In my column this week, I wrote about the terrible conditions at factories in China where Apple’s iPhones and iPads are made. The impetus was a groundbreaking pair of stories in The New York Times about how the iPhone is manufactured and why it’s not made here.
In this post, I want to focus on why Apple and other manufacturers have moved so many jobs overseas that much of the US workforce hasn’t benefited from innovations originated in the US.
Why does Apple do almost all its manufacturing in China? Yes, labor costs are much lower—about $20 a day at the main Foxconn plants. But that’s not the whole story, as The Times pointed out:
“The entire supply chain is in China now,” said another former high-ranking Apple executive. “You need a thousand rubber gaskets? That’s the factory next door. You need a million screws? That factory is a block away. You need that screw made a little bit different? It will take three hours.”
So, China has attained critical mass in fast, efficient, high-volume manufacturing. So, when the late Steve Jobs demanded new, unscratchable glass screens be added to the iPhone–“I want a glass screen, and I want it perfect in six weeks,” he reportedly said—an Apple exec got on a plane to Shenzhen because “if Mr. Jobs wanted perfect, there was nowhere else to go….”
The Chinese government had agreed to underwrite costs for numerous industries, and those subsidies had trickled down to the glass-cutting factory. It had a warehouse filled with glass samples available to Apple, free of charge. The owners made engineers available at almost no cost. They had built on-site dormitories so employees would be available 24 hours a day.
We’ll get back to the Chinese government later, but there’s another big issue—the skill set of the workforce.
Another critical advantage for Apple was that China provided engineers at a scale the United States could not match…In particular, companies say they need engineers with more than high school, but not necessarily a bachelor’s degree. Americans at that skill level are hard to find, executives contend.
In other words, the US simply isn’t preparing people for the jobs that do exist, or would exist, here if there were enough people trained to do them.
So, I have three conclusions:
- Labor-intensive, low-end manufacturing jobs are gone forever. You simply can’t replicate the Shenzhen supply chain in the US, nor should we pay people $20 a day, as they do there. The global economy has moved on, so clothing, textiles, and most consumer electronics products will be made in China or other places from now on.
- The Chinese government has richly subsidized many of these factories to do things that otherwise would be deeply unprofitable. Surely some of this must be illegal under the World Trade Organization agreement, whose admission of China in 2001 opened the floodgates. The US needs to monitor this closely and pick smart battles in the WTO, because it’s a tough place to win claims and we don’t really want a trade war with China.
- We must better coordinate the needs of private employers and the resources of educational institutions. None of the Republican candidates have discussed this, because it’s all about guv’mint, which the GOP base loathes. President Obama has talked about it a lot, but it has to be part of a coordinated plan that could get through Congress—a big, big challenge. Community colleges are key here, because they can provide much more targeted vocational education than the head-in-the-clouds four-year colleges can.
What do you think? How can we bring back some of these jobs to the US—or create new ones? Please make a comment and have your say.