Making It in America

I came across a very intriguing story from The Atlantic by Adam Davidson in which I believe that a good portion of the country could relate with.  The piece Making It in America has several plot lines but for the American worker it is a story about grit, ingenuity, and the pursuit of a better life and the challenges associated with that lone goal.


Coming from a manufacturing background and being able to relate some of the characters in the story to my own parents who work in manufacturing facilities this piece symbolizes the good and the bad of the American manufacturing sector which has actually grown in time.  It's the jobs piece of the manufacturing story that has been in a steady state decline that garners much of the attention.


As the piece points out as manufacturing productivity has increased there has been a correlating decrease in the number of people it takes to make a manufacturing facility run.  In turn the skills to run and manage that facility has also changed dramatically one that has created a need for the skilled worker vs. the unskilled worker.  See a related post [December 24, 2012 Robot Workers Take Over Warehouses].


IN THE PAST DECADE, THE FLOW OF GOODS EMERGING FROM U.S. FACTORIES HAS RISEN BY ABOUT A THIRD. FACTORY EMPLOYMENT HAS FALLEN BY ROUGHLY THE SAME FRACTION. THE STORY OF STANDARD MOTOR PRODUCTS, A 92-YEAR-OLD, FAMILY-RUN MANUFACTURER BASED IN QUEENS, SHEDS LIGHT ON BOTH PHENOMENA. IT’S A STORY OF HUSTLE, INGENUITY, COMPETITIVE SUCCESS, AND PROMISE FOR AMERICA’S ECONOMY. IT ALSO ILLUMINATES WHY THE JOBS CRISIS WILL BE SO DIFFICULT TO SOLVE.

• Yet the success of American manufacturers has come at a cost. Factories have replaced millions of workers with machines. Even if you know the rough outline of this story, looking at the Bureau of Labor Statistics data is still shocking. A historical chart of U.S. manufacturing employment shows steady growth from the end of the Depression until the early 1980s, when the number of jobs drops a little. Then things stay largely flat until about 1999. After that, the numbers simply collapse. In the 10 years ending in 2009, factories shed workers so fast that they erased almost all the gains of the previous 70 years; roughly one out of every three manufacturing jobs—about 6 million in total—disappeared. About as many people work in manufacturing now as did at the end of the Depression, even though the American population is more than twice as large today.
• Before the rise of computer-run machines, factories needed people at every step of production, from the most routine to the most complex. The Gildemeister, for example, automatically performs a series of operations that previously would have required several machines—each with its own operator. It’s relatively easy to train a newcomer to run a simple, single-step machine. Newcomers with no training could start out working the simplest and then gradually learn others. Eventually, with that on-the-job training, some workers could become higher-paid supervisors, overseeing the entire operation. This kind of knowledge could be acquired only on the job; few people went to school to learn how to work in a factory.
• Today, the Gildemeisters and their ilk eliminate the need for many of those machines and, therefore, the workers who ran them. Skilled workers now are required only to do what computers can’t do (at least not yet): use their human judgment. This change is evident in the layout of a factory. In the pre-computer age, machines were laid out in long rows, each machine tended constantly by one worker who was considered skilled if he knew the temperament of his one, ornery ward. There was a quality-assurance department, typically in a lab off the factory floor, whose workers occasionally checked to make sure the machinists were doing things right. At Standard, today, as at most U.S. factories, machines are laid out in cells. One skilled operator, like Luke, oversees several machines, performing on-the-spot quality checks and making appropriate adjustments as needed.
• The combination of skilled labor and complex machines gives American factories a big advantage in manufacturing not only precision products, but also those that are made in small batches, as is the case with many fuel injectors. Luke can quickly alter the program in a Gildemeister’s computer to switch from making one kind of injector to another. Standard makes injectors and other parts for thousands of different makes and models of car, fabricating and shipping in small batches; Luke sometimes needs to switch the type of product he’s making several times in a shift. Factories in China, by contrast, tend to focus on long runs of single products, with far less frequent changeovers.
• For Maddie to achieve her dreams—to own her own home, to take her family on vacation to the coast, to have enough saved up so her children can go to college—she’d need to become one of the advanced Level 2s. A decade ago, a smart, hard-working Level 1 might have persuaded management to provide on-the-job training in Level-2 skills. But these days, the gap between a Level 1 and a 2 is so wide that it doesn’t make financial sense for Standard to spend years training someone who might not be able to pick up the skills or might take that training to a competing factory.

