Mex­ico tak­ing US fac­tory jobs? Blame robots in­stead

Malta Independent - - TECHNOLOGY -

Don­ald Trump blames Mex­ico and China for steal­ing mil­lions of jobs from the United States.

He might want to bash the robots in­stead.

De­spite the Repub­li­can pres­i­den­tial nom­i­nee’s charge that “we don’t make any­thing any­more,” man­u­fac­tur­ing is still flour­ish­ing in Amer­ica. Prob­lem is, fac­to­ries don’t need as many peo­ple as they used to be­cause ma­chines now do so much of the work.

Amer­ica has lost more than 7 mil­lion fac­tory jobs since man­u­fac­tur­ing em­ploy­ment peaked in 1979. Yet Amer­i­can fac­tory pro­duc­tion, mi­nus raw ma­te­ri­als and some other costs, more than dou­bled over the same span to $1.91 tril­lion last year, ac­cord­ing to the Com­merce Depart­ment, which uses 2009 dol­lars to ad­just for in­fla­tion. That’s a notch below the record set on the eve of the Great Re­ces­sion in 2007. And it makes U.S. man­u­fac­tur­ers No. 2 in the world be­hind China.

Trump and other crit­ics are right that trade has claimed some Amer­i­can fac­tory jobs, es­pe­cially af­ter China joined the World Trade Or­ga­ni­za­tion in 2001 and gained eas­ier ac­cess to the U.S. mar­ket. And in­dus­tries that have re­lied heav­ily on la­bor — like tex­tile and fur­ni­ture man­u­fac­tur­ing — have lost jobs and pro­duc­tion to low-wage for­eign com­pe­ti­tion. U.S. tex­tile pro­duc­tion, for in­stance, is down 46 per­cent since 2000. And over that time, the tex­tile in­dus­try has shed 366,000, or 62 per­cent, of its jobs in the United States.

But re­search shows that the au­to­ma­tion of U.S. fac­to­ries is a much big­ger fac­tor than for­eign trade in the loss of fac­tory jobs. A study at Ball State Univer­sity’s Cen­ter for Busi­ness and Eco­nomic Re­search last year found that trade ac­counted for just 13 per­cent of Amer­ica’s lost fac­tory jobs. The vast ma­jor­ity of the lost jobs — 88 per­cent — were taken by robots and other home­grown fac­tors that reduce fac­to­ries’ need for hu­man la­bor.

“We’re mak­ing more with fewer peo­ple,” says Howard Shatz, a se­nior econ­o­mist at the Rand Corp. think tank.

Gen­eral Mo­tors, for in­stance, now em­ploys barely a third of the 600,000 work­ers it had in the 1970s. Yet it churns out more cars and trucks than ever.

Or look at pro­duc­tion of steel and other pri­mary met­als. Since 1997, the United States has lost 265,000 jobs in the pro­duc­tion of pri­mary met­als — a 42 per­cent plunge — at a time when such pro­duc­tion in the U.S. has surged 38 per­cent.

Al­lan Col­lard-Wexler of Duke Univer­sity and Jan De Loecker of Prince­ton Univer­sity found last year that Amer­ica didn’t lose most steel jobs to for­eign com­pe­ti­tion or fal­ter­ing sales. Steel jobs van­ished be­cause of the rise of a new tech­nol­ogy: Su­per-ef­fi­cient mini-mills that make steel largely from scrap metal.

The ro­bot rev­o­lu­tion is just be­gin­ning.

The Bos­ton Con­sult­ing Group pre­dicts that in­vest­ment in in­dus­trial robots will grow 10 per­cent a year in the 25-big­gest ex­port na­tions through 2025, up from 2 or 3 per­cent growth in re­cent years.

The eco­nom­ics of ro­bot­ics are hard to ar­gue with. When prod­ucts are re­placed or up­dated, robots can be re­pro­grammed far faster and more eas­ily than peo­ple can be re­trained.

And the costs are drop­ping: Own­ing and op­er­at­ing a ro­botic spot welder cost an av­er­age $182,000 in 2005 and $133,000 in 2014 and will likely run $103,000 by 2025, Bos­ton Con­sult­ing says. Robots will shrink la­bor costs 22 per­cent in the United States, 25 per­cent in Ja­pan and 33 per­cent in South Korea, the firm es­ti­mates.

