Thursday, February 04, 2010

Mr. President, Automate Manufacturing!

The centerpiece of Obama's job plan is green technology and renewable energy. The idea is to focus on a critical need and develop a domestic industry that will both make us less dependent on foreign oil and create new jobs. It is a nice idea, but it will not create jobs on a large scale. There may be a new job sector in research and development, but the manufacturing jobs will go to China. The Obama plan doesn't address the fundamental economic challenge for the United States: manufacturing labor in China costs $4,700 per year. As long as labor costs that much less, labor intensive businesses will not survive without sending manufacturing jobs to China. This will apply as much to green manufacturing as any other labor intensive operation. China's manufacturing sector will be the ultimate beneficiary of our renewable energy stimulus dollars, not the US. The irony is that we will spend tax dollars to develop intellectual property (IP) in the US, and as with software, pharmaceuticals, and other IP intensive industries, that will mean a few very highly qualified jobs here, and a host of manufacturing jobs there. What to do then? The answer is to make manufacturing automation the focus of economic stimulus and incentive. Simply reduce the amount of labor associated with manufacturing, and it will reduce the pressure to offshore the manufacturing process. The cost of transport, the IP risks, and the proximity to major design centers will overtake labor cost in significance and make the US a dramatically more attractive manufacturing economy. But, the unions will resist this idea. Automation and efficiency are old rivals for organized labor. But labor needs to recognize that offshoring means zero jobs here, and automation means fewer but not zero. Indeed, jobs in a highly automated manufacturing industry offer higher quality of life and higher pay. Look at the Longshoremen who have gone from lugging crates to operating container cranes. Look at semiconductor production in the US. These are excellent jobs. The US population is small compared to the world. If we want to be a world supplier, each of our laborers needs to have 10 or 100 times the output of laborers in China and other low cost areas. Automation is the only way to deliver that kind of productivity advantage. If we out compete we will capture more than enough work to sustain our working class. The good news is our relatively small population can be fully employed even with a highly automated manufacturing sector, precisely because our population is dwarfed by the rest of the world. Invest stimulus to increase manufacturing automation in all sectors, and we'll create more jobs in construction, infrastructure, and all other supporting industries. The government needs to spur this investment because there is little incentive for businesses to do so - offshoring is easy and doesn't require the R&D that automation does. Instead of pushing to capture one manufacturing industry - green technology - we need to change manufacturing itself. Automate to save American jobs.