I can recall off the top of my head, but the Atlantic article is more detailed than just GE. Also, the Forbes title is literally:

> Why Apple Is Bringing Manufacturing Back To The United States

I highly recommend reading some of the articles linked since they do explore some of the harder to quantify metrics (such as the maintenance tail of products manufactured in the US vs China) and how they affected GEs choice to move manufacturing.

So while I think in general your observation:

> That's how they've calculated margins and filed a 10-K for the past 50 years.

holds true, I think there is some gray area where harder to quantify and measure metrics are becoming more observable. And it's this "new" information that is potentially having substantial influence on these larger corporations decisions resulting in moving manufacturing back to the US.

I, with my light familiarity with the most basic concepts of Economics, was particularly intrigued by the assertion that GE may have exhibited more long-term thinking since it's widely accepted that businesses operate and make decisions in the short-term. This short-term thinking leading to many sub-optimal market results...but that was just the interesting thing I took away in passing.

A choice quote from the Atlantic piece sort of illustrating this:

> Harry Moser, an MIT-trained engineer, spent decades running a business that made machine tools. After retiring, he started an organization called the Reshoring Initiative in 2010, to help companies assess where to make their products. “The way we see it,” says Moser, “about 60 percent of the companies that offshored manufacturing didn’t really do the math. They looked only at the labor rate—they didn’t look at the hidden costs.”

Your question about a fully automated economy is interesting, but I don't have good references off the top of my head to point you toward...sorry :)

I worked for a company that moved a major product from being manufactured in Canada to Mexico. At the meeting where everyone was laid off the manager had the nerve to tell people they are moving the product because they estimate they can save 5%-10% of the manufacturing cost. 5 years later manufacturing was moved back to Canada after it ended up being more expensive and the quality was lower. OTOH there was another product that was successfully built in China but it involved a complete redesign and was essentially a different product.

There's definitely more to this than meets the eye and the decisions weren't always motivated by pure economics. Sometimes managers decided to move something to China just because everyone was doing it and they were under pressure to do so. Not because it was the right thing for their business. Managers making bad or short term decisions isn't exactly a new thing, their incentives/motivation varies.

Bombardier?

Even though this was 10 years ago it's probably still confidential. This was a Canadian company acquired by a US company which then went through a series of "cost cutting" measures.

That's amazing. 5-10% is a really small savings.

When people here eye roll union guys they should think about that. I bet the executive bonus plan accounted for 5% of COGS.

5-10% is a pretty big saving if your profit margin isn't all that big.

NB: it's "GE", not "G&E".

This hinges on a common fallacy that insists there are a fixed number of jobs.

If it wasn't possible to expand opportunities for employment, we would have run out of jobs as a country of 5.3 million people in 1800.

As we automate, new labor emerges. Trade has taken a huge cut of the US textiles industry. But in the early 1800s, a textiles industry on the scale of what we have would have been inconceivable. Many families were making clothes from sheep to stockings, or grew a quarter acre of flax to begin the hard strenuous work of breaking it down and turning it into a scratchy fabric. They had a couple outfits and called it good.

http://www.connerprairie.org/education-research/indiana-hist...

If you told those people about a society where even a median income would let you buy a variety of shirts with different patterns and levels of comfort, then just throw them out or give them away each season if they fade a bit, they would have just stared back at you slackjawed.

As far back as the BLS has data, the employment-population ratio has stayed within a narrow band around 60%. That strongly suggests there are feedback mechanisms that create new opportunities even when underlying sectors and conditions drastically change.

The future of labor will probably surprise us just as much as the farmers in the 1800s. We'll have people do things that we can't even imagine how it would be efficient or profitable to hire out. On the order of unlikeliness of hiring someone to brush your teeth, or sing your theme song when you walk into rooms.

EDIT: Added BLS point, we have no historical evidence of labor/population ratios shifting in the way people argue is imminent. It climbed sharply in '83 and dropped like a rock in '07. Those were not due to either automation or trade. It's hard to link to BLS, but basically go here, then expand back to 1947:

https://data.bls.gov/timeseries/LNS12300000

>This hinges on a common fallacy that insists there are a fixed number of jobs.

