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To Generate Jobs, Discard Outdated Images

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FILED IN:  Economic Forecasting
     
The problem is that current thinking is rooted in outdated images of factories that don’t recognize how and why manufacturing can be successful in America.
gdxg After a painful and prolonged recession, the American economy remains in a precarious position. Many companies have large cash reserves, but are uncertain about making new investments in people and production. Everything is managed with short-term perspectives. Meanwhile unemployment remains high.

Getting the unemployed re-employed isn’t just about putting people to work. There are 3 million jobs in this country that remain unfilled, while more than 6 million Americans (about 45 percent of the unemployed) have been out of work for more than a year. There is a sharp disconnect between the skills employers need and what unemployed workers
have to offer.

Central to the problem is that manufacturing has eroded, especially in the last decade, costing millions of jobs.  As previously discussed, manufacturing creates wealth. It generates jobs in ways that the service sector simply cannot. New manufacturing facilities support entire value chains—demand for raw materials, construction, energy, supplies and services. Manufacturing creates the multiplier effect that is necessary for anything approaching full employment.

In a new (January 2011) book, “Make It in America”, Andrew Liveris, chief executive officer of Dow Chemical, contends that for decades U.S. businesses relied blindly on market forces and free trade to boost the domestic economy, while at the same time sending jobs overseas because it fattened corporate profits. Meanwhile, many other countries were providing large subsidies for foreign manufacturers, while at the same time investing in their own infrastructure, education and workforce training.

As U.S. multinationals moved factories abroad, they moved research and engineering centers too, to keep them close to assembly lines and because of enticing foreign government incentives. The blind, short-term profit-motive reduced American competitiveness and longer-term global leadership.

Protectionism no deal

Some seek protectionism to avoid job losses. But, in my opinion, simply taxing imports and placing restrictions on offshore outsourcing has no real benefits—it only keeps U.S. workers in jobs that are far less productive. For example, Apple manufactures iPhones and iPads in China, with only minimal production costs and high U.S. profit margins. It’s a vastly better use of resources (workers and capital) to be producing more competitive, high-tech, value-added exports.

The problem is that current thinking is rooted in outdated images of factories that don’t recognize how and why manufacturing can be successful in America. The prevailing concepts of huge factories for high-volume manufacturing at low-cost are clearly wrong.

 “Innovative growth comes through new ways to generate incremental value and corresponding revenue. The cost of software is in development, not duplication and distribution. The high costs of pharmaceuticals are in research, development and approvals, not factory production. With new types of high-margin businesses, advanced knowledge generates growth and profits.

What is needed is new job creation with manufacturing of innovative high-tech, high-value, high-margin, non-commodity items. By encouraging a national manufacturing strategy that focuses on the high-skill, high-wage jobs of the future, and encourages exports, we can improve American competitiveness. By focusing on improving our nation’s education system, we will continue to develop a skilled workforce ready for the increased demand.

In my opinion, America can be the automation products leader through advanced developments, selling not just low-margin services, but advanced automation knowledge, products and software to the world.

Jim Pinto is an industry analyst and commentator, writer, technology futurist and angel investor. You can e-mail him at: [email protected]. Or review his prognostications and predictions on his Web site: www.JimPinto.com.

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