Between 2001 and 2010, the US has lost 2.8 Million jobs to China and out of this about 1.9 Million was manufacturing jobs. It’s no surprise considering the economics. The average hourly wage for a worker in China is $1.36 while that of a worker here in the US is $23.32. And to top this off, other costs such as healthcare, benefits, are significantly lower in China. It’s no wonder everybody from Apple to Amazon have their products made in China.
While the movement of jobs is inevitable, there are some serious repercussions as well. It’s not always a case of high-end design and innovation happening in the US and “low-end” manufacturing being shipped to China. According to Gary Pisano, the co-author of “Producing Prosperity, Why America Needs a Manufacturing Renaissance“, a country’s capability to innovate is related to its ability to manufacture products. According to Pisano, products like Kindle and iPad can no longer be manufactured in the US because many of the manufacturing techniques associated with displays and enclosure technologies are available only in Asia. Essentially, the supply chain needed to roll out a new electronic product is no longer in the US! If you are a product innovator, your decision to manufacture your product outside the US makes sense primarily because you can’t get it done here in the US!
Pisano also thinks that countries like Germany that have done very well in retaining manufacturing jobs have lessons for the US. Germany has been focusing on vocational training and has created a specialized workforce.
In the current globalized environment, the US can compete only in the most specialized manufacturing areas. However, even this requires significant investments in training. Pisano says, “It’s all about human capital. The country with the strongest human capital wins. And we’ve got to be investing much more in our human capital and not just at the university level, but also for the bright kids who don’t necessarily find it the best fit for them to go off to a university. We still have to make sure that they have great skills so they can be working in more complex jobs that the economy requires.”
With college education becoming more expensive every year, its time to invest in developing skills in high-end manufacturing. Enterprises, especially those that continue to retain manufacturing here in the US, need to constantly invest in training and skill development of its workers in-order to offset the cost disadvantages and, most importantly, retain the innovation edge here in the US.