The Technology Review has been debating for some time over the significance of manufacturing for the creating of jobs. The debate was set off by an article written by Andy Grove, the founder of Intel, who pointed out the role of manufacturing as a fundamental element for the growth of the American economy.
The discussion soon widened in scope with new input, especially from the United States, from the likes of Erika Fuchs (Carnegie Mellon University, Pittsburgh) and Willy Shih (Harvard Business School). Erika Fuchs demonstrates how the shifting of manufacturing towards countries with low labor costs is not only causing a significant loss of employment in the US, but also a certain depletion of the country’s capacity for innovation. The United States needs the “factory experience” to nurture and develop new ideas and products. Willy Shih similarly maintains that the ability to innovate often disappears when a country loses its manufacturing sector, because the know-how and technical abilities needed for the development of new technologies are often directly linked to the talent and experience gained from working in the factory. An example of this theory can be seen in photovoltaics. Up until ten years ago, only one of the world’s top five solar panel producers was Chinese, and it was not the leader in terms of technology. Today, four of the top five are Chinese, and their technology is among the best. This is due to significant government incentives and subsidies for factories in the sector, and the subsequent influx of innovation generated by the new experiences in manufacturing.
Apple, who produces nearly all of its products in Foxconn’s Chinese factories to the tune of 250,000 employees, is implicitly accused by this argument. Apple has responded, stating that its own innovation has hardly ceased, and this is true, but mostly because the value of its products lies in the design, software, and an extraordinary web-based collaborative business model. The fact that Apple does not intend to abandon its partnership with Foxconn, now that its push for the robotization of its factories has mostly negated the advantages of cheap labor, demonstrates that there can be other reasons for the delocalization factories. Foremost among these reasons is the benefit of having access to one of the most efficient supply chains in the world, and the ability of Foxconn to mobilize unparalleled production capacity on short notice.
Apple’s case aside, the idea that manufacturing is fundamentally important for both employment and innovation is gaining support in the United States. It has been heard in the government, which has tried many ways to incentivize the return of factories from abroad. One shining example can be found in the automotive sector, where an uptick in stimulus for investment in “retooling” (the modernization of manufacturing machinery) has contributed to the return of specifically trained skilled labor and a resurgence of innovation in terms of models and technology.
The fight against unemployment, however, is now being discussed from another point of view, the apparently old fashioned concern that technology is replacing skilled labor. From the beginnings of the Industrial Revolution, the loss of jobs to machines has given rise to at times violent resistance by Luddites, but these lost jobs have always been replaced by new roles that have more than compensated for those lost. Today we are living a similar phenomenon, where the digital revolution is systematically, and rapidly, causing the disappearance of entire categories of occupation (bank tellers, travel agents, technical illustrators, accountants, even young lawyers are being replaced by automated software that combs legal databases), while relatively few new jobs are being created, certainly not enough to replenish those whose jobs have been “digitalized.”
In an interesting opinion piece in the New York Times, Tom Friedman underlines the fact that unemployment is higher in areas where education levels are lower. 13.8% for those who have not completed high school, to 8.7% for high school graduates, to 4.1% for Bachelor’s degree holders. Friedman notes that digital technology tends to expand and replace the jobs of the undereducated much more quickly. This is nothing new, and this is made clear in David Talbot’s article here. But when a concept is exposed to the vast readership like that of the New York Times by a “guru” like Tom Friedman, it then becomes a “scoop,” and public attention skyrockets. The theme becomes less about the obvious necessity for investment in education, and more about how to create a decent occupation for the many people who would like to have a “nine to five” job without needing a college degree.
In reality Tom Friedman is in agreement with MIT economist and 2010 Nobel Prize winner Peter Diamond, and Erik Brynjolfsson and Andrew McAfee of the Center for Digital Business at MIT’s Sloan School of Management. “A classically trained economist would say: ‘This just means there’s a big adjustment taking place until we find the new equilibrium—the new stuff for people to do.’ ”We have undoubtedly adapted to these kinds of changes in the past, but whereas advances in agricultural technology were distributed over the arc of a century and the distribution of electricity and industrialization took places over the course of decades, maintain Brynjolfsson and McAfee, today “the efficiency and advantages of automation, made possible by information technology, are advancing too quickly for the job market to keep up.”
And so we have before us two equally important issues to face, in order to find a solution to unemployment: the recovery of manufacturing jobs that have emigrated, and the development of alternative activities for those who have had their jobs made redundant by software.