Thursday, January 13, 2011

U.S. is Still the World's #1 Manufacturer

We hear a lot about the "decline of U.S. manufacturing" (84,000 Google hits) or even more drastically, about "the death of American manufacturing" (15,400 Google hits).

The chart above shows the U.S. share of world manufacturing output, annually from 1970 to 2009, based on data from the United Nations.  There has been a recent decline in America's share of world manufacturing output, from 25.3% a decade ago in 1999 to 16.82% in 2008, but note several important facts about the chart:

1. The U.S. share of world manufacturing output was amazingly constant between 1970 and the early part of this decade, and as recently as 2006 was above 20%.  It sure seems like we've been hearing about the "decline of U.S. manufacturing" for the last several decades or longer, when the factual evidence suggests that it's actually only a very recent phenomenon - and that's only when measured by our share of rising global manufacturing output.  Given the recent phenomenal economic and manufacturing growth in places like China, Brazil, India, Russia, and Korea, among others, it would only make sense that our share of world factory output has declined in recent years (but notice it did jump up a bit 2009). 

2. In terms of the total amount of manufacturing produced in a year, the United States still leads the world in annual manufacturing, see chart below for the 2009 rankings of the top seven countries in the world for factory output.
   
In 2009, the United States produced almost 14% more manufacturing output than second place China, and produced almost as much ($2,334 billion) as Japan, Germany, Italy, France and the U.K. combined ($2,762 billion). 

3. Although it's true that the U.S. has lost more than 7 million manufacturing jobs, from an employment level of more than 19 million manufacturing jobs in the late 1970s to fewer than 12 million jobs today, that's happened at the same time that U.S. manufacturing output has continued to expand and grow.  In 2009, the U.S. produced more manufacturing output, $2.334 trillion, than ever before in history (nominal dollars), see chart: 
Bottom Line: The many stories about the "death of America's manufacturing sector" have been greatly exaggerated.

60 Comments:

At 1/13/2011 2:57 PM, Blogger warren said...

Good work, as always. I still can't shake the feeling that part of the manufacturing jobs loss is a measurement error.

In 1920, when Ford had people cleaning the windows of their factory, weren't those counted as manufacturing jobs -- they were in the factory headcount, after all.

Today, Ford (I presume) may hire a third-party service company to clean the windows. Those will show up a service job.

Does outsourcing non-core service functions to outside companies exaggerate the manufacturing job loss? Wish I had a grad student to point in that direction.

 
At 1/13/2011 3:35 PM, Blogger Buddy R Pacifico said...

Have U.S. manufacuring and productivity been overstated for at least a decade? If they have then by how much?

Here is a quote (page 5) from a Federal Reserve study titled Offshoring Bias in U.S. Manufacturing: Implications for Productivity and Value Added (September 2010):

"We find that non-energy materials inputs from domestic sources actually fell
while foreign non-energy materials inputs to manufacturing expanded nearly fifty percent—to 25
percent of all materials inputs—from 1997 to 2007. Moreover, developing- and intermediate income
countries accounted for almost all of this growth in import market share, with developing
countries, mainly China, accounting for over half of the pick-up."


The government uses data that does not separate out the influence of foreign inputs in manufacturing statistics or it imputes based on very old data. The solution is for the BLS and BEA to improve their methodology for a global sourcing world (IMO, not being an economist).

 
At 1/13/2011 3:46 PM, Blogger VangelV said...

I still can't shake the feeling that part of the manufacturing jobs loss is a measurement error.

That is not true. While the US is still a great manufacturing nation with huge amounts of production it is doing it with more capital and fewer but higher-paid workers.

 
At 1/13/2011 4:26 PM, Blogger Prof J said...

It is important to note, too, that the decline in manufacturing employment is not all demand-based. This is a long-term persistent middle-skill labor gap that has retarded growth of manufacturing in the U.S.:
http://www.mrcpa.org/pdf/306h.pdf

 
At 1/13/2011 4:57 PM, Blogger Sean said...

If we're doing a little more with fewer workers, you would expect the free-up workers to increase production in other areas. Why would you not expect, for example, manufacturing output to increase with productivity to keep the number of jobs constant?

That is, what this post says can be true, and yet still be consistent with manufacturing weakness in some respect (or not).

 
At 1/13/2011 5:28 PM, Blogger Jason said...

Warren, Ford can only hire third party window washers if the national and local union contracts allow it.

From what I see, the window washers are union workers and classified as a skilled trade.

Regardless, the loss of 7 million manufacturing jobs is still a point of crisis. And remember that the population grew 10 since 2000, but the number of these jobs declined.

I think we have to examine what forces caused that loss, then confront the brutal truth. I suspect unions and government regulations played majority roles.

 
At 1/13/2011 6:03 PM, Blogger PeakTrader said...

