Britain “haemorrhaging” manufacturing jobs | Hacker News Reader

Britain “haemorrhaging” manufacturing jobs

thelondoneconomic.com

36 pointsendswapper57 comments

I have two very raw ideas about this slowly taking form in my brain.

1. Factories produce wealth. If you look at the nations doing good and the nations doing bad[1], factories, I think, make a difference. USA completely moved their means of production to Asia, thinking they could produce cheap and make huge profits. Works for Apple. Doesn't work for the consumer. These jobs are just missing. Nobody can buy. So people borrow. Until the lenders crash, because they can't pay back. But the banks have to lend, that's their business! And when companies don't borrow because they don't build factories, then the consumer has to borrow. Needs to, because he doesn't get payed well.

2. With factories gone, our system doesn't work anymore. Forget Asia. Robots. And someday not even big robots in factories, but a desktop replicator. There is so many jobs that will just cease to exist. Sure, there will be new ones, but some researches claim that already today robots take more jobs than create. Especially combined with the low investments. Corporate profits are at an all time high, savings are at an all time high, money is cheap (negative interest rate!) but still investments are low. Companies aren't borrowing. Nations are still playing the ordo-liberal game and cut spending. Consumers are the only ones borrowing.

It's insane.

It's like capitalism forgot how capitalism work. Companies should borrow, invest, earn, pay their workers, and the workers consume. Now companies save, pull profits, cut wages and replace workers by cheaper means of production and the jobless borrow to consume.

Every couple of years this crashes because people can't pay their loans. Government takes over the debt to reset the cycle, but because their increased debt they have to cut their spending.

[1] I audaciously define good/bad in way that it serves my argument.

If you look at the nations doing good and the nations doing bad[1], factories, I think, make a difference.

I'd like to know what your definition actually is because there seems to be very little connection. Some examples:

Italy and Japan are first-world nations with lots of factories but middling growth.

Bangladesh is a poor nation with lots of factories but weak prospects.

[Edit -- in my original post I referred to Switzerland because I misremembered the stats. It does have a smaller share of labor force in industry than neighboring Germany or Italy, but Swiss manufacturing is still very significant. Thanks to the posters who corrected my mistake.]

Your general point is a good one, but the Japanese example is perhaps bad. The definition of recession doesn't work well in a country with a shrinking population. Japan's per capita income is growing, and labour force participation is up.

https://www.vox.com/2015/11/17/9749264/japan-recession-abeno...

Switzerland absolutely has factories. Mostly mid/high end mechanical stuff but they are there, and people work in them.

Well, Switzerland is rich because they have our tax-money. They also do have a lot of high-tech, precision engineering industry, don't they?

Japan is an interesting example - they have negative interest rates since a very long time.

Basically, I was talking about Germany. The German automotive industry plus the machinery section create a lot of well paying industry jobs (although the well-paying part is really hollowed out and wages rising way to slow in Germany). The political landscape is stable (although I despise the conservative government). Germans version of Trump/Brexit/Le Pen has about 8% in the surveys for the election. Gini-Index is way more healthy than in other nations (although getting worse).

But you are completely right, there is a lot of things missing in the picture (or wrong).

> Well, Switzerland is rich because they have our tax-money.

Isn't that now in Delaware?

It sure isn't in the pothole in the road to my building, I can tell you that.

Depending on municipality you may be able to report the pothole directly. Assuming you already haven't been proactive in that manner it may be a way to nudge things into action.

Since you were talking about Germany and jobs being a means of distributing wealth of sorts, what do you think about the taxes? Germany, Austria, Netherlands, Belgium all have some very high taxes on high earners compared to the US and UK, and more importantly, the progressive tax thresholds are much better adjusted for poor and middle class people to have more disposable income. Germany even has a solidarity tax on top of the normal income tax, which also goes into the country's budget. Correct me if I'm wrong.

And for some reason, these countries' rich people actually do pay their taxes for the most part, instead of hiding them using various means. That's either because of the education or the culture, I don't know.

In Belgium your tax rate is %50 (over 38,080eur[2]). That is totally insane I thought...