There's a very common fallacy that says that people have an unlimited amount of desires. Urban people (that are most) consume basically all the time, so you won't get all those new jobs unless you greatly increase the complexity of people's desires (we are doing that) or automate consumption.

If you just take a single desire--to stay young and healthy--it's not hard to imagine almost infinite job growth potential. The desire is not complex, but satisfying it will be.

> This hinges on a common fallacy that insists there are a fixed number of jobs.

It has nothing to do with that at all. What it hinges on is that companies will pay lower wages when it's more profitable.

The thing that allows high wages against labor competition is high productivity, so that labor is a smaller proportion of total costs and companies are under less pressure to reduce wages.

The problem is you skipped 200 years.

I was well clothed in 1987. Most of the textiles I was wearing were manufactured in the Carolinas. My parents also were buying clothes in 1967. Their stuff was made in the Carolinas and Central/Western New York. No homespun.

Today, I'm fortunate to have a lot more money relatively speaking than my family and buy nice stuff. With the exception of a couple of suits, a few of my wife's dresses and some Irish linen, every piece of fabric in my home is milled and sewn in China, India, Bangledesh, or Columbia.

The descendants of the people who made clothes for my parents 50 years ago or my childhood self 30 years ago are mostly on social security disability, in the military, or working some garbage service job.

The problem is that jobs aren't nearly so fungible. In the software industry, those of us who succeed are used to constantly retraining ourselves, on our own dime.

This simply isn't true for most workers. Why aren't those coal miners retraining as data scientists? Everyone knows coal is on the way down, right?

On the order of unlikeliness of hiring someone to brush your teeth, or sing your theme song when you walk into rooms.

But that kind of personal service is something we see less of, now, not more. The middle class in the US is rich compared to lords and ladies of 200 years ago, but have no personal servants. Software developers and medical doctors and middle executives could hire batmen and butlers and maids, but mostly do not, even when the money to do so is just sitting in their bank account and they complain about how little time they have to clean and service their house, cars, etc. Why is that?

1: Automation. Availability of white goods is the reason why most people don't have servants. If I had a spare full-time wage hanging around, I don't think I could find enough work for a servant to do in my house.

2: We don't have full-time personal servants, but a lot of people I know have a char who comes once a week; take their cars to a garage for servicing; buy prepared food; pay a window cleaner every so often; get the car cleaned whilst doing something else etc.

I'd also dispute the "richer than lords and ladies" statement, I think it selects one definition of "rich" and ignores the rest.

Yes, we have cars, electronic entertainment, indoor plumbing, free education, and access to healthcare beyond the wildest dreams of our 18th century forebears. However, I couldn't live off income from the tenants on my estate, no matter how well I manage it, or how frugally I live.

At my income, I certainly couldn't afford to employ, feed and house the 15 or so employees in a typical aristocratic household (one could argue that some of those are now white goods, which I can afford). Nor would I be able to maintain both a large house in my seat and a smaller (yet still substantial) one in Mayfair (as well as membership of White's and Brooks's). I doubt if I could afford a small country cottage, a studio flat in London, and membership of a gym.

I didn't literally mean those options, or even personal service.

I meant even if I knew what it would be, no one would believe me, because it would sound insane.

> You can't pay an American worker 20 times as much to make the same product in the same number of hours.

That's not true: you failed to mention the possibility of the customer paying more to make up for some of the difference in labor cost.

> People don't want to hear that, but those are the alternatives.

Those are the only alternatives, but only if you are restricted to thinking like a free-market economist. Other ideologies allow for other possibilities.

This is actually where free-market thinking matches the real world - unless you find a way to force people to follow your ideology, they'll keep choosing what's cheaper.

It's only cheaper because you don't account for social and environmental costs, and simply get rid of them as "externalities". But they're not externalities anymore, and their effects are coming down on us, and badly.

That it true, but it doesn't invalidate the observable fact that people tend to pick cheaper things if presented with a choice.

