Even If Apple’s iPhone Manufacturing Came to America, the Jobs Wouldn’t

 

foxconnFirst, this headline in a Washington Post op-ed by Vivek Wadhwa: “Trump’s demand that Apple must make iPhones in the U.S. actually isn’t that crazy.”

Well, maybe not that crazy if you don’t care who might assemble those iPhones. Actually, not “who” but “what.” If POTUS Trump could somehow coerce Apple into moving manufacturing to the US, it might not be humans getting those jobs. Wadhwa:

When American companies moved manufacturing to China, it was all about cost. China’s wages were amongst the lowest in the world and its government provided subsidies and turned a blind eye to labor abuse and environmental destruction. Things have changed. China’s labor, real estate, and energy costs have increased to the point that they are comparable to some parts of the United States. Subsidies are harder to get and Chinese labor is not tolerating the abuse that it once did. China is now a more expensive place to manufacture than Indonesia, Thailand, Mexico, and India according to Boston Consulting Group. … Technology is, however, changing the labor-cost equation even more and China is becoming unpredictable because of its faltering economy. It may make sense for Apple to locate some of its manufacturing closer to other markets just to protect itself from this uncertainty. …

What is changing the labor situation is robotics. Robots can now do the same manufacturing jobs as humans — for a fraction of the cost. A new generation, from companies such as Rethink Robotics of Boston, ABB of Switzerland, and Universal Robots of Denmark, are dexterous enough to thread a needle and nimble enough to work beside humans. They can do repetitive and boring circuit board assembly and pack boxes. These robots cost less than $40,000 to purchase and as little as a dollar per hour to operate. And unlike human workers, they will work 24-hour shifts without complaining.

There you go. The era of cheap labor is over. As it is, Chinese manufacturing employment looks to have peaked more than a decade ago. Beijing realizes this and is making a big automation push. As I have written, “So when Trump says he wants to force Apple to make its products in America, what he’s really unintentionally saying is that he wants American robots to do the work of Chinese robots.”

I don’t think this is what some Trump supporters are counting on. As Wadhwa adds, Apple’s manufacturing partner Foxconn might build a $10 billion iPhone facility in India: “India does have a labor cost advantage over the US but robots could eliminate this. Similar manufacturing facilities could be set up in the United States, product by product.”

Products manufactured by robots, that is. Not that zero human jobs would be created in the process. But the story of manufacturing is one of greater productivity through automation. We are not returning to mass manufacturing employment. The 1960s ain’t coming back.

An illustrative chart (although one that overstates the decline on factory jobs) from my colleague Mark Perry:

051716manufac

For more on this: “China, Apple, and Donald Trump’s economic nostalgia.”

There are 29 comments.

Become a member to join the conversation. Or sign in if you're already a member.
  1. I Walton Member
    I Walton
    @IWalton

    The idea that we can micro manage manufacturing and its logistics from the Oval office is demented.  Those who think some technocratic elite could do it centrally aren’t much brighter.  Even logistics and manufacturing decisions within the companies emerge after much trial and error as technology costs and prices change.  Doing it by government fiat for the entire economy would give us error, no correction, and what emerges can’t be known.  Doing it for select companies would be arbitrary corrupt extortionist crony capitalism of the worst kind.  Is this where we’re headed?  We’ve got to get some adults in the cabinet.

    • #1
  2. KC Mulville Inactive
    KC Mulville
    @KCMulville

    It’s a classic prisoner’s dilemma. The group as a whole is responsible for a collective good, but no individual group-member is required (or punished) for not contributing to the collective good. In this case, “business” as a whole is what the job market depends on, but no individual business is responsible for generating jobs. In fact, businesses have been increasing productivity, which eliminates jobs.

    The simple logic is that whereas each employer isn’t responsible for giving jobs, the cumulative effect of elbowing out mass job-makers out of the economy leads to fewer and fewer consumers. After all, if your customer base is all out of work, they can’t afford your products anyway.

    Sooner or later, fewer jobs means fewer consumers, and unless you find jobs somewhere, eventually it means all your productivity gains will go to waste, because it’ll be offset by the fewer consumers who can buy your product.

    So… where will new jobs come from?