The US: For hn types, the tax rate would be 28% (fed) + 10% (state tax CA) + 9% (medical cost deductions per paycheck[1]) + 8% sales tax (ca) = 55%? (also subtract medical bills will seize all your property later in life though, and any private schools needed). I am sure Belgium has many other costs, hell add %10 to Belgium. It is still comparable.

[1] http://budgeting.thenest.com/much-average-paycheck-gets-dedu... [2] http://taxsummaries.pwc.com/ID/Belgium-Individual-Taxes-on-p...

Add university. I graduated with 20k savings, Americans with 200k debt.

Taxes aren't that high in Germany. 40% - compared to what, 35% in the US?

Especially considering that a lot of what you pay in Germany is not a tax but insurance - health, social security, rent.

Also, no the taxes for high earners aren't that huge. Basically, the progressive tax stops growing at 50k and stays at 42% income tax. The insurances aren't progressive. If you take the total tax payed it's pretty flat over the whole income spectrum. I.e. sales tax hit rich people less because they don't have to consume all their income. Tax on property and wealth are low to non-existent. No inheritance tax either.

Middle class is actually where the tax increase is the steepest. Poor people as in working poor are relatively new in Germany - low income sector was created about two decades ago.

And no, our richt don't pay their taxes either. Top 0.1% evades 30% of taxes, among the 99.9% rest it's pretty much uniform 5%. There was an awesome report that I can't find right now. Workers in Germany also often can't evade. My tax is deduced before I'm, payed. Some jobs can evade tax by moonlighting.

Generally, _people_, even rich, pay their taxes (as they have no choice) - it's companies that evade big time. And the filthy rich.

Situation is much better than in the US, but the whole tax system is still bad. Basically, tax on profit is the best you can have. Companies either pay or invest - both cases are a win. Tax evasion breaks that and workers have to pay.

One could argue that Germany has an undervalued currency, which makes its exports more competitive, both in and out of the EU. The flipside is that countries like Spain have overvalued currencies, which means the jobs flow from there to Germany. Hence the chronic unemployment in Spain.

Sure, they have solid fundamental economic strengths, but a huge part of their recent success comes at the expense of other eurozone countries, due to the flawed euro currency union.

Very true. Funny thing is, Germany is forbidding Greece to do what they did when they had to jumpstart their economy after reunification: lower taxes.

German politics is very problematic for the eurozone at the moment. Schäuble doesn't understand basic economy.

>Switzerland is a prosperous nation without factories

Switzerland has a massive manufacturing sector - especially high value precision manufacturing (e.g. watches) and pharmaceuticals.

Chemical and pharmaceutical industry and Mechanical and electrical engineering industries are Switzerland’s largest industrial employer and account for about 70 percent of the country’s exports. They produce their stuff in factories.

Automation will be the first blow to Capitalism, the richer nations around the world are already experiencing the first stages of post-capitalism where resources and goods are so cheap that there's no point in selling them anymore. Once we do get to the mythical replicator, that's it, material goods no longer have value. That is the logical point where Capitalism ceases to function.

> resources and goods are so cheap that there's no point in selling them anymore

That's a good point. Adjacent, but related, I was thinking about starting a company to develop, make and sell educational tools to school. Think micro:bit-like boards, robot kits, water rocket kits, stuff to do experiments, along with the content for the teacher. I didn't do it for a lot of reasons, but one issue I constantly ran into was that market_size * price * profit_span was always just small. Not worth it.

The human capacity for desire is infinite. We will never stop learning to do more with less (economizing = economy).

Do you also believe everything that will ever be invented has already been invented? Less resource allocation for X means more resources to invent Y.

Of course not. I'm saying that once we have a machine that can build any material using nothing but energy (the Star Trek replicator, basically) and once we have sufficient access to for lack of a better word, infinite energy, then material goods no longer have value.

Capitalism is built on the idea of scarcity, once scarcity is obsolete, I see no reason why Capitalism would not also be obsolete.

Example: Platinum is a valuable metal because the supply is limited and the process to acquire more is difficult, costly, and dangerous. If for example you invented a machine that could turn, I don't know, wrought iron into platinum, then the value of platinum decreases. So, once you have this deus ex machina that can create matter from energy, anywhere, at any time at very little cost, then any and all material goods that were once scarce and therefore valuable now are worth whatever the energy cost is to get them made by the replicator and no more.