The U.S. offshored its low profitable manufactured goods to poor countries, e.g. as China, and shifted its resources into high profitable manufactured goods (and into other industries, including emerging industries).

Part of China's manufacturing belongs to the U.S., because the U.S. imports its offshored goods (at lower prices and higher profits):

The hidden downside of Santa's little helpers
December 21, 2002

"An investigation into the price of a Mattel Barbie doll, half of which is made in China, found that of the $10 retail price, $8 goes to transportation, marketing, retailing, wholesale and profit for Mattel.

Of the remaining $2, $1 is shared by the management and transportation in Hong Kong, and 65 cents is shared by the raw materials from Taiwan, Japan, the U.S. and Saudi Arabia. The remaining 35 cents is earned by producers in China for providing factory sites, labour and electricity."

 
At 1/13/2011 8:21 PM, Blogger Che is dead said...

‘Compliance’: The Word That Sunk a Million U.S. Jobs

Legal, social and environmental costs make U.S. manufacturers uncompetitive and drive manufacturing offshore.

 
At 1/13/2011 8:22 PM, Blogger David said...

Are these true value-added numbers, or are they output numbers that include the value of offshore-sourced parts and materials?

 
At 1/13/2011 9:28 PM, Blogger aorod said...

By mining I assume you mean oil and gas....

 
At 1/13/2011 11:14 PM, Blogger NormanB said...

I can't agree with the 'feel good' approach to this problem. The seemingly small drop in production is a lot in terms of jobs. The higher productivity only highlights why we shouldn't be losing jobs. Therein lies the problem.

The Chinese and others are making a trade of manufactured goods for capital. China does not recycle the proceeds from their exported manufacturing output into imported manufactured goods. They buy Treasurys to the tune of $500B per year which is the equivalent of 3.4% of our GDP.

This has had the effect of hurting our economy but on the other side it causes excess captial to be available driving down interest rates and raising stock prices just by the nature of the capital formation. Demographically it hurts our workers and benefits our investors.

This is a massive dislocation in the world's economy and especially ours. It cannot be explained away.

 
At 1/13/2011 11:34 PM, Blogger John Thacker said...

Why would you not expect, for example, manufacturing output to increase with productivity to keep the number of jobs constant?

Because people demand other stuff, including services. If productivity doubles in auto manufacturing, you might expect households to double the number of cars that they have when they're going from 1 to 2, and maybe even from 2 to 4 so that the kids can each have one. But it doesn't go on forever. At some point people, rather than owning 8 or 16 cars, will prefer to shift time, money, and jobs into things like food, yoga instructors, interior decorating, and all kinds of other stuff.

Yes, when things get cheaper, people want more of it. But on the other hand, as people get more of the same thing, they stop liking the extra one as much and want to get other stuff.

Farming is the same deal, incidentally. There's been a steady decline in the number of people who are farmers in this country, with mechanization and productivity improvements. Yet no one doubts that the US produces an amazing amount of agricultural products.

 
At 1/13/2011 11:49 PM, Blogger HaynesBE said...

Per capita manufacturing is interesting to contemplate:
US $8300
China $1500

 
At 1/14/2011 3:20 AM, Blogger Jet Beagle said...

Both Warren and VangeIV are correct.

Some of the decline in manufacturing jobs is apparent and not real. Manufacturers have outsourced support functions to other U.S. service firms. This includes not only low-skilled tasks such as janitorial, security, and food service. It also includes high-skilled work such as software development and engineering.

As VangeIV points out, far more manufacturing jobs have been eliminated through investment in capital. In some cases that investment occurs where it can be directly observed, such as when the GM plant in Arlington, TX, replaced the dozen or more tire installers with mechanical equipment.

Not all the the changes occur in a single plant, though. Much capital investment leads to the the normal process of creative destruction. For example, company A opens an automated widget factory in Indiana, causing company B's labor intensive widget factory in Ohio to shut down because it can not match the lower costs.

 
At 1/14/2011 3:30 AM, Blogger Jet Beagle said...

Jason: " the loss of 7 million manufacturing jobs is still a point of crisis"

How can this be a crisis? The decline in manufacturing jobs has been very steady over the past three decades. At the same time the total number of jobs in the U.S. has steadily climbed. Total income and wealth of U.S. has continued to rise. And total manufactuing output in the U.S. - the value added by manufacturing operations in the U.S. - has also steadily climbed.


The decline in manufacturing jobs is no more a crisis than was the decline in agricultural jobs seven decades ago.

 
At 1/14/2011 10:31 AM, Blogger Sean said...

John Thacker,


What you say may be true, but you're also skirting around the idea of finite demand, which has interesting consequences for employment.

 
At 1/14/2011 11:07 AM, Blogger VangelV said...

The Chinese and others are making a trade of manufactured goods for capital. China does not recycle the proceeds from their exported manufacturing output into imported manufactured goods. They buy Treasurys to the tune of $500B per year which is the equivalent of 3.4% of our GDP.