    • #2
  3. She Reagan
    She
    @She

    KC Mulville:It’s a classic prisoner’s dilemma. The group as a whole is responsible for a collective good, but no individual group-member is required (or punished) for not contributing to the collective good. In this case, “business” as a whole is what the job market depends on, but no individual business is responsible for generating jobs. In fact, businesses have been increasing productivity, which eliminates jobs.

    The simple logic is that whereas each employer isn’t responsible for giving jobs, the cumulative effect of elbowing out mass job-makers out of the economy leads to fewer and fewer consumers. After all, if your customer base is all out of work, they can’t afford your products anyway.

    Sooner or later, fewer jobs means fewer consumers, and unless you find jobs somewhere, eventually it means all your productivity gains will go to waste, because it’ll be offset by the fewer consumers who can buy your product.

    So… where will new jobs come from?

    Not from the government, that’s for sure.

    I suspect that if some of the strictures were taken off, good old Yankee ingenuity would find a way to invent and create lots of new jobs, many of which robots just wouldn’t do.   Less mass market. More localism.

    • #3
  4. Frank Soto Contributor
    Frank Soto
    @FrankSoto

    KC Mulville:It’s a classic prisoner’s dilemma. The group as a whole is responsible for a collective good, but no individual group-member is required (or punished) for not contributing to the collective good. In this case, “business” as a whole is what the job market depends on, but no individual business is responsible for generating jobs. In fact, businesses have been increasing productivity, which eliminates jobs.

    The simple logic is that whereas each employer isn’t responsible for giving jobs, the cumulative effect of elbowing out mass job-makers out of the economy leads to fewer and fewer consumers. After all, if your customer base is all out of work, they can’t afford your products anyway.

    Sooner or later, fewer jobs means fewer consumers, and unless you find jobs somewhere, eventually it means all your productivity gains will go to waste, because it’ll be offset by the fewer consumers who can buy your product.

    So… where will new jobs come from?

    Jobs are in the service sector. Now you might complain that these jobs pay less well than manufacturing jobs used to, however the increased Automation in manufacturing means that goods are cheaper than they otherwise would be. On the net we are far better off then in the other point in the nation’s history despite the loss in manufacturing jobs.

    As robotics get even better you might worry that more and more advanced jobs will be replaced. At some point you can envision 80% of the workforce being unemployable. This is potentially disastrous but not necessarily so. When you do reach a point where are machines are building the new machines and fixing the old machines your output potential is almost unlimited. Scarcity will essentially cease to exist.

    Now you may have numerous moral concerns about a human race that does almost no work. What you do not have to worry about over the long term is a world where people are getting poorer.

    • #4
  5. KC Mulville Inactive
    KC Mulville
    @KCMulville

    Frank Soto: At some point you can envision 80% of the workforce being unemployable. This is potentially disastrous but not necessarily so. When you do reach a point where are machines are building the new machines and fixing the old machines your output potential is almost unlimited. Scarcity will essentially cease to exist.

    Perhaps, but then, how will that abundance reach individuals? After all, they won’t have jobs. If they aren’t working, society will inevitably need some other basis by which the products are distributed. Which means that producers (who aren’t going to produce out of the kindness of their hearts) are going to decide for themselves how much to distribute, and to whom.

    One social function of a job is that it allows a worker to earn his keep by performing according to an objective standard. If you take that objective standard away, you’ll inevitably have to rely on whatever subjective standards that the producer decides.

    When it comes to subjective standards … what could go wrong?

    • #5
  6. David Foster Member
    David Foster
    @DavidFoster

    A little historical perspective would be useful.  Robots aren’t exactly new.  A Jacquard Loom, circa 1800, is a robot.  Numerically-controlled machine tools were widely adopted in the 1970s, and indeed were greeted with much the same hype level we see re today’s robots, AI, and 3D printing. Automated process control systems in oil refineries, etc, also led to much overstated hype. Many forms of assembly robotics have been around for a long time.

    We will not see a return to 1978 manufacturing employment levels, but we should have a lot more than we do.  A Chinese factory employing 5000 workers may be replaced by a much more productive plant employing 1500 workers; it is unlikely that it will be replaced by a plant employing 50 workers.

    BTW, the chart is a little misleading unless you look carefully and notice the offset scale for employment.