Many things have gone from extremely costly to almost free (Aluminum used to cost more than gold, now we wrap food in it), but that just freed up those resources to be allocated to something else where there is scarcity. This is what the force of Capitalism & free enterprise does.

Fame is an example of another scarce resource that will not diminish even with magic energy and magic alchemy. In fact, it would only become more valuable as there is a lot more resources freed up to allocate to it.

There's always going to be scarcity. You can't make more time. Unless you think we'll all have time machines as well?

Well unless you plan to have a Startup that sells Time, the scarcity of time is rather irrelevant to Capitalism, no? It has to be something a business can solve for you. Time Travel seems unlikely but treatments to extend the life of a human being so they have more time? Absolutely within the realm of possibilities, but where the first round of those will likely cost thousands if not hundreds of thousands and be newsworthy, centuries from now when those treatments are commonplace, they'll be getting cheaper and cheaper too just like aluminum did.

And again you're not addressing my raw point: that scarcity is the basis of Capitalistic goods and businesses, and that once scarcity is made obsolete by the unstoppable march of technology, once material goods, everything from toilet paper all the way up to time-defying treatments comes out of our Replicator, then what is left to be scarce? The only way at such a time to maintain scarcity and therefore capitalism is to impose it artificially, and if you knowingly withhold things that could be made free, realistically and practically, for everyone simply to continue making money, I'm sorry but that is the height of evil.

From another FussyZeus comment:

> Well unless you plan to have a Startup that sells Time, the scarcity of time is rather irrelevant to Capitalism, no? WHOA, NOW. Time is a zero-sum game. The scarcity of time is not even close to "irrelevant to Capitalism". Economists compare productivity gains as the ability to produce more widgets in the same amount of time.

The wealthy generally value their time much higher than the poor, so there is a spectrum. Are you saying that there's no value added in a company saving you time?

  * USPS delivering mail to your house rather than a PO Box.
  * Amazon/etailer website ordering as opposed to brick and mortar
  * Doordash, Google Shopping Express, InstaCart, etc
  * FedEx/UPS delivering to your door, rather than 
  * Pre-packaged meals.
  * A taxi/limo/Uber driver.
  * A helicopter to avoid traffic.
  * A dishwasher / clothes washer
  * Electrical hand-tools to make construction faster
  * A secretary / admin assistant
  * Amazon MechTurk
  * AAA membership as opposed to standing in line at the California DMV
  * A cousin of mine makes a living navigating local governments to gain building permits for her customers

Tristan Harris even argues that there is an "attention economy". I worked at a tiny social media website in 2008+, which was effectively destroyed by the rise of Facebook. Hell, we even saw that as our users grew up and went to college, we lost their attention. The entire marketing industry is about competing for the attention of users, which is also a zero-sum game.

> WHOA, NOW. Time is a zero-sum game. The scarcity of time is not even close to "irrelevant to Capitalism". Economists compare productivity gains as the ability to produce more widgets in the same amount of time.

Once widgets materialize in a box and can be moved immediately via non-human means to whomever needs them, or more likely, simply be removed from the box by the human who wanted the widget, the friction becomes 0. It's no longer about who can get the widget made faster unless you talk about the efficiency of the replicator itself, and that will likely approach a certain baseline point as well.

The thing is the further along you go on this curve, the faster all of these things will work to improve each other. Why have a prepackaged meal when you could have the exact molecular composition of a fantastic soufflé made by a five star chef in Paris, instantly, for the cost of running your replicator for 10 seconds? Why take a helicopter to avoid traffic when automated streets have made the few commutes that remain extremely fast? Who cares about shipping you things when the product you bought materializes next to your oven?

You're talking incremental improvements in the next 10 years. That's not going to do anything I've discussed. I'm talking the theoretical and in my mind, inevitable conclusion to capitalism: that all goods and services are worthless; not because we don't need them, but because they don't cost us anything.

I refute your first point by drawing a comparison with Spanish attempts at Mercantilism. As Ricardo famously pointed out, accumulation of gold from the new world didn't help Spain in the long run. In the long run, the only thing that's important to a country's economic development is focusing on what you do well, and do that thing a lot. In economics terms, this means focusing on your comparative advantage.