Customers have repeatedly demonstrated an unwillingness to pay a large premium for a made-in-USA tag, and protectionist tariffs don't help you export American products.

But consumers have also demonstrated willingness to pay for shipping, wholesale markup, retail markup, and other fees that dwarf the differences in regional labor and manufacturing costs. So local made goods can be competitive.

"How the cost of a shirt adds up" http://www.cbsnews.com/news/how-the-cost-of-a-shirt-adds-up/

Please name the country which achieved its legendary prosperity through a planned economy, protectionism, or a programme of economic isolation.

I don't think it's as binary as that. Many large prosperous countries (e.g Germany) rely heavily on exports but are still more heavily interventionist and protectionist than the United States.

While I'm largely in favor of free trade, it would be somewhat foolish at this point to deny that a trade policy such as ours, so exclusively focused on returns for the Capital class, has pretty bad political consequences. We either have to develop a better education system and social safety net, or subject ourselves to dangerous populist tantrums.

Parts of all of these, sometimes many parts, I think South Korea? Japan? USA and GB initially, until there economies were strong and they wanted free trade. It isn't black/white.

China. My understanding is it's becoming quite well known.

China's not really all that prosperous by developed-world standards, though, it's just huge. It's like 20% of US prosperity levels, and far more unequal.

Check back in 10, 20, 30 years when they run the world.

I'll do you one better and name three. Japan. South Korea. China. All three implemented protectionist tariffs, and industrial policy that involved the government "picking winners and losers".

> Please name the country which achieved its legendary prosperity through a planned economy, protectionism, or a programme of economic isolation.

Do you think that free-trade economics represents the perfection of economic thinking?

My point is: these stark choices that you and others are presenting are the artifacts of an economic dogma. That dogma shouldn't be confused with the truth and blind us to better ways of thinking. Perhaps getting the most goods for the least money-cost is not in fact the best deal? Perhaps there are other things that should be attended to, even if they're not packaged neatly in a compact ideological framework.

The United States, Britain, Germany, and Japan.

https://web.archive.org/web/20060106154801/http://www.newame...

http://fpif.org/kicking_away_the_ladder_the_real_history_of_...

edit:

“It is a very common clever device that when anyone has attained the summit of greatness, he kicks away the ladder by which he has climbed up, in order to deprive others of the means of climbing up after him. In this lies the secret of the cosmopolitical doctrine of Adam Smith, and of the cosmopolitical tendencies of his great contemporary William Pitt, and of all his successors in the British Government administrations.

"Any nation which by means of protective duties and restrictions on navigation has raised her manufacturing power and her navigation to such a degree of development that no other nation can sustain free competition with her, can do nothing wiser than to throw away these ladders of her greatness, to preach to other nations the benefits of free trade, and to declare in penitent tones that she has hitherto wandered in the paths of error, and has now for the first time succeeded in discovering the truth.”

--Friedrich List

Ha-Joon Chang is quite the champion of List.

He was also charmed to hear of a find I'd stumbled across -- a bit of an economic policy edit war between the British editors, and American publishers, of Chambers Encyclopaedia. Seems there was a slight difference of opinion on matters of trade (and other issues). The publisher also produced a number of List's books in the US.

https://www.reddit.com/r/dredmorbius/comments/4xe2k1/chamber...

China re the planning. (And the countries others have mentioned.) https://www.bloomberg.com/news/articles/2017-02-16/how-to-wi... and https://www.bloomberg.com/view/articles/2017-03-29/maybe-chi...

What do you call the US economy today?

It's not a free market. 16% of the GDP is healthcare, which is a mix of government price controls and insurance cartels at the state level. 5% of the GDP is military spending. 8% of the GDP is the financial services sector.

Basically a third of the economy of the richest nation in the planet with 300M+ people is controlled by a group of leaders who could fit in a midsize during arena.

The United States. Great Britain. France. Germany. Italy. Japan. South Korea. Holland.

And this little country you may have heard of, China.