    • #6
  7. Frank Soto Contributor
    Frank Soto
    @FrankSoto

    KC Mulville:

    Frank Soto: At some point you can envision 80% of the workforce being unemployable. This is potentially disastrous but not necessarily so. When you do reach a point where are machines are building the new machines and fixing the old machines your output potential is almost unlimited. Scarcity will essentially cease to exist.

    Perhaps, but then, how will that abundance reach individuals? After all, they won’t have jobs.

    Imagine a world where a new car costs nothing, because machines mine the asteroid belt for effectively unlimited raw materials, and then transport those raw materials back to earth, where other machines build the vehicle, and the car itself drives to your front door.

    It can be difficult imagining a world with unlimited labor output, because such a thing was impossible to envision until recently.  It’s eventually going to happen.

    • #7
  8. KC Mulville Inactive
    KC Mulville
    @KCMulville

    Frank Soto:It can be difficult imagining a world with unlimited labor output, because such a thing was impossible to envision until recently. It’s eventually going to happen.

    Fair enough, but we live in the interim. And at the moment, we still depend on jobs. As we’re seeing, there’s less and less incentive for business owners to generate jobs, when productivity and automation is cutting the need for human bodies. Maybe that prisoner’s dilemma will abate in the future, but it remains a dilemma at the moment.

    What do we do now?

    • #8
  9. Frank Soto Contributor
    Frank Soto
    @FrankSoto

    KC Mulville:

    Frank Soto:It can be difficult imagining a world with unlimited labor output, because such a thing was impossible to envision until recently. It’s eventually going to happen.

    Fair enough, but we live in the interim. And at the moment, we still depend on jobs. As we’re seeing, there’s less and less incentive for business owners to generate jobs, when productivity and automation is cutting the need for human bodies. Maybe that prisoner’s dilemma will abate in the future, but it remains a dilemma at the moment.

    What do we do now?

    For now there are still plenty of jobs.  Service jobs may not be as well respected as manufacturing jobs were, but innovation has meant that you can do more with less money.

    There is a question of what happens if job replacement hits critical mass before automation is sufficiently advanced that capitalism as we know it ceases to exist.

    Odds are we will respond with ever increasing government handouts. Have to hope that output is increasing fast enough to cover it.  It’s not ideal, but there is no backing this train up.

    • #9
  10. KC Mulville Inactive
    KC Mulville
    @KCMulville

    Frank Soto: It’s not ideal, but there is no backing this train up.

    With that, I probably agree.

    However, the other night, I happened to see an episode of Bob Massi, the Property Guy on Fox. (Massi is basically a semi-entertaining real estate guy who gives homeowner advice, but he also talks about the housing market in general.) That particular episode focused on Disney World.

    Disney World is a huge employer, not just for the employers who work in the park, but also the multiplier effect of taking care of all those employees, not to mention the millions of visitors. Massi was talking about the Orlando housing market, but he could have just as well been talking about all businesses, not just housing.  All of the housing, all of the business, and all of the economy starts with what Disney sells: i.e., Fun. Fun can be an enormous business multiplier.

    Now, of course, Hollywood sells entertainment. Vegas sells entertainment. Europe sells Old World charm, which is really the same thing. It occurs to me that whereas the need for individual products will come and go, the desire for fun and entertainment is bottomless and inexhaustible.

    It’s also intangible. And what struck me, the other night, is how tangible things are sucked into the same manufacturing prisoner’s dilemma – but intangible things like Fun might resist the dilemma.

    Then I had to admit that it probably also explains porn. Ah well.

    • #10
  11. PHCheese Inactive
    PHCheese
    @PHCheese

    I never hired a person to give them a job. I hired someone to make me money. The harder that becomes the less likely I am to hire anyone. Trump or no Trump.

    • #11
  12. David Foster Member
    David Foster
    @DavidFoster

    If imports/offshoring become more prevalent, then–even if there are no technological or skills-based improvements in manufacturing whatsoever–the ratio of employment to output will almost certainly fall.  Reason: the production types with lowest labor productivity and consequent higher unit labor costs will be those most attractive for importing/offshoring.

    Example:  There are 1000 workers producing $70K/year each, and another 1000 workers producing $130K/year each.  Average productivity = $100K/year/worker.

