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How Does America “Reshore” Skills That Have Disappeared?

How Does America “Reshore” Skills That Have Disappeared?

Now that manufacturing wages in Asia are starting to rise, some U.S. industries are bringing their businesses back to our own shores. Yet many others remain skittish about the paucity of workers here who still know how to make things. Can this downward spiral be reversed?

By TODD OPPENHEIMER

Made in America? | Craftsmanship Magazine, Spring 2016

Factory skills in the U.S. are hot right now. The boomlet ranges from small, artisanal operations like this leather goods shop in Portland, Oregon, to ''smart factories'' where people are combining machining with computer modeling and 3-D printing. A General Electric executive calls the latter ''a self-improving factory that never stops.'' Photo by Shawn Linehan

When I talked on the phone recently with Harry Moser about all the hyperventilated arguments that politicians have about immigration, I could almost see the mischievous twinkle in his eye. Moser is the founder of The Reshoring Initiative, a Chicago-based organization dedicated to bringing manufacturing back to America. And in his view, the solution to the immigration problem is pretty simple.

During your first meetings with overseas contractors, you’re likely to be shown some impressive prototypes, manufactured by a relatively skilled production team. By the time the second and third rounds of deliveries are made, the quality of the materials has declined. “The work isn’t being done by the A team anymore,” says Harry Moser of the Reshoring Initiative. “The plant now has its C team on the job.”

“If I were running for president,” he told me, “here’s what I’d tell everybody I would do on day one. I would call the president of Mexico and say, ‘Why don’t you and I target certain industries in Asia, and have the U.S. and Mexico cooperate as a team to bring those manufacturing operations back to North America.’ ” Some of that work, Moser explained, would be best suited to the labor force in Mexico, and some best done in the U.S. His point is that, with a little planning, our two countries could create a whole new manufacturing infrastructure on this side of the world, and a host of new jobs. This would cut our trade deficit with Mexico, boost our neighbor’s economy, and raise its workers’ wages. That, in turn, would reduce the pressure on immigration and eliminate the need for a wall—no matter who pays for it.

There’s only one small problem: Neither Mexico nor the U.S. has a workforce with the full complement of skills needed to fill those jobs. Many factory workers in China aren’t much better, but they’ve been working so cheaply that U.S. businesses haven’t minded. “You might get a third of the quality you had in the U.S., but you only paid a quarter of the cost,” Moser says. “So you could have all kinds of difficulties and still come out ahead.”

Over the years, however, this paradigm has started to change. When the off-shoring movement first began, way back in the 1960s, Chinese factory workers were being paid the abysmal wages being quoted by people like Bernie Sanders: an average of 50 cents an hour. But those wages have been rising every year—as China’s economy has grown, as its people have gotten richer, and as its manufacturing skills have improved.

Over the last decade, according to data Moser has compiled, the U.S. has gone from losing approximately 140,000 manufacturing jobs each year to gaining 10,000 a year.

Today, U.S. industries have to pay Chinese laborers $4 to $5 an hour. When those labor costs get added to the troubles with doing business overseas—the constant miscommunications, the difficulty supervising production, the cultural resistance to innovation, the frequent labor turnover, the often poor results, the returns, the long-distance shipping costs (and the carbon emissions that result), the delayed deliveries to an ever-changing market, the downside of minimal regulation overseas, the political instability there, and the negative publicity that offshoring generates—all of a sudden, a new U.S. factory starts to look pretty good.

Given offshoring’s many pitfalls, one can’t help wondering why American business leaders didn’t see them coming. It turns out that for many years, these pitfalls were somewhat hidden. During a U.S. executive’s first meetings with overseas contractors, Moser says, he or she is likely to be shown some impressive prototypes, manufactured by a relatively skilled production team. By the time the second and third rounds of deliveries are made, the quality of the materials has declined. And, as Moser puts it, “the work isn’t being done by the A team anymore. The plant now has its C team on the job.”

Made in America? | Craftsmanship Magazine, Spring 2016

Light manufacturing skills like these–the creation of a watchband loop–may not be at the forefront of manufacturing’s high-tech future. But they can recreate one of the few business sectors where the U.S. can distinguish itself: in quality luxury goods, or what might be called “artisan industrial.” Photo by Romain Blanquart

As this paradigm took shape (call it the Asian version of that old cliché, there is no free lunch), more and more companies started to “reshore” operations that they once gleefully offshored. Over the last decade, according to data Moser has compiled, the U.S. has gone from losing approximately 140,000 manufacturing jobs each year to gaining 10,000 a year. This trend has slowed somewhat during the last year or so, as the price of oil has fallen (and the cost of shipping along with it). By the Reshoring Initiative’s calculations, however, there are still three to four million manufacturing jobs overseas that are suitable for American industry—“a huge potential for U.S. economic growth,” Moser writes.

PLAYING LEAPFROG

Underneath all the overseas production problems is a much bigger trend: the dawning of the age of the smart factory. This is the moment when today’s digital capabilities—for modeling software, remote control, prototype testing through 3-D printing, even virtual reality—intersect with real machinery for making stuff. Some industry leaders describe the new factories following this model as “cyber-physical systems,” which will lead to a new age of manufacturing that the Germans call “Industry 4.0.”

Christine Furstoss, who is Technical Director of Manufacturing & Materials Technologies for General Electric, is so into these possibilities that she helped GE launch a program called the Brilliant Factory Initiative. “For you gaming fans,” she writes, “it’s like massive, multi-player online gaming meeting the real world of manufacturing.” Furstoss foresees an unprecedented range of efficiencies in this future, as computer modeling and 3-D printing help factories speed up the testing of new components, eliminating waste in the process. “It would essentially create a self-improving factory that never stops.” With 3-D printing, for example, “you can come up with a design, print it out in an hour, and then test it in an engine that runs at 2,000 degrees.” In some GE factories, she says, workers are already working with mechanical partners, called “co-bots.”

