WASHINGTON – A new report on U.S. advanced manufacturing calls for a national strategy that includes a mix of tax reforms, R&D funding to foster innovation and greater investment in technical education to spur “a sustainable resurgence in advanced manufacturing” in the U.S.
The report by a presidential advisory committee on advanced manufacturing released on Tuesday (July 17) includes a list of 16 recommendations covering innovation, building up the pool of manufacturing workers and their skills along with a series of tax and trade reforms designed to spur investment in advanced manufacturing. It also cited the importance of electronics manufacturing for maintaining U.S. global competitiveness as well as national security.
The panel said its recommendations “are aimed at reinventing manufacturing in a way that ensures U.S. competitiveness, feeds into the nation’s innovation economy and invigorates the domestic manufacturing base.”
MIT President Susan Hockfield and Andrew Liveris, CEO of Dow Chemical, co-chaired the committee that produced the manufacturing report. Industry members included Intel CEO Paul Otellini.
The manufacturing report stressed the importance of a robust electronics manufacturing sector for supporting U.S. national security. Citing the growing number of counterfeit chips found in U.S. weapons, the panel noted that a strong manufacturing sector “ensures the integrity of [military and commercial] goods, especially electronics and other mission critical items.”
Among the manufacturing sectors seen as critical to advancing U.S. competitiveness are industrial robotics, nanomanufacturing and flexible electronics manufacturing. “Technologies for flexible electronics manufacturing will be major differentiators in the next generation of consumer and computing devices,” the report concluded. “Some of these devices are expected to be among the fastest growing product categories over the next decade.”
The tech industry must work more closely with university researchers and community colleges to develop and deploy new manufacturing technologies and to ensure a steady supply of qualified workers to run advanced manufacturing lines, the panel concluded. To that end, it recommended establishing a “National Network of Manufacturing Innovation Institutes” that would assist in moving products from the research stage to production, the risky period of business development frequently referred to as the “valley of death.”
The problem is particularly acute for electronics manufacturers. Rahul Razdan a former executive in charge of strategy at electronics manufacturing giant Flextronics, noted that “it is exceedingly difficult for primary services cultures to shift to a product mode, and that has indeed been the case for EMS companies.”
Another driver, Razdan added, "is the ability for late-stage customization. That is, the later one can commit to manufacturing the more ability there is for efficiency, minimization of market risk and inventory exposure."
Among the proposed tax reforms was a recommendation designed to remove barriers to greater industry-university partnerships for advanced manufacturing. The panel recommended that companies receive a waiver from tax restrictions related to private industry use of tax-payer supported university buildings constructed with tax-exempt bonds.
Closing the so-called skills mismatch between industry and the U.S. workforce also must be addressed through greater emphasis on technical training by the nation’s community colleges. “The future of manufacturing will be radically different from its past,” the report warned. “The status quo curricula, teaching methods and silos must be replaced with a collaborative, innovative, life-long learning culture.”
Funding these manufacturing initiatives remains perhaps the biggest hurdle. A bill aimed at advancing manufacturing R&D and education was introduced last week (July 9) in the House by Rep. Eddie Bernice Johnson (D-Texas), but the breath of congressional support for the initiative remains unclear.
"But as we dig deeper into the issue, it is becoming apparent to me anyway that flexible, value-added manufacturing isn't going to make much of a dent in the U.S. employment rate."
That should have been obvious from the start. Manufacturing was traditionally a place where people who *were* unskilled/low-skilled could find employment, because it didn't require high skills or knowledge to work on an assembly line. But those jobs steadily moved overseas where unskilled labor was a lot cheaper. They aren't coming back.
Those sorts of jobs that have to be done *here* still exist - think "flipping burgers in McDonalds" - but they don't pay anywhere near as well as an assembly line job used to.
We do indeed need to invest in retraining, but we will still be left with some folks who simply won't get new jobs. Not everyone can be retrained for the new jobs that will be created.
Flexible, value-added manufacturing will create *some* new jobs, and have other indirect benefits to the economy because the work is being done here. But by itself, it's not a panacea. Nothing is.
"Still, I don't agree with the assertion above that high U.S unemployment is "structural.""
What would you call it, when it isn't across the board, and tends to affect certain kinds of jobs? The underlying process has been going on for decades. Ask what used to be the ILGWU. As a rule, work flows to where it can be done cheapest, and it has been doing so.
I'll make a few flat statements about the future:
1: If your job *can* be done by a machine, at some point, it *will* be.
