Government versus Business

Government versus Business

I saw this note in today’s Espresso from The Economist, “France’s finance minister pledged to save jobs under threat at General Electric’s plant in the country’s north-east. The American industrial conglomerate, which made a loss of $23bn last year, had said it would cut around 1,000 jobs. Earlier this year GE paid France a €50m ($56m) fine for failing to create jobs after it took over Alstom’s energy business.”

Meanwhile in the US, officials are taking a second look at the results of Foxconn’s supposed multi-billion dollar investments. Politicians made great PR hay in 2017 with the announcement of a large investment in Wisconsin. Two years down the road, maybe the investment may not be so large and the employment a few thousand shy.

Governments can preach and give breaks and whatever, but market forces and bad management mean much more than governments for success. Take Alstom, for example. Perhaps there is French pride involved, but GE discovered that that particular acquisition was not all that it hoped for. One of a string of GE missteps. The French government can fine all it wants, but job creation depends upon good management and proper economic tailwinds.

I recently reported on the “success” of re-shoring manufacturing jobs, as the Reshoring Initiative would have it. Most likely it’s a result of financial analysts taking a closer look at supposed savings from only low wages discovering that other costs, such as logistics, insurance, loss of intellectual property, longer lead times, inability to quickly respond to changing markets all combined to make manufacturing offshore unappealing.

Most of the ills of manufacturing society I read about have a common root cause—less than competent management. I don’t see any quick fixes for that! And it won’t come from government fines generated by disappointment at lack of political gain.

Government versus Business

Wages and the Future of Workers

Steve Levine writing in Axios Future of Work notes:

For many years, the economic rules were supported by both common sense and the data: When unemployment falls, wages rise soon after. But since the turn of the century and before, that relationship has broken down across the developed world, according to data from the OECD.

Stagnant wages aren’t just an American problem: Workers in the wealthier nations are facing similar headwinds, like declining union membership, increased competition from foreign workers in a global marketplace, and slow productivity growth. But no one knows precisely why economics are failing to observe the traditional supply-and-demand rules.

Gary’s descriptive take:

For years political and managerial attitudes have coalesced around the idea of driving down wages. Levine mentions declining union membership, for example. The political aspect was to break union power in elections toward electing Democrat candidates. Reagan recognized in the 80s (and Trump capitalized in the last election) that white male union members would vote conservative for social reasons.

I keep watching elections for years and seldom see a definitive correlation of votes and economic benefit. People surprisingly often vote against their economic benefit in favor of voting for emotional, social causes.

Twice this month I have been at technology conferences (Emerson Automation and Dell Technologies) where a top executive pronounces that the era of using technology for efficiency is over. We have likely achieved as much reduction in the workforce that will allow us to remain viable.

But I believe the mindset in top management ranks remains, “How can we ‘contain’ or drive down wages and salaries.”

Emotions and mindsets change slowly. The mechanistic law of supply and demand is powerful, but the emotional law of squeezing every last penny of cost has been bred in management DNA for 30 years. It won’t go away soon.

Gary’s prescriptive take:

I’m looking for leaders who see growth in more holistic ways. The “rising tide floats all boats” point of view. Better—the idea that all people in the organization contribute to the success of the organization and should share in the rewards.

There are leaders like that. Just too few

Government versus Business

Next Generation Workforce: Concern or Opportunity

How much should we worry about the next generation manufacturing workforce? An email came through late last week from an organization that I’d heard of but never had any dealings with—Junior Achievement. Press release was titled, “Labor Day Blues: Three-in-Four Parents and Teens Concerned Global Competition and Automation will Make it Difficult for Next Generation to Have a Successful Job/Career”.

A new survey from Junior Achievement USA (JA) shows that 77 percent of parents are “concerned” about their children’s ability to have a successful job or career as adults in light of global competition and automation. The same percentage (77%) of teens said they share similar concerns about having a successful job or career in the future because of global competition and automation. The survey of 1,204 parents of school-aged students and 1,000 teens was conducted by ORC International for JA.

So I thought, this is interesting, but is it new? My parents were worried about my future employability when I graduated from high school a long, long time ago. I probably had some concern about my kids, but I’m generally more optimistic and have higher expectations, I guess, than others. (They are both doing well.)

Just wondered if they had run this survey every year for the past 50 would there be any trend? Or, are they just rushing to capitalize on the current state of media who relishes negative news?

Then I thought about some (not all) parents I run into through my soccer work. I’ve met the “helicopter parent”. They have kids who referee soccer, too. I’d imagine parents with that mindset would be concerned—probably for the rest of their lives.

On the other hand, I wouldn’t let my optimism get in the way of preparation. The JA CEO is on the right track here.

“Education and skills are going to be critical for the next generation’s success in an ever-changing workplace,” said Jack Kosakowski, CEO of Junior Achievement USA. “Many of the entry-level jobs we know today won’t be around in the next decade, and many of the jobs of tomorrow haven’t even been conceived of yet. It’s important we encourage our young people to explore post-secondary education, whether that be a university, community college, or a technical or trade school. Having some level of technical training is going to be critical for future career success. A high school diploma or GED just won’t be enough for many jobs.”

