Worst Job Losses Since The Great Depression?
Today we have the primary elections in Ohio amongst other states. I'm sure by no coincidence we have a recently released study by MBG Information Services. MBG's study is specifically focused on Ohio's manufacturing sector and its apparent devastation over the last seven years.
If you would like to read additional information about the report and its conclusions, an IndustryWeek article discussing some of the trade dynamics contributing to this situation can be read here.
As I've written on here before, America is still a dominant global manufacturer. In fact, over the last ten years, the U.S. percentage of global manufacturing has increased ever so slightly. Mostly at the expense of Japan. Far and away, the U.S. is still the world's manufacturing leader. That said, the U.S. has lost a significant amount of manufacturing jobs above and beyond the typical losses associated with productivity. We are generally led to believe we outsource what is not competitive by media and those in a position of leadership. That's really less of a truth and generally what those with something to gain may want us to believe. I can speak with some authority on this topic as I've been involved in selling outsourcing and offshoring. In fact, I've walked from opportunities that would have benefited me quite handsomely because of not believing in this strategy. Regardless, many positions on nearly any topic can be counter argued to the point of incessant babbling. As an example, a loss in manufacturing jobs may lead to a gain in logistics jobs. Or, a loss in manufacturing jobs in one sector may lead to global demand for manufactured output in other domestic industries. The picture is never really one that is truly clear as those with differing views debate this topic in the public spotlight. One thing is clear. Offshoring and outsourcing cost/benefit analysis is seldom truly understood by those making the decisions. I would argue the contributing factor to this fact is poor management. What I would generally term as financial management that really doesn't understand the business of business. In fact, of the many instances I've been involved in, I am only confident one company clearly understood how to effectively analyze the cost/benefit equation. And, they weren't in the business of outsourcing or offshoring. They were considering its impact on their organization. The rest generally relied on consultants with a bias or incomplete analysis that was driven by biased management. That is one reason why many companies eventually insource again as promised costs/benefits are never achieved. Or new management has a different philosophy or belief they can more positively impact business that is insourced. Somehow executives are convinced that outsourcing their problems and failures makes them go away. (Maybe a little like packaging up toxic debt instruments and selling them to someone else and now believing they are not your problem.) In other words, offshoring is not a panacea for failed leadership and failed execution. Instead, now one is left with failed execution within an organization that they no longer can impact directly or as quickly as their own. Now the organization is left with a bigger failure. Obviously, there are reasons to create virtual organizations and many are for positive and compelling reasons. But, the MBG focus of trade policy isn't typically one of them. In the end, the MBG report is a hard hitting look into a topic that is starting to gain significant amount of traction with political leadership.
That the Chinese government wishes to compete globally by punishing its workers through artificially low labor rates is their accord. It's not a plan that leads to economic vitality but moving up the value chain is always a possibility. And, such an approach simply weakens their industry's ability to compete when changes evolve in markets. In any event, this strategy won't last. Something must change as we've written before. Either jobs will be pushed to inland China where labor rates are lower as it appears is an attempted strategy by the Chinese government (but transportation costs are higher) or less developed countries will be targeted by the global labor arbitrageurs or American politicians will create incentives or penalties for companies regarding their manufacturing decisions or the advancement of productivity enhancing innovations will shift certain manufacturing into developed economies to tighten the supply chain or we shall see trade wars over higher unemployment in developed economies or short-sighted corporate executives will realize much of manufacturing and labor are competitive advantages and a condition of long term viability or we shall see a resurgence in collective bargaining as a check against corporate hegemony or some combination of the above or or or. The only question is when and how.
I can assure you that political leaders across the U.S. in local, state and national government are well aware of these statistics in some form. They are far from limited to the focus state of this study. And, given the U.S. economy is the best example of a self-correcting economy, we shall see imbalances resolved in some manner be it through market forces or intervention. I did a series of posts about the industrial economy quite some time ago. And, how I ultimately expect its resurgence. Absolutely nothing has changed my perspective on this topic. In fact, I see many momentum builders continuing to develop in this direction. Some market based and some not. That doesn't necessarily mean lost jobs are coming back. It may mean innovation will drive re-employment into new areas of production growth. But, one thing is certain. Any time in history we have seen such a drastic reduction in manufacturing employment, the system has corrected itself in some manner. There is no reason to believe this time will be any different.