Several people have pointed out Ha-Joon Chang's scholarship on this issue, and Friederich List's The National System.

I'll point out that there was an amusing little incident in which disagreement over List and free trade policies came to light in the 1870s, in an early encyclopaedia edit revision war. Something I stumbled across on my own:

https://www.reddit.com/r/dredmorbius/comments/4xe2k1/chamber...

That link was fascinating, thanks.

I do hope some of my own experience of discovery came through there.

I was going through a bunch of Google Books results on "free trade" in the late 19th century, and the encyclopedia popped up. I'd started flipping through it at the Internet Archive, from the beginning, when I came on the Note, which I thought unusual. And so on.

It still strikes me as both funny and insightful.

What other ideologies allow for other possibilities?

> What other ideologies allow for other possibilities?

Literally every one that thinks more broadly than immediate goods vs. money-price in an economic transaction.

>People don't want to hear that, but those are the alternatives.

I wish we had politicians who would treat Americans as adults and tell them things they don't want to hear. We watched a whole country get swindled by a conman who promised a return to glorious 1958.

Nobody shed any tears for the horse-and-buggy industry, or the cotton-picking industry, cobbler industry, the millions of people who used to be employed in manual farming methods - why are suddenly people who used to be employed in factories this tender, can't-be-told-the-truth "protected" class of people we all must bow down to?

Yeah I get it - your father raised 4 kids in a white-picket-fence 2-car-garage house by pushing a button in factory, all while being barely literate and not being able to point out Canada on a map.

So those days are gone, forever - so what do we do going forward?

Instead, the entire country is now held hostage by the pissed-off, unable-to-accept-the-truth rust-belt blue-collar class who've been told they're the "real" America or whatever and are now dragging everyone else down with them. Wonderful.

We have politicians that tell the hard truths, and they don't get elected.

Or at least don't get re-elected. Jimmy Carter was right about almost everything, and look where it got him...

> I wish we had politicians who would treat Americans as adults and tell them things they don't want to hear.

If that's what Americans wanted, they'd vote for it; but they don't, they prefer politicians who tell them what they want to hear and so that's who they put into office. Want to lose an election, tell the truth.

I suspect it is hard to sell the electorate as a whole on the nuance required to tell them these jobs aren't coming back but you are the best choice for election.

Pretty much every election campaign seems to be run on "the county is in crisis and we can save it", regardless of the state of the constitution country.

Here in Australia there is a decade old thought, not back up by evidence, that the Liberal Party are better enconomic managers. Even after months of compaigning on complex issues you will have that line bought up on Election Day as to the rationale of their vote.

There was a Scythian ritual/sport that involved a rider slashing his horse's throat, and riding it down. I gather that it was dangerous. Rather like a mix of bull fighting and rodeo, except with horses.

The US is the horse.

These are not the only two options: Germany pays (very) high wages, but has many manufacturing jobs -- and they're not in danger of going away.

Germany also has a much higher degree of automation compared to the US: https://twitter.com/TheEconomist/status/846769129763880961

And you base that on what? Tesla is doing 10x improvements in automations and will force BMW/Audi/Mercedes to do it as well.

I think you underestimate the level of automation at a german car manufactures (e.g.: https://youtu.be/VreG1iC65Lc?t=1m6s).

20 times as much as who? As far as I can figure out, there is a minimum wage in China, for example, which is between $2 and $3 per hour.

So who works for 36 cents hour?

EDIT: https://www.quora.com/What-is-the-average-hourly-rate-for-a-...

Welp, there's one answer. I guess either this is common knowledge, or no else cared enough to check. :p

The traditional US manufacturing jobs we "want" pay middle class wages.

You said "we have is a choice between fewer American manufacturing jobs (automation) or no American manufacturing jobs (outsourcing). People don't want to hear that, but those are the alternatives."

Why is it impossible to pay closer to the world market rate for labor, at the U.S. federal minium wage of $7.25/hr? I'm not saying you're wrong, these are intended as real questions :)

In practice the answer was traditionally "unions". The United Auto Workers won't let you eliminate all pensions and benefits and pay minimum wage, but they can't stop you from building a factory in Mexico, so what happens?