By buying treasuries the Chinese are keeping the USD and the US government afloat. I take it that you have a problem with that but what do you suggest as the alternative? After all, if there were no cheap goods American workers would have to spend more of their income on consumption. That would leave even less savings and with less savings there would be less capital accumulation.

Preventing fewer treasury purchases is very simple. All that the US government has to do is to learn to live within its means and spend less. If that were the case the Chinese would have to invest directly in the US economy, which they are doing and have tried to do.

This has had the effect of hurting our economy but on the other side it causes excess captial to be available driving down interest rates and raising stock prices just by the nature of the capital formation. Demographically it hurts our workers and benefits our investors.

First, do not confuse money with capital. Recycling newly printed money is not the same as accumulating capital. Second, it is the money printing that is driving down interest rates, not Chinese investments. Third, investors are not helped when governments print money and raise taxes because both are forms of confiscation.

This is a massive dislocation in the world's economy and especially ours. It cannot be explained away.

It can be explained very easily but you won't like the explanation. The problem is not trade but money printing. Look at history again and show me where the middle class has been destroyed by freer trade. Compare that to the destruction of the middle class by money printing and you should understand why your argument fails.

 
At 1/14/2011 11:19 AM, Blogger VangelV said...

Per capita manufacturing is interesting to contemplate:
US $8300
China $1500


The Chinese have less capital per worker so they produce less per worker. Less capital means less productivity and lower wages.

 
At 1/14/2011 11:23 AM, Blogger VangelV said...

What you say may be true, but you're also skirting around the idea of finite demand, which has interesting consequences for employment.

Finite demand? In human society? Sorry but you lost me. I know that in the case of my kids demand is not limited. Wouldn't you like to have someone cut your lawn, wash your dishes, tie your shoes, clean your house, answer your trivial mail, take your kids to school? I know that I would. In fact, I am willing to hire 100 people right now to do those jobs and more.

At the right price of course.

Sorry but you have to reexamine your assumption about limited demand.

 
At 1/14/2011 11:46 AM, Blogger Buddy R Pacifico said...

In my comment above I noted a new study by the Federal Reserve that seems to confirm suspicions that U.S. manufacturing and producitvity have been progressively overstated. If this is true then, the now 25% figure for foreign inputs might put the U.S. behind China in manufacturing and falling. Does the chart need revision?

Am I correctly interpreting the Fed report? Any confirmation from economists?

 
At 1/14/2011 12:42 PM, Blogger Benjamin said...

I can't remember when the last time it was I bought something made in America, except for food, bulky construction materials and styrofoam cups. Generally, if it can be imported, it is.

Makes me wonder about these numbers.

 
At 1/14/2011 1:16 PM, Blogger VangelV said...

I can't remember when the last time it was I bought something made in America, except for food, bulky construction materials and styrofoam cups. Generally, if it can be imported, it is.

Makes me wonder about these numbers.


Come now. You are not allowed to buy all those state of the art weapons systems. US defense contractors must sell several hundred billion a year to the US government to use in its wars abroad as it defends Japan, Korea, Germany, and other nations from the evil Nazis and other potential enemies. Doesn't that count?

You have to set aside your skepticism and accept what your government is telling you.

 
At 1/14/2011 3:15 PM, Blogger Sean said...

VangeIV,

Sorry but you have to reexamine your assumption about limited demand.

Maybe so, just a stray thought.

As a sci-fi fan, there has often been in the back of my mind the question of whether you could ever have a society where the robots did all the work and the economy didn't need humans at all, and whether that would work out for people, or not.

 
At 1/14/2011 4:09 PM, Blogger Benjamin said...

Vange, in his usual truculent fashion, does raise a point: How much of our manufacturing is captive to defense, NASA, governments, utilities, etc. Some say we wouldn't even have Boeing without defense spending.

Add to that certain bulky, heavy one-offs, such as construction beams etc., asphalt for roads, etc.

It would be interesting to know what fraction of manufacturing the USA has in "free market" goods, that can be produced anywhere? I would bet we are a distant second or third behind China and Japan.

It is notable that we consider our agriculture sector to be competitive, and it is the most mollycoddled, subsidized, regulated, supported, protected, enfeebled of all domestic industries.

Again, if free trade is nirvana, then we need an all-powerful WTO to enforce open trade laws and resolve disputes, and a global central bank and currency. Open borders for labor, capital, services and goods.

This will bring higher living standards to all---right?

 
At 1/14/2011 6:38 PM, Blogger Jason said...

Jet, if you believe that the 7 million former factory workers are now tech industry workers or own their own businesses or have found equivalent pay and benefit jobs, then you are right - there is no crisis.

Can we at least agree that 7 million manufacturing jobs lost indicates some phase change that requires better work from legislators? I mean I'm not asking for tarrifs, I'm asking for an end to the relentless regulation and laws that seem to erupt from government. And how about some torte reform? Make it simple, something like loser pays or end contingency service.