If you would like to read additional information about the report and its conclusions, an IndustryWeek article discussing some of the trade dynamics contributing to this situation can be read here.
As I've written on here before, America is still a dominant global manufacturer. In fact, over the last ten years, the U.S. percentage of global manufacturing has increased ever so slightly. Mostly at the expense of Japan. Far and away, the U.S. is still the world's manufacturing leader. That said, the U.S. has lost a significant amount of manufacturing jobs above and beyond the typical losses associated with productivity. We are generally led to believe we outsource what is not competitive by media and those in a position of leadership. That's really less of a truth and generally what those with something to gain may want us to believe. I can speak with some authority on this topic as I've been involved in selling outsourcing and offshoring. In fact, I've walked from opportunities that would have benefited me quite handsomely because of not believing in this strategy. Regardless, many positions on nearly any topic can be counter argued to the point of incessant babbling. As an example, a loss in manufacturing jobs may lead to a gain in logistics jobs. Or, a loss in manufacturing jobs in one sector may lead to global demand for manufactured output in other domestic industries. The picture is never really one that is truly clear as those with differing views debate this topic in the public spotlight. One thing is clear. Offshoring and outsourcing cost/benefit analysis is seldom truly understood by those making the decisions. I would argue the contributing factor to this fact is poor management. What I would generally term as financial management that really doesn't understand the business of business. In fact, of the many instances I've been involved in, I am only confident one company clearly understood how to effectively analyze the cost/benefit equation. And, they weren't in the business of outsourcing or offshoring. They were considering its impact on their organization. The rest generally relied on consultants with a bias or incomplete analysis that was driven by biased management. That is one reason why many companies eventually insource again as promised costs/benefits are never achieved. Or new management has a different philosophy or belief they can more positively impact business that is insourced. Somehow executives are convinced that outsourcing their problems and failures makes them go away. (Maybe a little like packaging up toxic debt instruments and selling them to someone else and now believing they are not your problem.) In other words, offshoring is not a panacea for failed leadership and failed execution. Instead, now one is left with failed execution within an organization that they no longer can impact directly or as quickly as their own. Now the organization is left with a bigger failure. Obviously, there are reasons to create virtual organizations and many are for positive and compelling reasons. But, the MBG focus of trade policy isn't typically one of them. In the end, the MBG report is a hard hitting look into a topic that is starting to gain significant amount of traction with political leadership.
That the Chinese government wishes to compete globally by punishing its workers through artificially low labor rates is their accord. It's not a plan that leads to economic vitality but moving up the value chain is always a possibility. And, such an approach simply weakens their industry's ability to compete when changes evolve in markets. In any event, this strategy won't last. Something must change as we've written before. Either jobs will be pushed to inland China where labor rates are lower as it appears is an attempted strategy by the Chinese government (but transportation costs are higher) or less developed countries will be targeted by the global labor arbitrageurs or American politicians will create incentives or penalties for companies regarding their manufacturing decisions or the advancement of productivity enhancing innovations will shift certain manufacturing into developed economies to tighten the supply chain or we shall see trade wars over higher unemployment in developed economies or short-sighted corporate executives will realize much of manufacturing and labor are competitive advantages and a condition of long term viability or we shall see a resurgence in collective bargaining as a check against corporate hegemony or some combination of the above or or or. The only question is when and how.
I can assure you that political leaders across the U.S. in local, state and national government are well aware of these statistics in some form. They are far from limited to the focus state of this study. And, given the U.S. economy is the best example of a self-correcting economy, we shall see imbalances resolved in some manner be it through market forces or intervention. I did a series of posts about the industrial economy quite some time ago. And, how I ultimately expect its resurgence. Absolutely nothing has changed my perspective on this topic. In fact, I see many momentum builders continuing to develop in this direction. Some market based and some not. That doesn't necessarily mean lost jobs are coming back. It may mean innovation will drive re-employment into new areas of production growth. But, one thing is certain. Any time in history we have seen such a drastic reduction in manufacturing employment, the system has corrected itself in some manner. There is no reason to believe this time will be any different.
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