In theory we could try to compete with Asia on labor costs, but nobody really wants that. It's better to have middle class jobs than a larger number of subsistence-level jobs, especially when the output is the same.

People will take the best job available on the market. If bringing back manufacturing brings back a lot of subsistence level jobs, you won't have people in middle class jobs leaving those jobs for the subsistence jobs. The only people who take those new jobs are those who are in a worst position than what the subsistence level would provide them, and thus are better off with the subsistence level job than without.

This is basic free market economic theory that any economist (other than perhaps Marxians) would agree with.

I think quite a few companies would love to try and compete with Asia on labor cost, and a good many have. I'm not trying to argue against the value of corporations or anything, but I think it's generally agreed that the goal of corporations is to make as much money as possible for their shareholders. To that end, companies are going to pursue profits (i.e. lowering labor costs) over creating good paying jobs whenever they can. I'm sure many CEO's would, in theory, prefer to keep middle class jobs over profits, but in reality many of them know that they will be replaced if they do. It's rare that they can have it both ways. Also, it seems to me that given the choice between creating a few middle class jobs or a larger number of subsistence level jobs, large corporations have more often chosen the latter. "creating" more jobs looks better on paper and it's easier to fire someone if you have a larger pool of candidates to replace them with, or, better yet, pick up their slack while being paid the same.

On the subject of unions, I was interested to see here, https://www.bls.gov/news.release/union2.nr0.htm, that in 2016 only 10.7% of workers were union. I certainly agree that unions have traditionally been a force in keeping wages high, but I don't think they are really the best case to use as an example of US manufacturing as a whole. I'll be the first to say that I haven't really researched it, but it seems to me that quite a lot more then 11% percent of US manufacturers have moved their operations overseas.

An American manufacturing worker from the 80s, adjusted for inflation, earned between $20 and $60/hour. And a corporate pension.

The point still stands.

Well $20/hr: https://fred.stlouisfed.org/series/CES3000000008

Jan 1980: $6.82/hr, adjusted for inflation is $20.16 https://data.bls.gov/cgi-bin/cpicalc.pl?cost1=6.82&year1=198...

Current wages: $20.62

Standard inflation rates exclude too many things to be reliable. And the basket has changed, over time. I suspect that's why parent said $20-$60 per hour.

Those comparisons are tricky, especially in hot markets.

My childhood home in NYC was $30k in 1980. My grandparents lived in a nicer house up the block on a sanitation workers salary. That home sold a year ago for $1.2M. The 2016 version of my parents or grandparents would be living in some distant suburb.

Ok.. but this is an article about manufacturing. So which manufacturing town in the US is a hot market?

They don't call it the rust belt for nothing.

Edit: Average home price in Detroit: $38k

The rust belt are the places that lacked diversification. There are lots and lots of little rust belts that were overshadowed.

For example, New York City. NYC had 875k manufacturing jobs in the mid 60s, which plummeted 60% by 1993. The same thing happened for complimentary industries like wholesaling.

Info: https://www.bls.gov/mlr/1993/02/art4full.pdf

Those cool hipster spaces in Brooklyn, etc are there because hundreds of people were working there until the 80s.

Keep in mind Labor cost is only one part of the puzzle, it depends a lot on what you are manufacturing. In large heavy industries (Metals, chemicals, plastics etc) the raw materials costs can dwarf the labor cost by a significant amount. Obviously the story is different for lighter manufacturing (component assembly etc) where labor costs probably do make up a higher proportion of overall expenses.

An example from the industry I'm familiar with - Steel: The raw materials which go into manufacturing steel; iron ore and coal are such a huge portion of the operating costs that labor expenses almost look like a rounding error next to it when you tabulate out the expenses. A lot of heavy industry is similar (Aluminum has added expense that it required large amount of electricity which is why traditionally aluminum smelters have been linked to hydro sites).

If you can improve yield (ratio of raw materials consumed to product produced) by even a small margin you can justify your salary many times over which lends support to the idea you want to be employing smarter people not necessarily less people.