 
At 1/14/2011 8:28 PM, Blogger Jet Beagle said...

Jason: "if you believe that the 7 million former factory workers are now tech industry workers or own their own businesses or have found equivalent pay and benefit jobs"

First, the decline in manufacturing jobs the past ten years was only 5.5 million, not 7 million. Prior to that, the decline from 1980 was very gradual. Most of the workers who lost manufacturing jobs 30 years ago are probably dead or retired.

Second, why would it be a "crisis" if the replacement jobs did not provide equivalent pay and benefits? No one in America is guaranteed the very high level of pay some factory workers were earning. The service sector jobs which have been added to the economy since 1980 have, on average, paid very well. Perhaps not as well as all the UAW jobs which have gone away, but still very well.

Third, the responsibility to maintain one's value as an employee lies with the employee - not with the employer or with the nation. So if a former worker is experiencing personal "crisis" because he allowed his value to deteriorate, that is his own "crisis". The opportunities for retraining in the U.S. are endless.

 
At 1/14/2011 8:32 PM, Blogger Jet Beagle said...

Jason,

I'm all for reducing regulation and for tort reform. But that's not what most who lament the decline in manufacturing jobs have in mind. Most will promote "fair trade" - ie, protectionism to counter protectionism by other nations. Which, of course, is an incredibly dumb response.

 
At 1/14/2011 9:42 PM, Blogger Jet Beagle said...

Benjamin: "I can't remember when the last time it was I bought something made in America, except for food, bulky construction materials and styrofoam cups."

Well, food is a pretty big deal for most people. Construction materials are pretty important for everyone who lives and works in shelter.

Here's a few products which are still being made in America n large amounts:

motor vehicles
motor vehicle parts
gasoline
pharmaceuticals
chemicals
plastic
Harley-Davidson motorcycles
aircraft
aircraft parts
medical equipment
aluminum
fabricated metal products
glass
paper and cardboard
lumber
printed materials
industrial machinery
telecommunications equipment
ships and boats

If you are curious, Benjamin, you can find out what is being produced in the U.S. at the Census Bureau's Annual Survey of Manufactures

 
At 1/15/2011 9:52 AM, Blogger joebhed said...

Please excuse my ignorance but, Utilities?
Might as well include labor.
Utilities are an input to manufacturing so you are minimally counting them twice.
As our manufacturing industries have become more energy-intensive, that is actually displacing labor in manufacturing, the inclusion of utilities as a component is somewhere between misleading and deceptive.
Rewind, please.

 
At 1/15/2011 10:08 AM, Blogger Mark J. Perry said...

Joebhed:

Please check the original data sources that I link to in the post (via the United Nations). For most countries like the U.S., the manufacturing is listed as: a) manufacturing only, and b) manufacturing PLUS mining and utilities. But for China, the United Nations ONLY lists total manufacuturing INCLUDING mining and utilities. Therefore, the only way to make an accuracte comparison between the U.S. and China is to INCLUDE mining and utilities.

This is not an attempt to be misleading or deceptive, but an honest attempt to compare "apples to apples" manufacturing data between U.S. and China.

If you can provide an alternative data source for global manufacturing output, I'll be happy to consider revising the post and graphs.

 
At 1/15/2011 5:10 PM, Blogger Sean said...

The answer to my question about where the demand is leaning:
http://innovationandgrowth.wordpress.com/

 
At 1/15/2011 8:59 PM, Blogger Ron H. said...

"As a sci-fi fan, there has often been in the back of my mind the question of whether you could ever have a society where the robots did all the work and the economy didn't need humans at all, and whether that would work out for people, or not."

One possibility is that we would all become like the people in the movie Wall-E, who had left Earth, and needed to do nothing for themselves. If you haven't seen the movie, I highly recommend you do. It's great fun.

 
At 1/15/2011 9:00 PM, Blogger VangelV said...

As our manufacturing industries have become more energy-intensive, that is actually displacing labor in manufacturing, the inclusion of utilities as a component is somewhere between misleading and deceptive.

It isn't deceptive because energy costs do matter. When provinces or states pursue stupid policies that cause electricity rates to increase they find that they lose manufacturing facilities because margins can be so thin that even a minor increase in the cost of some inputs can become a critical factor.

 
At 1/15/2011 10:43 PM, Blogger juandos said...

Fo what its worth the following is from Foreign Policy dated two years ago: The myth of "Made in China"

Note the following from the 2nd paragraph: 'But as it turns out, "Made in China" is a bit of a misnomer these days. Over the last 20 years, supply chains have fragmented across the globe -- with one part made here, and another made there. Rarely is any one product made in any one country. China often specializes in the final stage of production: putting components together before exporting to the final users. Indeed, much of the value of U.S. imports from China, and similarly from Mexico, includes parts and components made in other countries -- the United States among them. According to our recent study, domestic content (the stuff that directly contributes to domestic economic growth) makes up about 45 percent of Chinese exports and 34 percent of Mexican exports to the United States'...

