Among the number of plant closings announced in the United States this week: A printing plant in Greenburg, Ind., costing 220 jobs; a tomato processing plant in Westover, Md., with 103 people fired; an office-supply facility in Mattoon, Ill., with 129 jobs lost.
None of these companies are going out of business. They are outsourcing.
Generally regarded by economists as a good thing — the ability to create goods at lesser cost, passing those savings on to the consumer and allowing the economy to create ever-more sophisticated jobs and goods — outsourcing, in this recession, has highlighted America’s most intractable problem: the permanent loss of blue-collar jobs.
“Economists have been talking about this for years,” says Daron Acemoglu, professor of economics at MIT. “Occupational polarization has been very visible in the data, accompanied by wage polarization.”
It’s been an unstoppable 30-year trend, linked and launched by our supersonic technological progress.
“There are fewer middle-skilled jobs in the US,” he says. “Autoworkers in the 1960s could have a high-school degree and good training, and make a relatively attractive salary.”
No longer, and never again.
It’s astonishing to realize that the most iconic American totems — such as the baseball, Levi’s jeans, the actual American flag — are no longer made in the USA, and haven’t been for a very long time.
And yet, most economists will tell you that this is a good thing.
“It is unqualifiedly positive,” says Aneel Karnani, assistant professor at the Ross School of Business at the University of Michigan. “We, as a country, should be doing high value-added work versus low value-added work. We don’t want to be making shoes — we’re making pharmaceuticals, software, high-tech cars. That’s how you become a rich country.”
His most recent favorite example: a DVD player he bought for $40.
“That is a very complicated device,” he says. “But we are outsourcing to a place that makes it cheaper. It is the case that the middle class in the US is getting squeezed, and globalization partly contributes to that. But the bigger force is technology.”
Despite the crushing number of plant closings in the US over the past few years — there is even a publication called Plant Closing News, which costs $999 for a yearly subscription — manufacturing in the US is not totally gone. But automation and technology means that the factory worker of the 21st century will not find work without a college degree. He will not be making a car; he will be designing and installing computer software for Apple or Microsoft.
Until, that is, a robot is doing it for him. Robots have already supplanted many of today’s unemployed, and a study released this week by UCLA’s Anderson School of Business reported that “displaced workers are likely to have a difficult time finding jobs elsewhere partly because the jobs will remain scarce and partly because of a mismatch between the skills and abilities offered and the skills and abilities needed.”
The study, written by Edward Leamer, also found that companies have easily been able to grow without hiring more people: Productivity has gone up as hours worked have gone down.
He predicts a 3% growth in GDP while unemployment remains high.
“There are a large number of people in the labor force, the 25-30% in manufacturing, looking at their skill set becoming obsolete. And because they’re middle-aged, it’s harder to learn a new set of skills,” says Polina Vlasenko, research fellow at the non-partisan American Institue of Economic Research.
So what becomes of the 45-year-old toll taker replaced by the E-ZPass?
Or the 50-something cashier replaced by a self-service scanner, each worker without a college education and with a limited skill set?
“You have to get more educated,” Karnani says. “That’s a little glib, I agree. We all can’t become MBAs or Ph.D.s and so on. The toll taker can’t become a software designer. We have to put a lot of emphasis on retraining and re-education — that’s where the US is doing a poor job, but that’s the long-term solution.”
Education itself is both the cause of and solution to this very problem: The best higher education is available to those who qualify — who had solid K-12 — and who can afford it. “Education is very elitist, and that’s problematic,” says Karnani. “Harvard claims anybody can go there — that’s not true. Ninety percent of the student body is the upper quintile of the population. Upward mobility is decreasing. Technology is polarizing society, dividing the educated and the less educated.”
The lost generation of American workers — low-educated, low-skilled, too old to be retrained, too young to retire — has led to the fear of a permanent underclass, the idea that the US will eventually become like much of Europe, subsidizing 10% of the under- or unemployed population.
“I would hate for a permanent underclass,” Karnani says. “The child of a janitor should be able to go to college.”
“A permanent underclass is one possibility,” Vlasenko says. “But here’s the other: Let’s imagine that four years from now, there’s 15% of the labor force that’s under- or unemployed. That’s a large pool of labor that’s available and probably quite cheap. If it becomes profitable enough to employ those people productively without needing high-level skills — whoever figures that out will make a lot of money.”
Yet all these solutions offered — retraining, more affordable education, moving middle-aged blue-collar workers into a whole other sector — are completely amorphous, long-term solutions that will not in any way impact the discarded manual laborer of this decade.
“This is true,” says MIT’s Acemoglu. “And any simple solution is bad. Banning outsourcing is a bad idea, and it’s only temporary. You cannot stop technology, and you don’t want to.”
“Free markets are pretty cruel,” Karnani says. “Totally free markets come with income inequality, and we need to temper that. We are a society founded on the pull-yourself-up-by-your-bootstraps philosophy, but it’s not, ‘total free markets or total socialism.’ Even the Republicans don’t want a totally free market — they wanted the bailout of the banks. So as we get more fortunate as a country, we should be more compassionate. Our hypothetical toll-taker — we, as a society, have to show her more compassion, that she got caught up in this.”
AMERICAN ICONS … MADE ABROAD
The American flag
Like most everything else, it’s now made in China. The amount of money spent importing flags in the month after 9/11: $34.8 million.
The baseball
Hasn’t been made in America since 1969. Rawlings now manufactures out of Costa Rica.
The Radio Flyer red wagon
Invented in Chicago in 1923, the wagon is synonymous with an all-American childhood. In 2004, the company moved production to China.
Mattel toys
Most of these are made in China; the California-based company shut down its last US plant eight years ago.
Cellphones
The first cellphone call was made in New York, in 1973, by its inventor, Martin Cooper. As of 2008, not a single one of the world’s 1.2 billion were made in the USA.
The incandescent light bulb
Thomas Edison’s greatest invention has been outlawed by Congress — by 2014, all incandescent bulbs will be gone. The last big US factory closed three months ago; there is one small plant left in Pennsylvania.
The TV
American Philo Farnsworth invented the first fully functional television in 1927, transmitting his first image from his lab in San Francisco. A television hasn’t been made in America since 2004.
Converse sneakers
Once the shoe of choice for otherwise non-conformist American teens, Converse, founded in 1908, was bought by Nike in 2003 for $305 million. Today, the shoes are made in Indonesia.
Source: BusinessInsider.com