    Now container freight is invented, and/or tariffs are reduced.  The jobs producing $70K/year are ousourced, or are displaced by imports.  Resultant labor productivity is now $130K/year/worker.  It would be inaccurate to assume that this was driven by automation of manufacturing.

    • #12
  13. Big Green Inactive
    Big Green
    @BigGreen

    KC Mulville:It’s a classic prisoner’s dilemma. The group as a whole is responsible for a collective good, but no individual group-member is required (or punished) for not contributing to the collective good. In this case, “business” as a whole is what the job market depends on, but no individual business is responsible for generating jobs. In fact, businesses have been increasing productivity, which eliminates jobs.

    The simple logic is that whereas each employer isn’t responsible for giving jobs, the cumulative effect of elbowing out mass job-makers out of the economy leads to fewer and fewer consumers. After all, if your customer base is all out of work, they can’t afford your products anyway.

    Sooner or later, fewer jobs means fewer consumers, and unless you find jobs somewhere, eventually it means all your productivity gains will go to waste, because it’ll be offset by the fewer consumers who can buy your product.

    So… where will new jobs come from?

    History tells us that this is almost always an unfounded concern, the solutions to which are generally a huge waste of money and resources.  Let the market work.  I understand that these adjustments are painful for some people (which a reasonable debate can be had about what, if anything, should be done to alleviate it), but grand government plans about to “maintain” a fixed number of jobs in industry is a colossally bad idea.

    • #13
  14. Valiuth Inactive
    Valiuth
    @Valiuth

    David Foster:If imports/offshoring become more prevalent, then–even if there are no technological or skills-based improvements in manufacturing whatsoever–the ratio of employment to output will almost certainly fall. Reason: the production types with lowest labor productivity and consequent higher unit labor costs will be those most attractive for importing/offshoring.

    Example: There are 1000 workers producing $70K/year each, and another 1000 workers producing $130K/year each. Average productivity = $100K/year/worker.

    Now container freight is invented, and/or tariffs are reduced. The jobs producing $70K/year are ousourced, or are displaced by imports. Resultant labor productivity is now $130K/year/worker. It would be inaccurate to assume that this was driven by automation of manufacturing.

    But the numbers on the graph seem to be totals, rather than a per worker basis. Even if you are arguing that we in fact make less goods in a per widget basis, what we do make seems to be more valuable.

    • #14
  15. TKC1101 Inactive
    TKC1101
    @TKC1101

    I honestly wish that economists would spend sometime in the industries they claim to understand.

    The jobs in final assembly are small compared to all the suppliers that provide parts and components which also located in China. If you locate final assembly here, you open up opportunities up the supply chain for a large number of suppliers who are not as easily robotisized.

    • #15
  16. Valiuth Inactive
    Valiuth
    @Valiuth

    I think people always have a limited view of labor. 200 years ago who could imagine that you would be paid to sit on a seat all day typing? In a world where physical labor becomes so cheap as to be beneath human effort we will see more people engaging in creative work. We will be a nation of philosophers and artists. We started off as hunters and gatherers, then we became farmers and herders, then clerks and machinists. The question I have is what is beyond artists and philosophers?

    • #16
  17. Valiuth Inactive
    Valiuth
    @Valiuth

    TKC1101:I honestly wish that economists would spend sometime in the industries they claim to understand.

    The jobs in final assembly are small compared to all the suppliers that provide parts and components which also located in China. If you locate final assembly here, you open up opportunities up the supply chain for a large number of suppliers who are not as easily robotisized.

    Well the most valuable part of the iPhone is already made in the US which is the software and apps. Also just because jobs can not be  easily automated today that does not mean they will not be, so you still have the same problem in the end.

    • #17
  18. Fake John/Jane Galt Coolidge
    Fake John/Jane Galt
    @FakeJohnJaneGalt

    First there would be new jobs.  To suggest there would not be any new jobs created is silly.  Second and maybe more important.  The knowledge and experience to create the products would be in the US.  That knowledge and experience would allow for the creation of spinoff and derivative technologies.  Those would in turn create even more jobs and so the wheel turns.