 
At 1/16/2011 2:04 AM, Blogger juandos said...

This comment has been removed by the author.

 
At 1/16/2011 9:26 AM, Blogger Jason said...

Jet Beagle: Third, the responsibility to maintain one's value as an employee lies with the employee - not with the employer or with the nation. So if a former worker is experiencing personal "crisis" because he allowed his value to deteriorate, that is his own "crisis". The opportunities for retraining in the U.S. are endless.

I agree with you on this point. And this is what I tell co-workers and friends. But as far as retraining is concerned, I just don't believe it can happen.

In my experience, I've found there are just so many workers who can handle more than the mundane and tedious. Frankly, we have a world populated mostly by ditch diggers. To be sure, in this world there are also your engineers, techs, managers, entrepreneurs and such. But let's agree that 80% are cannon fodder and current or future inmates. What do you do with them? Retrain them?

Despite this belief I have, I also know the conclusion of protectionism both for labor and products. So I advocate better support for factory work though better labor policy, less regulation and Torte reform. If you wanted to eliminate unions also, let's talk.

I believe we have to do something, because I am convinced that in America we should keep the fodder working before they turn the cannons on rest of us.

 
At 1/16/2011 10:57 AM, Blogger Jet Beagle said...

Jason: "In my experience, I've found there are just so many workers who can handle more than the mundane and tedious. ... But let's agree that 80% are cannon fodder and current or future inmates."

What an outrageous thing to say! Of course I will not agree.

I have worked alongside common laborers, tire changers, landscape workers, short order cooks, delivery couriers, roofers, and many more jobs which are classified as low or medium skilled. I doubt that you are capable - without years of experience - of doing very many of these as efficiently as the workers I have observed and worked with. You are probably not aware of how much knowledge and training are possessed for the "cannon-fodder" workers you disparage.

Those of us with high IQs have been fooled many times into believing there is a great chasm between us and the common man. The truth is, the gap is really not that large at all - certainly not nearly as large as you imply.

 
At 1/16/2011 3:55 PM, Blogger Jason said...

Jet, let me be clear, I make no assumptions about a person when I first meet them. Really I don't. This is one of the ways in which I am able to lead teams. I give everyone an equal opportunity to succeed. And over time, even working in an environment where supposedly everyone is trained and a professional and intelligent...you just know who can hack it, rise above the garbage and succeed and who cannot. And it is about 20%. Every time, every company. And by the way, I've found intelligence has no bearing on success. Motivation is really the key. Not the size of the dog in the fight, the size of the fight in the dog...

So you are telling me that a majority of people are fully thoughtful, intelligent, capable, skilled individuals who just need training and an opportunity...come on man.

There is no shame in having followers in a society.

 
At 1/16/2011 4:38 PM, Blogger Ron H. said...

Jason,

"So you are telling me that a majority of people are fully thoughtful, intelligent, capable, skilled individuals who just need training and an opportunity...come on man."

Your elitist attitude is what has gotten us the enormous bloated government and crushing regulations we suffer from today. the idea that some group of smart people knows what is best for everyone else, and how best to spend other people's money.

It is the same attitude that has told people that their problems are not their fault, but are caused by others, and those others will take care of them. It has encouraged the very lack of ability you are complaining about.

 
At 1/16/2011 5:34 PM, Blogger Jason said...

Ron H, I will agree that liberals share my view. But that is all I share with them. I don't share THEIR view that the nanny state is a solution. I agree it makes the problem worse. I take a constructionist view that it is not the purpose of government to take care of people for the reasons of personal and economic freedom. We only have a right to pursue happiness, not a right to happiness.

But this blindness to all the stupid, unmotivated people all around us is really naive.

 
At 1/16/2011 6:12 PM, Blogger Ron H. said...

Jason,

"But this blindness to all the stupid, unmotivated people all around us is really naive."

I don't know where you live, but my experience seems to be different from yours. I do meet people I consider to be stupid and unmotivated, but I don't feel I'm surrounded by them, and I don't think it's my responsibility to do something if they are unhappy.

If people didn't have different abilities, there would be no trade or division of labor. The world would be a much poorer place. I try not to think that my skills and attitudes are far superior those of other people.

I don't think I need to provide training or job opportunities for people who aren't interested, and I don't think they will overrun the civilized world if I don't. If some people are unhappy it may be because others have told them they are helpless victims, and incapable of getting by without help. More of the same in the form of training probably isn't the answer.

 
At 1/16/2011 7:21 PM, Blogger VangelV said...

So you are telling me that a majority of people are fully thoughtful, intelligent, capable, skilled individuals who just need training and an opportunity...come on man.

