October 1, 2003
With all of the doom and gloom stories you hear in the automation industries -- it's hard to hear the few, faint, optimistic voices amongst all the crying, moaning and groaning. We hear of many people and companies getting out of the automation business because they don't believe it will ever recover.
Two optimistic voices are from Bruce Bartlett of the National Center for Policy Analysis and Daniel Griswold of the Cato Institute.
They make the argument that manufacturing employment may be down -- but not manufacturing. They do not subscribe to the common theory that moving plants overseas will doom us.
They make several good points:
As of the first quarter of 2003, the US is near an all time high of real goods production as a share of real (inflation adjusted) GDP.
Although foreign workers earn less than American workers, by the time you add-in all costs -- foreign plants are usually not cheaper. For example, if a production line in America takes 10 workers, and Mexican workers earn 1/4 as much, it will probably cost the same since it takes 4 times as many Mexican workers to get the product built, inspected, repaired to meet American quality standards, and shipped to the US. We have talked with several companies that moved production over to Mexico -- all had limited success and started moving production back to the US.
Productivity in the US is way up. Mr. Bartlett writes "(gains in productivity) is why employment growth and hiring levels remain weak" (employers are able to produce more with less labor) and "In the long-run, higher productivity increases employment".
Many "production" jobs such as accounting, engineering, janitors, etc. are now out-sourced and contracted. Even a lot of labor is contracted through temp agencies. This makes it appear that manufacturing jobs are down when actually "business services" are up.
Mr. Griswold makes the point "The same domestic recession that put the kibosh on domestic manufacturing output also curbed demand for imports".
Although we are in bad economic times, once the economy recovers there should be plenty of manufacturing still around that needs automation.
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