Broadly speaking, America is really good at organizing businesses to achieve a goal. Her citizens speak English, the language of international trade, and her shorelines allow convenient trade with both Europe and Asia. Her currency is still the gold standard of international trade and people throughout the world travel to the US to study in it's world leading universities.

In this mindset, America's problem with manufacturing jobs is the other side of having a productive IP economy. Large demand for US technology supports a strong US dollar, making physical exports comparatively expensive.

The best example of this is the familiar phrasing on the back of every Apple product: 'Designed in California'.

Your second point deals with the consequences of this economic reality and really speaks towards the redistribution policies the US Government pursues. International trade is said to produce dispersed benefits, but concentrated loses. Importing lower priced manufactured goods benefits consumers with lower prices, but eliminates manufacturing jobs. The role of government is to reverse or dampen these consequences[0].

[0]: government intervention always has a cost. See the 'Leaky Bucket' analogy.

tl;dr; people are basic creatures, we associate the object with the money, the market doesn't work like that.

I really struggle to comprehend the relationship between "factory work" and business results. They money is in the value, if I control the production but the value isn't captured in the production line [it is captured in the R&D, sales, marketing, etc], it doesn't matter where I choose to produce.

I think the reason people talk about factories shrinking being an issue is because they need physicality to understand the market, but in reality, it has little to do with the actual outcomes. Case in point is every technology company that has no physical product, and even those that do, often don't produce in the same company that they sell, yet head offices continue to be just fine as do the countries they're based in.

Factories are the symbol for the unskilled labor earning lives and skilled labor earning decent lives. I never said business results are bad, they are quite good, it's just more and more people falling of the wagon.

Perhaps even beyond the money is the real economy version of quality of life derived from the consumption of produced good and services. Politicians talk about jobs and work because it is unseemly to talk about enjoying wealth.

When all public discourse talks about effort, it is easy to understand why people begin to think that lowered productivity, and decreased specialization are advantages rather than the enormous impediments to economic growth and prosperity.

Manufacturing is also much less "real" work than agriculture or perhaps construction, if you claim that mass produced goods don't feed you or put a roof over your head, yet few people bemoan the decline fro 50% to 2-3% of the workforce being in agriculture.

I suppose the answer to what other people are thinking requires an understanding of what their mental model of the economy is. For example, in real economy terms a trade deficit today means that we are getting a lot more stuff from our trading partner than they are getting from us in return.

So, ask these people to explain why our partner would agree to these terms right now, and also ask how they believe that they imbalance will play out over time. The potential answers are numerous, and it's really difficult to guess how you can shed any light on the dynamics of international trade unless you understand why people are worried about it in the first place.

The USA didn't move their means of production to Asia, they moved their overflow.

http://www.marketwatch.com/story/us-manufacturing-dead-outpu...

Manufacturing jobs have gone away due to productivity increases, not due to factories leaving.

So if your claim is that manufacturing jobs produce wealth your argument might logically fit what happened, but if that were true we could just setup a factory to create something on one end of the floor and deconstruct it on the other...boom problem solved.

> So if your claim is that manufacturing jobs produce wealth ...

It's more like these jobs distribute the wealth, rather then produce it. But I also think that growth slows when wealth isn't distributed.

I'm going to stop replying to everybody now, but I like the input and there are many valid points being raised.

The two points, vaguely, seem to describe thoughts I've had, but lots of your brief statements are either over-simplified or outright wrong:

> USA completely moved their means of production to Asia > These jobs are just missing > Until the lenders crash, because they can't pay back > Needs to, because he doesn't get payed well > Companies aren't borrowing > It's like capitalism forgot how capitalism work.

We live in a time when consumers have been trained (err brainwashed) by corporations, which have the advantage in the information asymmetry of sales/marketing/behavior. Consumers are saving more than $2k a year on cheaper goods because of globalization, but they only look at one side of their ledger. They didn't bother to save more, to reinvest in their own skills/education, to start their own businesses. Instead, consumers are increasingly spending more on personal entertainment, squandering that savings generated by a global supply chain.