I would not tell you that. What I will tell you is that most people are capable of being very good at one thing and that is what the market usually rewards. If you are a good machinist you don't need to be great at assembling cars, fitting pipes, writing computer code, or to be able to tell the difference between Seneca and Socrates. Most people can acquire a skill if that is what they must do to survive and are allowed to.

 
At 1/16/2011 7:43 PM, Blogger Sean said...

Ron H.,

Yes, we've seen Wall-E, and it is fun and cute. But no, I don't think that's a likely result. :)

 
At 1/16/2011 7:55 PM, Blogger Jason said...

Van and Ron, you are both making great points. Van you've struck one important point: Regardless of intelligence, people can be good enough at something to be employable. Whether that be as a laborer or as a scientist. Ron, this gets to the division of labor you discussed. Even then, motivation is an issue. But nothing motivates people like hunger, right?

But this is really my point: There are a LOT of people that fit in the "laborer" mold. As of right now, they have fewer and fewer opportunities. We can argue about why they are in the place they are in, and why they are in that spot and how it can be avoided, if it can ever be avoided, for the rest of time, but for now they exist.

All I would like is for America to WAKE UP and stop the judicial and legislative insanity that erodes our competitiveness. If we did, we might be able produce more of what we consume. Even if the competitive factory wage is $17 an hour or less, it is better for those people, and everyone here, that they are productive rather than consuming unemployment, taking endless training programs, food stamps or EIC that destroys otherwise useful capital. If those people don't like their jobs, then they can decide to improve their lot themselves or live within their means or be unemployed. And history has shown the ones that motivate themselves are the engine of growth, right?

And Ron, I don't think my experience is all that unlike yours. Although Detroit is not known for being a hyper-competitive place, Regardless I am very concerned at the lack of motivation I see everywhere I go, whether that be in Los Angeles, New York City, New York State, or Alabama. We have a massive accountability problem in America, to be sure. Can we agree there?

 
At 1/16/2011 8:08 PM, Blogger VangelV said...

But this is really my point: There are a LOT of people that fit in the "laborer" mold. As of right now, they have fewer and fewer opportunities. We can argue about why they are in the place they are in, and why they are in that spot and how it can be avoided, if it can ever be avoided, for the rest of time, but for now they exist.

I do not believe that there are as many people as you seem to think that are untrainable. Many choose to be in the position that they are in because of the support that they receive from the government. Why try to work very hard to learn something new if you can exist comfortably on a combination of assistance and doing a few things on the side that the government does not know about?

I used to work with a guy who was what one would term a threshold earner. He worked as little as possible and took as much unpaid leave as he could get away with because he wanted to keep his compensation below a level that would qualify him for a subsidized apartment that he really liked. He would do some work on the side for people but would take beer and food instead of money as payment.

There are many people just like him. They hang around the fringes choosing to earn as little as they have to in order to live in ways that they want. Many are very bright but see themselves are more interested in a good time than a career. When governments get into the act and let people like that live off the rest of us you will see far more idleness than you would see if they were on their own.

 
At 1/16/2011 8:12 PM, Blogger VangelV said...

All I would like is for America to WAKE UP and stop the judicial and legislative insanity that erodes our competitiveness.

It seems to me that many voters talk a good game but act to perpetuate the madness instead.

Even if the competitive factory wage is $17 an hour or less, it is better for those people, and everyone here, that they are productive rather than consuming unemployment, taking endless training programs, food stamps or EIC that destroys otherwise useful capital.

As I wrote in other posts, for some people playing the game and having much more free time is more important than a career of money that they don't see retaining its value.

If you want a real solution get rid of the legal tender laws and most of the regulations that hold back economic activity in the US. Workers and investors would have far more in the way of incentives to be as productive as they want or need to be.

 
At 1/16/2011 8:48 PM, Blogger Jet Beagle said...

Jason,

Many millions of Americans are working in middle-skill positions which neither you nor I could perform without months if not years of training. You're kidding yourselves if you are referring to these people as "cannon fodder" or even "laborers". Furthermore, these middle-skill positions have been increasing in the U.S., not decreasing.

Jobs which you refer to as low-skill have also been increasing in the U.S. Over the past 10 and 20 years, the U.S. economy has provided more and more such opportunities, not fewer and fewer. That 12 million illegal immigrants can find such positions not a shortage of opportunity but rather a strong, vibrant, job-creating economy.

 
At 1/16/2011 9:02 PM, Blogger Jet Beagle said...

Jason,

How many times are you going to demonstrate the trait of the intellectual, elitist snob?

"populated mostly by ditch diggers"

"cannon fodder"

"regardless of intelligence"

"blindness to all the stupid, unmotivated people all around us"


If one is forced to work for a team leader with such a disparaging attitude toward the common man, one might be discouraged enough - or disgusted enough - to withhold his best efforts. Perhaps the lack of motivation you claim to observe has as much to do with the observer as with the observed.