The Future Workforce Survey

In the survey, nearly half (45%) of parents said that they were “extremely or very” concerned about their children’s prospects for future employment, while almost as many teens (40%) had the same level of concern.

The survey was conducted in conjunction with the fall rollout of Junior Achievement’s work- and career-readiness programs. For more detail on these and other JA programs, visit JA’s programs page.

Methodology

This report presents the findings of ORC International’s Online and Youth CARAVAN surveys conducted among a sample of 1,204 parents of school-aged children and 1,000 13-17 year- olds.  These surveys were conducted live from June 29 to July 6, 2017, for the parents’ portion and from July 11 to July 16, 2017, for the teens’ portion.

Respondents for this survey are selected from among those who have volunteered to participate in online surveys and polls.  Because the sample is based on those who initially self-selected for participation, no estimates of sampling error can be calculated.  All sample surveys and polls may be subject to multiple sources of error, including, but not limited to sampling error, coverage error, error associated with nonresponse, error associated with question-wording and response options.

About JA

Junior Achievement is the world’s largest organization dedicated to giving young people the knowledge and skills they need to own their economic success, plan for their future, and make smart academic and economic choices. JA programs are delivered by corporate and community volunteers, and provide relevant, hands-on experiences that give students from kindergarten through high school knowledge and skills in financial literacy, work readiness, and entrepreneurship. Today, JA reaches 4.8 million students per year in 109 markets across the United States, with an additional 5.6 million students served by operations in more than 100 countries worldwide.

–Gary Mintchell

Manufacturing Jobs In America-Part 2

Manufacturing Jobs In America-Part 2

Mobile Workers in Production PlantManufacturing jobs—will they be people or robots? Whenever I am presented with an either/or I tend to think why not both or neither. Four choices, not two. In this case, three choices since neither means no manufacturing. And every country on God’s good Earth wants manufacturing. Just check out all the government initiatives underway.

Within the past week, I’ve seen two articles in local newspapers—The Sidney Daily News and The Dayton Daily News—parroting the New York Times article about how robots take jobs away from people.

This week was the biennial edition of Automate—the trade show of Association for Advancing Automation (A3). A3 released a white paper for the show, and I had a chance to sit with two association executives, Bob Doyle and Alex Shikany, to discuss the findings and analysis leading up to the white paper Work in the Automation Age: Sustainable Careers Today and Into the Future.

“As a representative of over 1,000 companies and organizations making up the automation ecosystem, A3 believes it is critically important to clear up some of the confusion surrounding the relationship between automation and jobs,” said Jeff Burnstein, A3 president quoted in the press release. An admirable goal.

My take is that I agree with pretty much everything they found with one addition—I still believe that manufacturing enterprise executives bear much blame for problems with manufacturing in America. Such things as management-by-spreadsheet, no passion for products or customers, faddish reactions (such as unintelligent offshoring), and lack of investment.

Technology Makes Lives Better

We discussed that humans have been developing technology to increase production and make lives better probably since there were humans on earth. Recent discussions that cover only the past 250 years or so with technology advancing from steam to electricity to IT-driven human prosperity and quality of life have all advanced.

Let’s look at a summary of findings. Here are some surprising facts.

Manufacturing Jobs

More robots, more jobs.

As employers add automation technologies such as robots, job titles and tasks are changing, but the number of jobs continues to rise. New technologies allow companies to become more productive and create higher quality products in a safer environment for their employees. This allows them to be more competitive in the global marketplace and grow their business. We see this in the statistics: over the seven-year period from 2010 to 2016, 136,748 robots were shipped to US customers—the most in any seven-year period in the US robotics industry. In that same time period, manufacturing employment increased by 894,000 and the US unemployment rate decreased from 9.8% in 2010 to 4.7% in 2016.

Specifically looking at two companies, Amazon had more than 45,000 employees when it introduced robots in 2014. While the company continues to add robots to its operations, it has grown to over 90,000 employees, with a drive to hire more than 100,000 new people by the end of 2018. Similarly, General Motors grew from 80,000 US employees in 2012 to 105,000 in 2016, while increasing the number of new US robot applications by about 10,000. We see similar results from multi-national companies with thousands of employees, to small manufacturing companies.

The skills gap and its impact.

Skilled workers are key to companies’ success and countries’ economic development. Employers rank the availability of highly skilled workers who facilitate a shift toward innovation and advanced manufacturing as the most critical driver of global competitiveness. But studies show an increasing skills gap with as many as two million jobs going unfilled in the manufacturing industry alone in the next decade. Fully 80% of manufacturers report a shortage of qualified applicants for skilled production positions, and the shortage could cost US manufacturers 11% of their annual earnings.

Changing job titles reflect changing tasks.