Companies are borrowing and spending MASSIVE amounts to repay their investors. Some companies have made huge capital investments (Amazon, Apple, Nvidia, Microsoft, Samsung, Intel, AMD, Tesla/SolarCity, pharma, and all of their supply chains). Even fintech is making big investments (feature-filled ATMs, check scanning, Visa/MC/AMEX machine learning of spending behavior). The problem is that all of these companies are huge, which means that they are already very good at optimizing and scaling their growth. This means that productivity rises, so the employee headcount rises less than linearly with product growth.

Looking at more traditional types of manufacturing: Caterpillar, John Deere, Polaris, GE, Boeing, etc are all more productive than ever. But their businesses are also more susceptible to changes in the value of the US dollar, or geopolitical events which may close borders or affect intellectual property enforcement.

And (non-Tesla) car manufacturing left Michigan for better markets. In the beginning, the South was advantageous because of weaker unions and lower cost of living. Later, Mexico was superior because of the low labor costs matched with superior export market (lower peso value and large number of free-trade countries to export to). In that market, the US was at a disadvantage because it was such a strong and mature/developed market.

Capitalism isn't a person. It is an observation of a system, which doesn't really describe modern America and hasn't for nearly a century. We are far more of a hybrid capitalist/socialist since we have high taxes, high regulation, high barrier to entry in many markets (due to licensing requirements), high employee/labor protections, intricate zoning and NIMBY issues, etc. We live in a time when rent seekers and government regulation have largely skewed our markets. Lobbyists have extended Intellectual Property lifetimes and patent trolls have gamed our system to suck profits out of the more innovative companies.

British manufacturing output has grown significantly over the last 40 years, despite a 60% reduction in manufacturing employment over the same period. We're making more and better stuff with far fewer people.

The union narrative of manufacturing having been "run into the ground" by neglectful governments is clearly bogus, as is the nationalist narrative that manufacturing jobs have been exported abroad. This is about automation and mechanisation.

http://www.thisismoney.co.uk/money/news/article-2803400/UK-m...

Except OPs article laments the loss of jobs, not output. And, its not clear from your reference if the increase in output should be attributed to larger dollar goods (eg. Rolls Royce engines), or more smaller dollar goods. Likely the former I would think.

Anecdotal: I walk into the centre of Birmingham through Digbeth across the river Rea in its little culvert most days and have done since around the late 80s. Used to go past small metal bashers and 'repetition' companies with doors open for ventilation. Metal baskets full of washers, and a galvanising company with a huge Victorian shed dipping parts into vats. Now, mostly garages, car scrap and rebuilding. A few hipster galleries and coffee bars.

Historical Note: Thatcher's administrations moved the UK economy from manufacturing to service industries. This has always worried me through the volatility of the service sector. Germany (then West Germany) went down a different path.

Numerical sideline: West Midlands (mentioned in OA) has a population of 5 million.

Breaking News: Jeremy Corbin is addressing a rally down the hill. Big turnout.

Background: GMB is a TUC affiliated trade union

https://www.gmb.org.uk/

https://www.tuc.org.uk/britains-unions

Thanks for the ancedote. As a fellow brit I'm not sure what kind of universal truth or meaning this conjunction of ideas means but it's certainly characteristic of the liberal and flexible nature of British society at least.

No universal anything and no claim to truth. Just trying to convey the various influences in the moment.

I understand the sentiment but it's a little harsh to say Thatcher moved the UK economy from manufacturing to service industries (although that seemed her intent).

From 1970 - 1980 the percentage of GDP from manufacturing fell by 5%, from 1980 - 1995 it then fell by another 5%

https://fullfact.org/economy/did-labour-decimate-manufacturi...

Agreed, perhaps I should of said 'nudged the rudder in the direction of services' and later governments rolled with the course change as the path of least resistance.

PS: the geographical distribution of those GDP share reductions might bear investigation. The kinds of jobs available in the Black Country changed radically in the 1980s.

I think manufacturing has been in decline since the late 50s but can't find data to back that up.

One of the challenges I see is that most of UK manufacturing has gone high-tech and become more automated so less opportunities for people in sheds!