 
At 1/17/2011 12:18 AM, Blogger Jason said...

Jet, I am no snob, nor elitist. Perhaps discouraged or tired may have been better words to describe me.

No one is forced to work with me. You know that is not how it works. I'm brought in to perform a service. And I never have the luxury of choosing my team nor the task. I get what I get. An elitist wouldn't be able to work in that environment, they would be shot in the back by the troops so to speak. And you can probably tell I am not that good an actor.

Regardless, the result is always ways the same. Some people are motivated and get it and most are just along for the ride. Some are pretty well uselss. It is just how it is. I describe some of those folks as "work to live" and move on. If I have to work with them again, I'm thankful for the work and do the best I can with the resources at my disposal.

If you've been blessed with working amongst only highly intelligent, motivated people - congratulations. Talk to a factory plant manager or a hr manager at a McDonalds or some shoe store assistant manager or a small business owner and ask them about their personnel. I think you might find it enlightening.

 
At 1/17/2011 6:07 AM, Blogger Jet Beagle said...

Jason: "Talk to a factory plant manager or a hr manager at a McDonalds or some shoe store assistant manager or a small business owner and ask them about their personnel."

Funny you should suggest that. Consider my resume:

1. owner of two small retail businesses for 15 years in the past two decades;

2. five years as manager of a fast food burger place and a diner;

3. industrial engineer who worked very closely for four years with package sorters and delivery couriers to improve their productivity.

Jason, I know a lot about workers in and applicants for low-skilled jobs. I'm confident in the ability and motivation of my feloow Americans. I'm sorry to read that you are not.

 
At 1/17/2011 8:52 AM, Blogger Jason said...

Jet, I'll admit, that is an impressive resume. I want to live where you live.

My experience is mostly consulting in the Detroit, but not only in Detroit. I have direct family members that own businesses. For them, it's been hard to find good people. Although, I will admit their people skills are on the abrasive side. They are do-it-yourselfers.

Regardless, VangeIV really captured the thing that rubs me raw in in his post a few spots above: He talks of someone doing the minimum and working the system. This is what I see, a majority of people who are content to do the minimum. It's hard to gauge intelligence when people operate like that.

If you've experienced more than this, then I really need to understand what you look for when you hire people.

I've worked with people I haven't hired, people I have hired and I've found it to be a crap shoot. When I hire, I try to find people who are either self-driven (sometimes this can backfire if you start to enter the narcissist spectrum) or looking for leadership (this can backfire as well becase these types sometimes won't think for themselves).

 
At 1/17/2011 11:13 AM, Blogger VangelV said...

Regardless, VangeIV really captured the thing that rubs me raw in in his post a few spots above: He talks of someone doing the minimum and working the system. This is what I see, a majority of people who are content to do the minimum. It's hard to gauge intelligence when people operate like that.

You are confused. The guy I used in my example was extremely capable and very trainable. He used to be one of the more reliable workers that we had and would do tricky jobs quickly and efficiently. (Which is one of the reasons why he was tolerated.) The point was that the government is willing to hand out benefits and he saw no reason why the should not take advantage of them given the marginal tax rates that we are talking about.

I think that you look at some people who are doing what they want to and think that you are smarter than they are because you have other goals and values. But human beings are not the same. Many of of us assign value to various social and economic activities that would deviate from the 'norm'.

In my case I rejected a certain career path that may have paid more much more for one that I enjoyed even though it had its share of occasional frustrations. When my company was closing down I had to make a choice between taking a job right away and giving half my severance back or taking a year off with full pay and travel a bit with my family. I chose the later, which was fortunate because some the investments that I made, which could not have been made had I been working, allowed me to retire after that year was over even though I was still in my early 40s. I could still work now because I have a useful skill set but why would I take time away from my wife and kids for money that will be taxed away at a marginal rate of much more than 50%?

 
At 1/17/2011 11:26 AM, Blogger VangelV said...

I have hired and I've found it to be a crap shoot.

Welcome to humanity. Some people who are supposedly terrible workers sometimes turn out to be very effective under different circumstances.

In my case I recall joining a small business unit where the previous manager, who was now my customer had split the crews and gave me and my boss the misfits and the inexperienced workers. My first day on the job he took me to his office and showed me the 'death board' that had a long list of names of previous managers who had either quit, died, had heart attacks, or had nervous breakdowns trying to make that particular area work.

Because the inexperienced workers didn't know any better (and neither did my boss and I) we wound up cutting assembly costs by around 50% and wound up with a motivated crew that had multiple skills and flexibility. I still see that manager every once in a while and he still accuses me of cooking the books because he could not figure out how the band of misfits he gave me could do what it did. The answer was simple. As new people in an industry with lots of layoffs they knew that they had a limited time to learn how to do things extremely well and acquire free training that might help them in the future. And because they found certain jobs hard they figured out ways to get rid of the non-value added work by getting the engineers to push through design changes that they knew would work. And because we didn't know any better we allowed our workers to bring external skills not normally used in assembly into play. They would talk to their suppliers and come up with a system of making parts that would reduce or eliminate any rework even as it cut the manufacturing cost for the supplier.