    • #18
  19. KC Mulville Inactive
    KC Mulville
    @KCMulville

    Big Green:History tells us that this is almost always an unfounded concern, the solutions to which are generally a huge waste of money and resources. Let the market work. I understand that these adjustments are painful for some people (which a reasonable debate can be had about what, if anything, should be done to alleviate it), but grand government plans about to “maintain” a fixed number of jobs in industry is a colossally bad idea.

    This isn’t really about government, is it? It’s about the incentives for business owners.

    The problem with the advice “let the market work” is that it is indeed working – and responding to circumstances exactly as rational self-interest would predict. However, the incentives are not favorable for producing jobs, and that’s why jobs are not being created in ways – and in sufficient numbers – to sustain the workforce.

    • #19
  20. TKC1101 Inactive
    TKC1101
    @TKC1101

    Fake John/Jane Galt: First there would be new jobs. To suggest there would not be any new jobs created is silly. Second and maybe more important. The knowledge and experience to create the products would be in the US. That knowledge and experience would allow for the creation of spinoff and derivative technologies. Those would in turn create even more jobs and so the wheel turns.

    Say it again, Brother!

    • #20
  21. David Foster Member
    David Foster
    @DavidFoster

    Valiuth:

    But the numbers on the graph seem to be totals, rather than a per worker basis. Even if you are arguing that we in fact make less goods in a per widget basis, what we do make seems to be more valuable.

    Take 1000 workers producing $70K/year each and 1000 workers producing $130K/year each, total output $200MM. Outsource all the $70K/year work to Vietnam. Of the American workers who were doing these tasks, 80% find new jobs at the higher ($130K) productivity level; 20% remain unemployed.  Presto Chango, total output is now $234MM, total employment is 1800 vs the earlier 20000.  No technological changes involved.

    The original post seems to be saying that import/export balance doesn’t matter much because robots.  IMO this is way oversimplified.

    • #21
  22. Ed G. Member
    Ed G.
    @EdG

    Bruce Springsteen made quite a living singing about the plight of the industrial worker and the rust belt between the late 70’s and early eighties when the job decline was about two million in a few short years. It was keenly felt despite simply a return to 1975 levels still near the all time highs.

    What about the decline of 5 million jobs between 2000 and 2010 down below levels well below the 1950’s? Undoubtedly technological advancement contributed some to that sudden leap off the cliff, but surely we had massive technological advancement from 1950 onward when we see the employment level steadily climbing and eventually plateauing.

    What else happened at the edge of that plateau? China joined the WTO and was granted most favored nation trading status around that time – then it proceeded to dump goods, manipulate currency, infringe on intellectual property, protect its domestic markets with trade barriers for about a decade or more. This is the kind of stuff that we can and should do something about through foreign and trade policy – it’s not some dynamic and beneficial change wrought from free enterprise like technological development which we need to simply accept and adapt to.

    • #22
  23. Frank Soto Contributor
    Frank Soto
    @FrankSoto

    Ed G.: What else happened at the edge of that plateau? China joined the WTO and was granted most favored nation trading status around that time – then it proceeded to dump goods, manipulate currency, infringe on intellectual property, protect its domestic markets with trade barriers for about a decade or more. This is the kind of stuff that we can and should do something about through foreign and trade policy – it’s not some dynamic and beneficial change wrought from free enterprise like technological development which we need to simply accept and adapt to.

    No, our jobs didn’t go to China.  The economy has far more jobs than it did before trade was opened with China, and it has grown consistently.  Currency manipulation doesn’t do what many people on this site seem to think it does.  You cannot manipulate the international trade market so that you win and others lose.

    If you slice jobs up into categories then yes, manufacturing jobs are going away.  As the OP explains, these jobs can never come back as automation is constantly improving.

    • #23
  24. David Foster Member
    David Foster
    @DavidFoster

    According to this Forbes article, manufacturing the iPhone in the US would cost $3.6 billion in additional taxes, which dwarfs the incremental labor cost:

    http://www.forbes.com/sites/timworstall/2013/09/25/if-apple-brought-iphone-manufacturing-to-the-us-it-would-cost-them-4-2-billion/#722767118e29

    • #24
  25. Ed G. Member
    Ed G.
    @EdG

    Frank Soto:

    Ed G.: What else happened at the edge of that plateau? China joined the WTO and was granted most favored nation trading status around that time – then it proceeded to dump goods, manipulate currency, infringe on intellectual property, protect its domestic markets with trade barriers for about a decade or more. This is the kind of stuff that we can and should do something about through foreign and trade policy – it’s not some dynamic and beneficial change wrought from free enterprise like technological development which we need to simply accept and adapt to.

