Tag: US jobs

OM in the News: Manufacturing Jobs Begin the Long March Back (From China)

For more than a decade, deciding where to build a manufacturing plant to supply U.S. markets was simple: China was the  answer. But the International Business Times (June 2, 2012) estimates that in the next 10 years, increased production from manufacturing re-shored from China will add  $20-$55 billion annually to the U.S. economy. And in 5 years, U.S. exports could increase by  $65 billion annually, creating  1.8-2.8 million new manufacturing jobs here.  In the next few years, rising Chinese wages, higher U.S. productivity, a weak dollar, and other factors will virtually close the cost gap between the U.S. and China.

The article, a good starting point for the semester, looks at 4 issues:

Labor Costs. In 2000, factory wages in China averaged just 52 cents an hour,  3% of what average U.S. factory workers earned. Since then, Chinese wages have risen by double digits each year, while costs for U.S. production workers increased by less than 4% annually. Since wages account for 20- 30% of a product’s total cost, manufacturing in China will soon be only 10-15% cheaper than in the U.S. — before inventory and shipping costs are considered. After those costs are factored in, the total cost advantage will drop to single percentage digits or be erased entirely.

Logistics. Logistical issues — such as shipping costs, the time it takes get a manufactured product to the market, and the proximity of production lines to engineering and design teams — are big factors in comparing China vs. U.S. manufacturing.

Supply-Chain Threats. There are the many costs and headaches of relying on extended supply chains. These include inventory expenses, quality-control problems, and the threat of supply disruptions. For example, the floods in Thailand last year left Apple with a shortage of  hard drives.

Currency Risk. In the past, the risk of currency fluctuation was minimal in China because the central bank kept the yuan rigidly pegged to the U.S. dollar. But in 2005, Beijing allowed the yuan to fluctuate. Since then, the yuan has appreciated about 30% against the dollar.

Discussion questions:

1. How can OM help the US recapture manufacturing jobs?

2. What advantages does China retain in manufacturing, and what are the advatages of producing here?

OM in the News: Illegal Immigrants Vacate Jobs that Americans Find Undesireable

When I was a young child, my dad proudly took me for a tour one Saturday morning of the meat processing plant, Dubuque Packing (home of the famous Dubuque ham), where he worked. Decades later, I still recall the stench, the noise from cows being slaughtered, and the massive cold and damp rooms. Jobs in slaughter houses, as are field-hand picking jobs, are unpleasant, with low pay and skimpy benefits.  As our US population has become better-educated, we seek office and manufacturing  jobs that have set hours, higher pay, and safer conditions–things we take for granted. Businessweek (Nov.10-17, 2011) tackles a tough issue of how illegal immigrants have taken over many of the dirty jobs Americans no longer aspire to.

In particular, this lengthy article deals with Alabama, which in September passed a law making it almost impossible to employ illegal immigrants, mostly Hispanic and heavily Guatemalan (the Hispanic population had grown from 1% in 1990 to 4% today). The law follows an anti-immigration sentiment throughout the country that has accompanied the recession. With 211,000 residents out of work and high unemployment rates (18% in some rural counties), the state’s ruling has resulted in an exodus of 1,000’s of  immigrant field hands, hotel housekeepers, dishwashers, and chicken plant employees.

The result:  employers trying to fill a massive number of vacant positions with Americans. But Americans are not interested in these jobs, and it’s not just because of the hard work and low pay. We have come to think of these jobs as beneath us, says a Princeton prof. “It doesn’t have anything to do with the job itself. In other countries, citizens refuse to take jobs Americans compete for. In Europe, auto manufacturing is an immigrant job category”.

Furious employers have bombarded their legislators with complaints of unpicked tomatoes, unmade beds, and uncleaned fish. This is a thoughtful article that you may want your students to read as you teach Chapter 10.

Discussion questions:

1. Why is this an important OM issue?

2. Should illegal immigrants be hired to do the jobs Americans don’t want?

Teaching Tip: American Productivity–a Double-Edged Sword

Last Saturday, we had a bunch of friends over for dinner and the talk turned to  productivity, about which we write in Chapter 1 (p.13): “Productivity is an excellent way to evaluate a country’s ability to provide an improving standard of living for its people. Only through increases in productivity can the standard of living increase“.

But here was the gist of the conversation— From a pediatrician: “We have a practice of 22 doctors and business is stable. Six staff turned over this year, but because of the economy, we only replaced two. The  work was split among the rest, who each got more hours”. From an ophthalmologist: “I am a sole practitioner, but when two staff left this year, I only replaced one.” From a lawyer: ” My firm made offers to two dozen new associates this year. But with the downturn, we rescinded the start dates by one year. Current associates will pick up the slack”. From a second attorney: “We did exactly the same with new hires. But we  placed each of them with a non-profit for the year and picked up their ( lower) salaries”.

The Wall Street Journal writes about “superjobs“, a situation where employees do more than one job’s worth of work. (More than 1/2 of workers surveyed said their jobs had expanded, but usually without a raise). So it’s no wonder that US productivity increased twice as fast in 2009 as it did in 2008, and twice as fast again in 2010. This makes American workers the world’s most productive. We not only work longer hours (Americans put in an average of 122 hours more per year than Brits and 378 hours more than Germans), but technology investments have increased their rates of return, and companies have become more efficient.

With more productive workers supporting a growing population, the employment rate and living standards are falling. This can make for a good classroom discussion as your students provide their view of our productivity gains. Perhaps this is lean management at its best.