I have discovered first hand that no matter how smart we may be, if you want effective and efficient production it makes a lot more sense to rely on a decentralized system that takes inputs from the very people who are doing the work. I think that you underestimate people.

 
At 1/17/2011 3:07 PM, Blogger Jet Beagle said...

VangeIV,

About your last post above: I couldn't agree more.

I have observed such turnarounds in performance at a fern bar restaurant, at a large FedEx delivery courier station, and in a strategic planning unit of a Fortune 500 corporation. In all three cases, a new manager took the exact same employees and dramatically improved unit performance. I don't believe the previous managers were untalented or unmotivated. It's just that sometimes a certain management style works better with a particular group.

Over the past four decades I've noticed that the very best managers are able to figure out how to manage the individual - to learn what his needs are and structure the job and rewards accordingly. In other words, the very best managers adapt to the employees rather than vice versa.

 
At 1/17/2011 3:31 PM, Blogger VangelV said...

Over the past four decades I've noticed that the very best managers are able to figure out how to manage the individual - to learn what his needs are and structure the job and rewards accordingly. In other words, the very best managers adapt to the employees rather than vice versa.

I don't know about this. I think that it simply comes down to incentives. We just have to figure out how to get people to want to do what is necessary and get a benefit from doing the right things. Everything else is gravy. Some of my best and most productive employees were by-the-book hard-ass CAW reps who did much more than required even though deep down they fought urges to go the extra bit. Once the right incentive came into play the violated some of their own unofficial and unwritten rules. After I my plant closed down one of my reps wound up running a little company. Needless to change some of his feelings towards unions have changed.

 
At 1/17/2011 3:55 PM, Blogger Jet Beagle said...

Jason: "Jet, I'll admit, that is an impressive resume."

Well, thank you! It's actually not my complete resume. I've worked full time for thirty-eight years and parttime for another four.

 
At 1/17/2011 7:17 PM, Blogger Jason said...

Jet, Van I must admit you are making me think quite a bit.

I've known for quite a while that management can make a huge difference in productivity. And I also know from experience that people will take initiative when they feel their contributions matter. Basically, I use that technique to motivate team-mates - I attempt to communicate in clear ways that their contributions make a difference. It works.

Despite everything, and doing a bit of soul-searching, perhaps my issue is I expect MORE. For instance, I don't mind doing the things necessary to motivate a team, it's part of the job. But I struggle with the question of why is that necessary? I mean WHY do people need this kind of care and feeding? Isn't it enough that they have a job and are paid a good wage?

I'll admit, it's really frustrating when the workforce needs a reason to do the things they OUGHT to do. But I guess as VAN said, "welcome to humanity."

 
At 1/17/2011 7:49 PM, Blogger VangelV said...

Despite everything, and doing a bit of soul-searching, perhaps my issue is I expect MORE. For instance, I don't mind doing the things necessary to motivate a team, it's part of the job. But I struggle with the question of why is that necessary? I mean WHY do people need this kind of care and feeding? Isn't it enough that they have a job and are paid a good wage?

I do not believe in the false motivation efforts that one sees these days. I do not believe that one has to try and bribe of fool people into thinking that they need to do more for some unexplained reason. My approach has always been to use incentives. In many operations there are lots of crappy little jobs and a lot of rework that is absolutely unnecessary. If the employees figure out how to eliminate this work they win because they have to do a bit less but still produce more. You win because you get more efficient production and more free time to improve employee skill sets. Their skill sets and record of performance makes them far more valuable and provide them with more job security even if the company fails.

As long as everything is above board and there is plenty of transparency and communication I have found that people will respond positively, even in a very corrosive unionized environment.

 
At 1/17/2011 9:01 PM, Blogger Ron H. said...

" I mean WHY do people need this kind of care and feeding? Isn't it enough that they have a job and are paid a good wage?"

No, it isn't enough. Money is only part of the picture. People need to feel that their contribution is important. If they don't feel respected and appreciated, they won't perform to their potential.

How about you? How do you feel about your job? Is the money enough to make you perform your best?

 
At 1/18/2011 10:40 AM, Blogger Jason said...

Ron, I have to say I don't look at it from a happiness point of view. My customers have a business to run, I have a skill they want and will pay for but only at the right price. If I'm good at what I do, they may continue to pay for my services.

Would I take more, sure. Would I take less, it depends. But I am certain if I don't take care of business, it won't take care of me.

I've become more motivated by trying to achieve excellence, as I believe that will help it all work out in the end.

 

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