With the U.S. presidential election entering the home stretch, hyperbole about the decrepit state of American manufacturing has reached a fever pitch.
With deserted, dilapidated factories as their backdrop, Donald Trump and Hillary Clinton talk about lost jobs. They promise to bring them back.
But they won’t – because they can’t.
Long gone is the era when brigades of workers tightened bolts and forged steel. Modern industry is about Big Data, analytics, robotics, 3-D printed prototyping and new interfaces, like augmented reality.
Consultants call it Industry 4.0, and it makes political speechmaking about globalization patently ridiculous.
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You can’t blame politicians for trying. They are forever looking for easy fixes, trying to turn back time. Yet, as Binyamin Appelbaum writes in a recent article in The New York Times Magazine:
“In the years after World War II, factory work created a broadly shared prosperity that helped make the American middle class. … But the value of stuff made in America reached a record high in the first quarter of 2016, even after adjusting for inflation. The present moment, in other words, is the most productive in the nation’s history.”
That’s the hard truth. Businesses in the U.S. still make a lot of stuff. They just need far fewer people. And they will be further incentivized to cut payrolls as digitization and the Internet of Things reach scale.
eventually the humans will all be gone.
In 2012, Amazon (AMZN) bought a robotics company called Kiva Systems for $775 million. The online retailer now has 30,000 of that company’s diminutive robot helpers roaming the floors of 13 warehouses. Costs have been cut by an average of 20%, or $22 million per location. Deutsche Bank analysts believe that deploying the robots across all of Amazon’s 110 sites could lead to savings of $2.5 billion.
In 2015, Alcoa (AA) invested $60 million in a Pittsburgh 3-D printing research facility to develop new metal fabrication processes for the labor intensive automotive and aerospace sectors. General Motors (GM) is using 3-D printing for rapid prototyping to drastically reduce the time from the drawing board to market. Again, the goal is to reduce man-hour costs.
General Electric (GE) and Swiss automation giant ABB have made tremendous strides bringing Big Data, predictive analytics, and cutting-edge robotics to factory floors all over the world. The result has been better products and lower payrolls.
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None of this truth will stop politicians from promising to bring back factory jobs that have already been whisked away by digitization and automation. Republican nominee Donald Trump often claims he will bring iPhone factories to U.S. shores.
Perhaps Trump is unaware of how few people those Chinese factories now employ. Or perhaps more importantly, he’s unaware that through the end of last year, Apple’s domestic payroll was already over 66,000.
Stomping out globalization will not bring back manufacturing jobs. Most no longer exist. While that does not make for good sound bites, it is the basis of sound policy.
Best wishes,
Jon Markman