The concern for Britain and other countries ought to be the loss of sovereignty that accompanies a decline in manufacturing of the magnitude the article describes. When a country's infrastructure and supply chain is dominated by imported goods a country's ability to make decisions in its citizens best interests declines. Its ability to make fair trade deals declines. Its national security declines.

Nothing in the article suggests there has been a decline in manufacturing output in Britain but a decline in jobs.

I don't know the situation there enough to know what is happening, but in the USA for instance the decline of jobs in manufacturing wasn't accompanied with a decline in output, quite the opposite.

Depends heavily on how you measure. U.S. manufacturing looks good by value of the manufactured products, because it remains strong in a handful of high-value manufacturing segments. That's an important measure, but may or may not capture what everyone is interested in. Besides employment, other measures may include, for example, how dependent is the country on imports for items vital to national security? An exclusive dependence on imported steel can have downsides even though steel is now a low-value commodity. Another measure is the diversity of the overall manufacturing industry. Does a country manufacture a whole range of products, or is it highly specialized in a few segments? The latter can still be good by value, but may be more brittle, and make it harder to start new companies in certain fields due to a lack of a local ecosystem (the U.S. has nothing like the Shenzhen ecosystem in electronics, for example).

Yes, the very same point I raise in another comment on this thread. And the difference is this: Manufacturing output is an almost meaningless metric unless its tied to jobs, balance of trade or some other "facts on the ground" statistic. For example, the loss of British manufacturing jobs is strongly correlated to a growing British trade deficit, an enlarged British welfare system, and a concerning British debt-to-gdp ratio.

It doesn't matter how many Trent jet engines Rolls Royce exports if the bulk of inputs are imported and there is little impact on jobs. But, because of the high price, those engine can have quite an impact on reported manufacturing output.

Isn't the world "haemorrhaging" manufacturing jobs? Isn't this just mechanization?

That is highly likely. But this article looks more like a tone piece in support of the current iteration of the Labour Party, written with an election in mind, not a serious piece of analysis. The surrounding articles put this impression in my mind.

Not really. This is actually a side effect of GHG policies.

Traditional British industries like steel production can't possibly compete with China when they have to pay carbon offsets and their competitors don't.

So British factories are being shut down, even if they are more carbon efficient.

That's... a vast (and very inaccurate) over-simplification.

I buy RaspberryPi stuff and cheeses that are made in Britain. I also have a nice vintage Burberry trench coat that I treasure. I'm not sure what all they make there. The article talks about "manufacturing jobs" without any examples. Examples for such an article, especially including changes that exemplify the claims of the article that manufacturing is down, would be really nice.

Employment in manufacturing has been falling since the sixties, this isn't a recent occurrence.

The West Midlands has lost almost 100,000 manufacturing jobs.

The coal pits of the Midlands are no more. The last deep coal mine in the UK closed on 18 December 2015. Many heavy manufacturing jobs went down with them.

Post-Brexit this will be...

Britain “haemorrhaging” jobs

First they say that it's been happening for over a decade, but then they blame Brexit at the end, this makes no sense.

They might have their cause and effect backwards there.

I can only read, not listen to this, but they aren't blaming Brexit, they just say that post-Brexit Britain will pay the price if they can't figure out a solution, which seems fair. Of course, post-Remain Britain would be in exactly the same circumstance considering the jobs have been going for 10+ years.

Could you point me towards that bit where they blame Brexit?

I can only find the part where it says

> “If this sad decline is not addressed then post-Brexit Britain and the next generation will surely pay the price.”

...which is a fair statement, I'd say.

The quote doesn't blame Brexit. It's expressing the urgency of the issue and only referencing "post-Brexit Britain," as where Britain stands today.

I believe you are referring to this:

“If this sad decline is not addressed then post-Brexit Britain and the next generation will surely pay the price.”

Or, if the issue isn't addressed, from here on out it will be to our detriment.

That something happens over a long time does not mean that it does not have several causes.

I can remember well how the UK promoted the 'service' and 'finance' industry in the past decades. Manufacturing was seen as obsolete. Especially when North Sea oil brought wealth to to Britain for some time, they were mostly busy managing and consuming this wealth - currently oil is cheaper and North Sea oil is less competitive.

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