Image credit: Dean Kaufman

• Tony explains that Maddie has a job for two reasons. First, when it comes to making fuel injectors, the company saves money and minimizes product damage by having both the precision and non-precision work done in the same place. Even if Mexican or Chinese workers could do Maddie’s job more cheaply, shipping fragile, half-finished parts to another country for processing would make no sense. Second, Maddie is cheaper than a machine. It would be easy to buy a robotic arm that could take injector bodies and caps from a tray and place them precisely in a laser welder. Yet Standard would have to invest about $100,000 on the arm and a conveyance machine to bring parts to the welder and send them on to the next station. As is common in factories, Standard invests only in machinery that will earn back its cost within two years. For Tony, it’s simple: Maddie makes less in two years than the machine would cost, so her job is safe—for now. If the robotic machines become a little cheaper, or if demand for fuel injectors goes up and Standard starts running three shifts, then investing in those robots might make sense.
• “What worries people in factories is electronics, robots,” she tells me. “If you don’t know jack about computers and electronics, then you don’t have anything in this life anymore. One day, they’re not going to need people; the machines will take over. People like me, we’re not going to be around forever.”
• To keep the business of the giant auto-parts retailers, Standard has to constantly lower costs while maintaining quality. High quality is impossible without good raw materials, which Standard has to buy at market rates. The massive global conglomerates, like Bosch, might be able to command discounts when buying, say, specially formulated metals; but Standard has to pay the prevailing price, and for years now, that price has been rising. That places an even higher imperative on reducing the cost of labor. If Standard paid unskilled workers like Maddie more or hired more of them, Larry says, the company would have to charge its customers more or accept lower profits. Either way, Standard would collapse fairly soon. (Industrial profit margins are notoriously thin to begin with—typically in the low single digits—and reduced profits or losses would drive down Standard’s stock price, making it a likely target for predatory acquisition.)
• Standard makes only about half of the parts it stocks; it buys the rest from other manufacturers, most of them in China. The company’s engineers are constantly reviewing the parts they buy, to see whether they could make the parts more cheaply in-house. Not infrequently, Standard finds that by doing so it can control costs, quality, and delivery speed far better, and thus can better serve the superstores.
• These meetings can lead the company to move dozens of jobs to another country or, in some cases, to create new jobs in the U.S. When Standard decided to increase its fuel-injector production, it chose to do that in the U.S., and staffed up accordingly (that’s how Maddie got her job). Standard will not drop a line in the U.S. and begin outsourcing it to China for a few pennies in savings. “I need to save a lot to go to China,” says Ed Harris, who is in charge of identifying new manufacturing sources in Asia. “There’s a lot of hassle: shipping costs, time, Chinese companies aren’t as reliable. We need to save at least 40 percent off the U.S. price. I’m not going to China to save 10 percent.” Yet often, the savings are more than enough to offset the hassles and expense of working with Chinese factories. Some parts—especially relatively simple ones that Standard needs in bulk—can cost 80 percent less to make in China.
• Nearly every manufacturing company in the U.S. goes through this same process: regularly, carefully studying its products to see if they could be made more cheaply in a lower-wage country. The calculation constantly changes, because the world changes. Sometimes that’s bad news for American industrial workers, other times it’s good news. Workers in China and Poland and Mexico, for example, have become more highly skilled, and their factories are now able to produce more-precise goods than they could a decade ago. But at the same time, the wages of those workers have risen, as have shipping costs. Unrest in northern Mexico or an oil-price spike caused by trouble in the Middle East can encourage manufacturers to keep production lines in the United States. The development of increasingly complex machinery can do the same: because expensive machines are more likely to pay off when they can be counted on to run 24 hours a day, every day, the availability of steady electricity, for instance, is essential.
• Yet however chaotic and contradictory these forces can be at any moment, over the years and decades they point in one direction: toward fewer jobs for low-skilled American workers. People who can be replaced by machines or lower-paid workers somewhere else, eventually will be. Unless people like Maddie learn how to do things that computers and overseas workers aren’t able to do, they are likely to lose their jobs one day.
• Is there a crisis in manufacturing in America? Looking just at the dollar value of manufacturing output, the answer seems to be an emphatic no. Domestic manufacturers make and sell more goods than ever before. Their success has been grounded in incredible increases in productivity, which is a positive way of saying that factories produce more with fewer workers.
• Productivity, in and of itself, is a remarkably good thing. Only through productivity growth can the average quality of human life improve. Because of higher agricultural productivity, we don’t all have to work in the fields to make enough food to eat. Because of higher industrial productivity, few of us need to work in factories to make the products we use. In theory, productivity growth should help nearly everyone in a society. When one person can grow as much food or make as many car parts as 100 used to, prices should fall, which gives everyone in that society more purchasing power; we all become a little richer. In the economic models, the benefits of productivity growth should not go just to the rich owners of capital. As workers become more productive, they should be able to demand higher salaries.
• The double shock we’re experiencing now—globalization and computer-aided industrial productivity—happens to have the opposite impact: income inequality is growing, as the rewards for being skilled grow and the opportunities for unskilled Americans diminish.
• It’s hard to imagine what set of circumstances would reverse recent trends and bring large numbers of jobs for unskilled laborers back to the U.S. Our efforts might be more fruitfully focused on getting Maddie the education she needs for a better shot at a decent living in the years to come. Subsidized job-training programs tend to be fairly popular among Democrats and Republicans, and certainly benefit some people. But these programs suffer from all the ills in our education system; opportunities go, disproportionately, to those who already have initiative, intelligence, and—not least—family support.
• This may be the worst impact of the disappearance of manufacturing work. In older factories and, before them, on the farm, there were opportunities for almost everybody: the bright and the slow, the sociable and the awkward, the people with children and those without. All came to work unskilled, at first, and then slowly learned things, on the job, that made them more valuable. Especially in the mid-20th century, as manufacturing employment was rocketing toward its zenith, mistakes and disadvantages in childhood and adolescence did not foreclose adult opportunity.
• For most of U.S. history, most people had a slow and steady wind at their back, a combination of economic forces that didn’t make life easy but gave many of us little pushes forward that allowed us to earn a bit more every year. Over a lifetime, it all added up to a better sort of life than the one we were born into. That wind seems to be dying for a lot of Americans. What the country will be like without it is not quite clear.