2. If your job *can* be done somewhere else by someone getting paid less than you to do it, at some point, it probably will be. (Think "outsourcing to India")
3: You will need to find things to do which either *must* be done here, or things which carry a high enough value that someone will be willing to pay what you ask, or both. (And what those high-value things will be can and will change. Today's hot, in-demand, you can name you own salary level skills are tomorrow's outsourcing candidates as people elsewhere acquire them.)
4: You cannot be ignorant or stupid. You will have to know various things, and be able to continually learn new things. If you do not know various things, and are incapable of learning them, you will have insoluble problems. You will be unable to get a decent job because you can't do anything anyone will pay for.
Your friend's question is the same one that inspired us to launch the "Rebuilding America" series. The underlying premise is that we needed to return manufacturing to the U.S. since the ability to manufacture is the key to continuing technology and product innovation. But as we dig deeper into the issue, it is becoming apparent to me anyway that flexible, value-added manufacturing isn't going to make much of a dent in the U.S. employment rate. Still, I don't agree with the assertion above that high U.S unemployment is "structural." As you pointed out earlier, there's a lot of capital out there looking for a return in investment. We need to invest in our workers through retraining as much as we need to rebuild our manufacturing infrastructure. At the same time, the service sector that provides most of U.S. employment is changing as more services are "produced" via the cloud. In the long run, that could be a far larger source of future employment for workers with the skills needed to fill those types of jobs.
"The question is whether a revived manufacturing "ecosystem" can help boost U.S. job growth."
It can, with caveats many people will be unhappy about.
Unemployment is structural, not across the board. Certain *kinds* of jobs are disappearing. Initiatives like this can create *new* jobs, but they won't help those currently out of work. By definition, they will *be* new jobs, and require knowledge and skills those currently unemployed will not have and may not be able to acquire.
Building a robotic factory certainly creates employment for those who build it, and continuing jobs to maintain it. What will go away will be the large numbers of low-skilled workers that used to do the assembly. The factory of the future will employ many less people overall.
Essentially, labor is being replaced with capital. The labor being replaced is all unskilled/low-skilled, and the sort of jobs that moved overseas because unskilled/low-skilled labor was simply a lot cheaper elsewhere.
But replacing labor with capital has its own requirements. There must be a potential return great enough to justify the investment. There must be ready markets for the products the automated factory will make. The market will have volume requirements. You will need to sell at least X number of what you are making simply to cover the costs of making it, let alone make money, and X may be a large number indeed. I don't see an autmomated factory like this being used for low volume manufacturing unless what is being made carries a high price. It will start at medium volume and scale from there.
I had a phone conversation last night with a friend who asked "But what do we *do* about the unskilled/low-skilled people? What opportunities can we provide for them?" My answer was "I don't know, and I consider that the biggest question we need to answer."
Indeed, we have heard from some domestic EMS providers that they attempt to "design the labor out" of products. Hence, electronics manufacturing by itself doesn't hold much promise for creating a lot of jobs. The question is whether a revived manufacturing "ecosystem" can help boost U.S. job growth.
Please note that I have linked to Rep. Johnson's bill in our story. So far, it has no cosponsors.
Here's what her office released:
"H.R. 6081, the Advancing Innovative Manufacturing (AIM) Act of 2012, to accelerate research, development, innovation, and education in advanced manufacturing. H.R. 6081 addresses a number of the recommendations included in the [manufacturing] report and will help to ensure our common goal of making sure the U.S. manufacturing sector is the most sophisticated and innovative in the world. American manufacturing is a cornerstone of our economy – it creates jobs, increases our national security, and promotes innovation across the private industry."
It's highly likely that introduction of the bill was timed to coincide with release of the manufacturing report.
Manufacturing jobs *left* the US for lower labor costs, but the jobs involved were low-skilled/unskilled. Bringing manufacturing *back* to the US replaces large numbers of low-skilled people with a much smaller number of high-skilled ones. One issue is the lack of the high-skilled workers required.
1) This report is an improvement over the last one George highlighted (at least the last one I saw) in that the industry contributors look more credibile. In other words they actually came from industry. So that's a step in the right direction.
2) But to me all these large-scale proposals miss the point in that they address supply (fullfillment infrastructure) while paying lip service to that which preceeds it: demand. And we can't forget about profitability.
3) George, what are the details of the bill introduced by the Texas Democrat? The optimist in me assumes they correlate with this report? The realist in me compells me to other conclusions. Please advise.
A lot of that potential investment money is sitting offshore, and we have to find "sticks and carrots" to get companies like Apple to bring some of it back and invest in manufacturing and people. Let's start with wages at Apple Stores.