CEO Ron­ald De Feo is over­see­ing a turn­around at Ken­nametal, a Pitts­burgh-based in­dus­trial ma­te­ri­als com­pany. The ef­fort in­cludes in­vest­ing $200 mil­lion to $300 mil­lion to mod­ern­ize Ken­nametal’s fac­to­ries while cut­ting 1,000 of 12,000 jobs. Au­to­ma­tion is claim­ing some of those jobs and will claim more in the fu­ture, De Feo says.

“What we want to do is au­to­mate and let at­tri­tion” reduce the work­force, he says.

Vis­it­ing a Ken­nametal plant in Ger­many, De Feo found work­ers pack­ing items by hand. He or­dered $10 mil­lion in ma­chin­ery to au­to­mate the process in Ger­many and North Amer­ica.

That move, he says, will pro­duce “bet­ter qual­ity at lower cost” and “likely re­sult in a com­bi­na­tion of job cuts and re­as­sign­ments.”

But the rise of the ma­chines of­fers an up­side to some Amer­i­can work­ers: The in­creased use of robots — com­bined with higher la­bor costs in China and other de­vel­op­ing coun­tries — has re­duced the in­cen­tive for com­pa­nies to chase low-wage la­bor around the world.

Multi­na­tional com­pa­nies are also re­think­ing how they spread pro­duc­tion across the globe in the 1990s and 2000s, when they tended to man­u­fac­ture com­po­nents in dif­fer­ent coun­tries and then as­sem­ble a prod­uct at a plant in China or other lowwage coun­try. The 2011 earth­quake and tsunami in Ja­pan, which dis­rupted ship­ments of auto parts, and the bank­ruptcy of the South Korean ship­ping line Han­jin Ship­ping, which stranded cargo in ports, ex­posed the risk of re­ly­ing on far-flung sup­ply lines.

“If your sup­ply chain gets in­ter­rupted and your raw ma­te­ri­als are com­ing from off­shore, all of a sud­den shelves are empty and you can’t sell prod­uct,” says Thomas Cau­dle, pres­i­dent of the North Carolina-based tex­tile com­pany Unifi.

So com­pa­nies have been re­turn­ing to the United States, cap­i­tal­iz­ing on the sav­ings pro­vided by robots, cheap en­ergy and the chance to be closer to cus­tomers.

“They don’t have all their eggs in that Asian bas­ket any­more,” Cau­dle says.

Over the past six years, Unifi has added about 200 jobs, bring­ing the to­tal to over 1,100, at its au­to­mated fac­tory in Yad­kinville, North Carolina, where re­cy­cled plas­tic bot­tles are con­verted into Repreve yarn. Un­manned carts criss­cross the fac­tory floor, re­triev­ing pack­ages of yarn with me­chan­i­cal arms — work once done by peo­ple.

In a sur­vey by the con­sult­ing firm Deloitte, global man­u­fac­tur­ing ex­ec­u­tives pre­dicted that that the United States — now No. 2 — will over­take China as the most com­pet­i­tive coun­try in man­u­fac­tur­ing by 2020. (Com­pet­i­tive­ness is mea­sured by such fac­tors as costs, pro­duc­tiv­ity and the pro­tec­tion of in­tel­lec­tual prop­erty.)

The Reshoring Ini­tia­tive, a non­profit that lob­bies man­u­fac­tur­ers to re­turn jobs to the United States, says Amer­ica was los­ing an av­er­age of 220,000 net jobs a year to other coun­tries a decade ago. Now, the num­ber be­ing moved abroad is roughly off­set by the num­ber that are com­ing back or be­ing cre­ated by for­eign in­vest­ment.

Harold Sirkin, se­nior part­ner at Bos­ton Con­sult­ing, says the global scram­ble by com­pa­nies for cheap la­bor is end­ing.

“When I hear that (for­eign­ers) are tak­ing all our jobs — the an­swer is, they’re not,” he says.

“If your sup­ply chain gets in­ter­rupted and your raw ma­te­ri­als are com­ing from off­shore, all of a sud­den shelves are empty and you can’t sell prod­uct

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