Boosterism or not, GE has been putting its money where its mouth is. It has renovated factories in Louisville, Kentucky, and elsewhere that make water heaters, refrigerators, and washing machines—a move that has allowed the company to bring 1,300 jobs back from China. To underscore just how bright the future looks to GE, the company is now selling off its iconic appliance division to focus on a bigger project: upgrading 400 factories that make everything from jet engines and medical imaging scanners to power generation equipment and locomotives.

This kind of activity suggests that American business leaders are starting to make an entirely new set of calculations. Yes, the U.S. might impose higher costs than the Chinese do for items such as labor and regulatory compliance. In the coming years, however, if that expense buys innovation, efficiency, and dominance of new markets, what’s not to love?

Should those calculations succeed, it will be thanks to what might be called the Leapfrog Principle of Economics. The pattern goes like this: After Henry Ford invented the assembly line, the U.S. dominated manufacturing for much of the coming decades. Then, when Asia, beginning with the Japanese, introduced new methods of efficiency and automation, its economies jumped over our greasy assembly lines, stealing our business in the process. Now, quite possibly, it’s our turn to retake the lead, with all the technical innovation pioneered in recent years by American entrepreneurs. As long as we can find enough workers with the right skills.

THE HUNT FOR GOOD WORKERS

Some manufacturing leaders are starting to connect the dots on this picture. Oklahoma recently developed a whole new trade school program devoted to the next wave of automation. Tech Shop—an initiative that creates high-tech shop classes for youngsters and adults—has been growing steadily, and now has eight centers around the country, one in Paris, one in Abu Dabi, and another opening this April in Tokyo. (Mark Hatch, Tech Shop’s CEO, says he has people come in all the time, just for the fun of building some new gizmo. A week later, when their invention is finished, so many people like what they made, “they start companies the next day.”) In Los Angeles, the National Toolmaking and Machining Association has been training people for tomorrow’s factories for years, landing high-paying jobs for graduates even in the depths of the recession.

No wonder countries like Germany and Switzerland have done better jobs keeping their manufacturing sector healthy. “They get the B students, and they’re better trained,” Moser says. “We get the C and D students, and we don’t train them very well.”

The problem is that all this activity still lives in the job market’s shadows. “People still have this image of 1950s style factories,” says GE’s Furstoss. “Dirty, boring places where your days are full of piece work.” American culture doesn’t exactly help the situation. Everywhere one turns, it seems, the people getting glamorized in America are celebrities, financiers, and other big winners in the “new” economy. No wonder countries like Germany and Switzerland have done better jobs keeping their manufacturing sector healthy. “They get the B students, and they’re better trained,” Moser says. “We get too many of the C and D students, and we don’t train them very well.”

WILL RESHORED JOBS LAST?

While all these job opportunities sound enticing, haven’t we been here before as well? The history of the American labor market is littered with promises of new booms in one industry or another, only to see those jobs fade away the next decade. Remember the booms and busts of the oil industry in one state after another? Or the chronic call for more engineers?

There is growing evidence, however, that this movement might have legs. One reason is that America’s financial stability might literally depend on it.

Made in America? | Craftsmanship Magazine, Spring 2016

If the U.S. doesn’t bring back jobs like this watch assembly operation, at Shinola’s new plant in Detroit, Moser fears the U.S. will eventually take China’s place as the world’s grunt country–doing the work that no one else wants to anymore. Photo by Romain Blanquart

“The ultimate success of reshoring will be if we can eliminate or minimize the trade deficit,” says Moser. Like many economists, Moser is alarmed at the slowly ballooning level of debt the U.S. has started to carry. Not coincidentally, in his view, the growth of that deficit closely matches our offshoring activity—starting relatively small in the latter decades of the 20th century, then rising dramatically from 2000 to 2007, after President Clinton loosened our trade relations with China. Today, our trade deficit amounts to $500 to $600 billion a year, and growing. While the U.S. pays no interest on that debt, the larger it gets, the more it weakens the dollar. And the more other countries lose confidence in our economy. “If you keep that up, Moser says, “eventually the U.S. dollar isn’t worth anything, and the dollar collapses.”

At some point, Moser believes, the U.S. will be forced to reshore jobs here just to survive. This grim scenario leaves him with yet another idea–this one not nearly as rosy as his solution to immigration.

In Moser’s view, a significant new wave of jobs will come back to the U.S. in one of two ways. The first is “the smart way”—getting ahead of the manufacturing curve in all the ways that people like Furstoss envision. The second is “the painful way”—we continue letting events take care of themselves, while suffering more and more each year from growing trade deficits. If the latter scenario unfolds, Moser fears we will trade places with China and become the world’s new grunt country. “And the Chinese will send their dirty laundry here to be done by Americans.”

The more likely possibility, of course, is some muddled combination of the two: a little advanced planning, a lot of laissez-faire. One can only hope that as the nation confronts today’s crying need for high-tech solutions on a number of fronts–renewable energy; new water supplies in the American West, where droughts are expected to become an increasingly frequent pattern (better seawater desalinization and rainwater catchment systems are two immediate answers); and our crumbling infrastructure—we will start to pursue the “smart way” to bring jobs back to our own shores.

Resources for more information:
. The Reshoring Initiative
. Maker’s Row
. National Toolmaking and Machining Association

Todd Oppenheimer is founding editor and publisher of Craftsmanship Magazine.

© 2017 Todd Oppenheimer, all rights reserved. Under exclusive license to Craftsmanship, LLC. Unauthorized copying or republication of this article is prohibited by law.

Published: March 13, 2016

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