    No, our jobs didn’t go to China. The economy has far more jobs than it did before trade was opened with China, and it has grown consistently. […..]

    If you slice jobs up into categories then yes, manufacturing jobs are going away. […..]

    Well, yeah, I was commenting on the chart in the OP.

    Otherwise I think it’s a difficult case to make that we lost no jobs to China, that this significant drop was driven primarily by technological advancement as if the year 2000 were special in some way in that regard.

    I saw your exchange with KC. I realize you’re sanguine about the switch to service jobs. I’m not; not that I think there’s always something we could or should do about it.

    • #25
  26. Ed G. Member
    Ed G.
    @EdG

    Frank Soto:[…..] Currency manipulation doesn’t do what many people on this site seem to think it does. You cannot manipulate the international trade market so that you win and others lose.[…..]

    Blockbusting was real on a local scale. It was devastating. It was manipulation of a market on a scale difficult to imagine (hundreds to thousands of houses) and it often involved short term loss with risk of not recovering those losses.

    Of course it wasn’t the only factor in the devastation of certain neighborhoods, but it was real. Manipulation has a beneficial end in mind, otherwise people wouldn’t engage in it.

    • #26
  27. Valiuth Inactive
    Valiuth
    @Valiuth

    TKC1101:

    Fake John/Jane Galt: First there would be new jobs. To suggest there would not be any new jobs created is silly. Second and maybe more important. The knowledge and experience to create the products would be in the US. That knowledge and experience would allow for the creation of spinoff and derivative technologies. Those would in turn create even more jobs and so the wheel turns.

    Say it again, Brother!

    On the other hand if the goods produced are more expensive you will greatly lower consumption. Cheaper goods also open up possibilities for new businesses as well. The thing to ask is who makes the decision about all of this that happens. Constantly trying to micromanage the economy to maximize out put is a fools errand. So if manufacturing comes to the US it should be because of private actions not government mandates. Otherwise we just risk going down the Venezuelan route.

    • #27
  28. Valiuth Inactive
    Valiuth
    @Valiuth

    David Foster:

    Valiuth:

    But the numbers on the graph seem to be totals, rather than a per worker basis. Even if you are arguing that we in fact make less goods in a per widget basis, what we do make seems to be more valuable.

    Take 1000 workers producing $70K/year each and 1000 workers producing $130K/year each, total output $200MM. Outsource all the $70K/year work to Vietnam. Of the American workers who were doing these tasks, 80% find new jobs at the higher ($130K) productivity level; 20% remain unemployed. Presto Chango, total output is now $234MM, total employment is 1800 vs the earlier 20000. No technological changes involved.

    The original post seems to be saying that import/export balance doesn’t matter much because robots. IMO this is way oversimplified.

    Good point. I guess we need more graphs to see what is actually happening.

    • #28
  29. Ed G. Member
    Ed G.
    @EdG

    Valiuth:

    TKC1101:

    Fake John/Jane Galt: First there would be new jobs. To suggest there would not be any new jobs created is silly. Second and maybe more important. The knowledge and experience to create the products would be in the US. That knowledge and experience would allow for the creation of spinoff and derivative technologies. Those would in turn create even more jobs and so the wheel turns.

    Say it again, Brother!

    On the other hand if the goods produced are more expensive you will greatly lower consumption. Cheaper goods also open up possibilities for new businesses as well. The thing to ask is who makes the decision about all of this that happens. Constantly trying to micromanage the economy to maximize out put is a fools errand. So if manufacturing comes to the US it should be because of private actions not government mandates. Otherwise we just risk going down the Venezuelan route.

    Agreed. However, that cliff dive starting in 2000 indicates something dramatic happened. Isn’t it possible that the foreign/trade policy decisions we made at the same time were a contributor? Would failing to grant most favored nation trading status or not failing to combat foreign protectionist polices have counted as micromanagement or as government mandates?

    • #29

Comments are closed because this post is more than six months old. Please write a new post if you would like to continue this conversation.