Here is Australia what has rocked my industry is falling demand, largely driven by GFC which has led to a sudden decline in new commercial and residential construction etc. (It is starting to recover now but is pretty staggered). As well as increased completion from imports.

I haven't seen any data supporting this but what I keep getting told is that in some cases Chinese government heavily subsidizes their industry so they can export at what would otherwise be a loss. This is called "Dumping" and is a form of predatory pricing the idea being you flood the market with very cheap goods then raise prices when competition is driven out of business. There is evidence this is happening to the US as well here is an article I found from Jan this year (http://www.cnbc.com/2017/01/18/us-affirms-finding-of-china-s...)

If I wanted to stimulate manufacturing I'd focus on demand (i.e government funded infrastructure projects) and trade policy (Better anti-dumping legislation etc).

Also in the steel industry in Australia (Tasmania). Mostly structural steel at our workshop but also marine and agricultural at our other sites.

Huge slump right now. We need multiple large projects on the go at once to keep all four workshops busy but the work just isn't available.

You're grossly mistaken if you think that American workers are paid 2000% (!) more than comparable manufacturing workers in China, Germany, and Japan (the other top manufacturing countries).

This is only true if labor makes up the largest component of the cost. If the worker is only 10% of the cost of the output (versus say raw materials like steel) then being more 2X (or even 20X) more productive requires a much smaller productivity increase.

It's also worth noting that manufacturing can carry significant negative externalities in the form of pollution.

we have is a choice between fewer American manufacturing jobs (automation) or no American manufacturing jobs (outsourcing)

That is simply incorrect. Consider the economic facts of the 20th Century. In each decade, the nation with fastest rising productivity also had the lowest unemployment. There is no obvious correlation between automation and job loss. Sometimes automation gets rid of jobs and sometimes it simply leads to more hiring in that sector, because that sector is profitable.

Adam Smith tied rising wages and high labour demand to growth.

Which becomes problematic if the gravy train stops.

But it would be otherwise in a country where the funds destined for the maintenance of labour were sensibly decaying. Every year the demand for servants and labourers would, in all the different classes of employments, be less than it had been the year before. Many who had been bred in the superior classes, not being able to find employment in their own business, would be glad to seek it in the lowest. The lowest class being not only overstocked with its own workmen, but with the overflowings of all the other classes, the competition for employment would be so great in it, as to reduce the wages of labour to the most miserable and scanty subsistence of the labourer. Many would not be able to find employment even upon these hard terms, but would either starve, or be driven to seek a subsistence either by begging, or by the perpetration perhaps of the greatest enormities. Want, famine, and mortality would immediately prevail in that class, and from thence extend themselves to all the superior classes, till the number of inhabitants in the country was reduced to what could easily be maintained by the revenue and stock which remained in it, and which had escaped either the tyranny or calamity which had destroyed the rest.

https://en.wikisource.org/wiki/The_Wealth_of_Nations/Book_I/...

You can't pay an American worker 20 times as much to make the same product in the same number of hours.

Some people believe the solution is to that problem is to pay American workers less. For example, Trump has stated he believes American wages are too high to compete with foreign imports. http://www.politico.com/story/2015/11/donald-trump-wages-215...

If labor costs are only a small fraction of overall production posts and the rest is capital (i.e. machines), then this difference becomes unimportant. And this is increasingly the case.

> If labor costs are only a small fraction of overall production posts and the rest is capital (i.e. machines), then this difference becomes unimportant. And this is increasingly the case.

...because of automation.

It may not be palatable to you but trade protectionism is also an answer you haven't accounted for.

Yea, personally I care about the trade deficit more than jobs anyway. That is because the current economy is based on credit and that is not a good thing.

Why do they need higher wages? Land prices due to financialisation.

Why are land prices still at a level that kills your economy?

Oh, you with the pesky questions!

https://www.reddit.com/r/dredmorbius/comments/608w97/asset_p...

Congrats on avoiding the hacker news rentier lobotomy!

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