Last month I attended the Vistage International Conference during which Michael Milkin presented the Milkin Institute research on the changing U.S. demographics. I was struck by the data change in the number of unskilled jobs. In 1950 there were 3 unskilled jobs for every 1 skilled job. Today, there are 4 unskilled jobs for every 1 skilled.
Michael postulates that this is the reason why the American dream is dead – it used to be you work hard and you get ahead. Today while hard work still matters, education and skills come first.
In my opinion, this also explains the sticky unemployment numbers. At the same time, my Vistage members tell me finding talented people continues to be challenging. In short there is a war for talent, while millions remain unemployed.
You might ask, so what is the leadership question? Isn’t this a global problem, not a leadership topic?
Here are my leadership related wonderings:
- At what point does it become cost effective for companies to create their own educational programs?
- When and how will it become cost effective for small/mid-sized companies to provide training via entry level unskilled jobs?
- As robots continue to replace workers, what will be the impact on small/mid-sized companies capital requirements?
- As the mismatch between job opportunities and qualified employees grows, how might this impact both immigration and emigration?
- As the world becomes less dependent on geography, how might employers match their jobs with qualified individuals worldwide?
Having spent quite a bit of time in manufacturing businesses I have had a very close perspective of the migration of jobs to Asia (esp. China), and internal international thinking about migrating those jobs to Thailand and in some cases back to the U.S. A few quick thoughts:
– The cost difference for shipping across the Pacific is catching up to the labor savings
– The benefit of being able to quickly adapt to changing demand by varying supply and/or product features is not understood in a comprehensive way in many large companies. The write-off of excess inventory is managed by someone different than the person who is in charge of minimizing unit cost. The traffic person is yet a third party. Potentially, the person responsible for lost sales from not having the right product available at the right time is a fourth person. When all of this is looked at comprehensively, the U.S. is already competitive in many cases. Unfortunately, many functionally organized companies either have trouble seeing this, or they have trouble constructing a holistic sourcing strategy.
– The American worker is becoming competitive (in part) precisely because automation is reducing the labor content of U.S. manufacturing. So, these are not really opposing forces, they are really synergistic and should be encouraged and welcomed. Of course, on the surface it doesn’t seem this way when a U.S. workers loses his/her job to a robotic machine.
– In addition, generally more labor hours are needed for the same activity in lower cost countries (for many reasons, including education level and the level of accountability the worker has for the construction of his/her job). This is separate from and in addition to the effect of automation. I have personal experience with a U.S. factory requiring less than 50% of the manpower to do the same work with the same equipment as a factory in Asia. So, this effectively doubles the hourly rate of work in Asia.
Summing this all up, I don’t think that manufacturing is permanently lost – at least not on higher cost products. Also, in the end the goals of the worker and the company (including automation) should be aligned, even though this is sometimes hard for either party to see.
Thank you for your insightful comments. This question about American manufacturing comes up frequently in my Vistage groups. As all businesses become more efficient, the question for me becomes less about what stays in the U.S. and more about what happens to U.S. unskilled workers. How do they become skilled or where do they go for work?