In the automation age, as in the computer age before it, job titles shift to reflect the impact of technology. A recent study concluded that occupations that have 10% more new job titles grow 5% faster. Just as we saw the rise of entire industries around previously unheard-of job titles in cloud services, mobile apps, social media, and more, we’re seeing similar shifts in the automation age. As lower-level tasks are automated with advanced technologies such as robots, new job titles and industries arise across nearly every economic sector.

Supply and demand and wages.

In the manufacturing industry, which is the largest user of automation today, the skills gap is driving up what are already strong wages and benefits, well over the US average. In 2015, manufacturing workers earned $81,289 including pay and benefits compared to $63,830 for the average worker in all nonfarm industries. And 92% of manufacturing workers were eligible for health insurance benefits. Despite that, manufacturing executives reported an average of 94 days to recruit engineering and research employees and 70 days to recruit skilled production workers.

Bridging the skills gap with innovative training.

Automation age jobs range from well-paying, entry-level and blue-collar positions through engineers and scientists. Stable automation-age manufacturing jobs can start at $20 per hour with just a high school diploma, a few months of automation training, and professional certification. Employers, vocational schools, and universities are offering innovative training approaches that give workers alternatives to the traditional (and expensive) high-school-to-college-to-job route. And employers such as GM are revitalizing apprenticeships, recognizing the significant advantage those programs offer.

Summary

Consider this equation

Automation –> Increased Productivity –> Improved Competitive Position –> Company Growth –> More Jobs

More Robots Do Not Equal Manufacturing Job Losses

More Robots Do Not Equal Manufacturing Job Losses

The Association for Advancing Automation (A3) today published a white paper entitled “Robots Fuel the Next Wave of U.S. Productivity and Job Growth” in which data from the Bureau of Labor Statistics and a wide range of manufacturing firms document how and why increasing the use of robots is associated with increased employment.

A3 White Paper Robots and Employment

Key statistics from the A3 white paper show that during the non-recessionary periods – 1996-2000, 2002-2007, and 2010-2014 – general employment and robot shipments both increased. Since 2010, the robotics industry in the United States has grown substantially. Even during this period of record-breaking robot sales, U.S. employment increased. This new data is in stark contrast to media coverage and a perception that increasing use of robots causes higher rates of unemployment in the U.S.

At a glance:

  • Robots save and create jobs
  • Robots take care of the dull, dirty, or dangerous jobs
  • Robots extend workplace functionality, improving the bottom line
  • Robots are reviving American manufacturing
  • Robots create better, safer, higher paying jobs

“We are seeing concrete shifts in the factors that resulted in cuts to the U.S. manufacturing work force over the past few decades,” said Jeff Burnstein, president of A3. “Manufacturing automation increasingly provides the flexibility in the variety of tasks robots perform to drive improvements in overall product quality and time to market.”

Burnstein concluded, “One of the biggest challenges we now face is closing the skills gap to fill jobs. Robots are optimizing production more than ever, increasing global competitiveness, and performing dull, dirty and dangerous tasks that enable companies to create higher-skilled, better-paying, and safer jobs where people use their brains, not their brawn.”

Correlation does not equal causation

The white paper overlays graphs of robot sales and US employment. I asked Burnstein if he is trying to show causation from the correlation. He said that was not the intent. “It is not so much to show causation as it is simply to refute the argument,” he told me in an interview preceding the release. Taking the argument that robots cause unemployment, one would expect climbing robot sales to be reflected in declining employment. Statistics do not support that supposition.

Anecdotal evidence

As companies seek to bring manufacturing operations stateside while remaining cost-competitive, they continue to turn to automation to help lead the new wave of productivity and job growth in the U.S.

“The whole premise for our company is to bring manufacturing back to this country, and our new robot fits perfectly with that master plan,” said Geoff Escalette, CEO of faucet-maker RSS Manufacturing & Phylrich in Costa Mesa, California. “Our robot not only makes it possible to increase production speed without buying additional CNC machines, but also helped us open up 30 percent more capacity on existing machinery.”

Robotics also helps companies stay competitive when seeking new talent—particularly those who are interested in long-lasting careers working with technology.

“It’s really an opportunity for us to grow,” reports Matt Tyler, president and CEO of Vickers Engineering, a contract precision engineering manufacturer in Michigan. “Because we have robotics and are able to compete on a global scale, it makes the U.S. more competitive in manufacturing, and that’s good for all of us.”

The white paper includes notes from other manufacturers who both acquired additional automation and people.

The Association for Advancing Automation is the global advocate for the benefits of automating. A3 promotes automation technologies and ideas that transform the way business is done. A3 is the umbrella group for Robotic Industries Association (RIA), AIA – Advancing Vision + Imaging, and Motion Control & Motor Association (MCMA). RIA, AIA, and MCA combined represent some 850 automation manufacturers, component suppliers, system integrators, end users, research groups and consulting firms from throughout the world that drive automation forward.