As a result of recent supply chain disruptions, expect to see new high-tech manufacturing facilities popping up all across America. It can be argued the changes made during the Trump years on how we tax American companies has been a gift to the rich and added to inequality but some of them also pave the way for companies to build new facilities here in America rather than abroad. This was not the chief goal of the legislation but we should celebrate this small victory. In truth, the structural issues that haunt America’s competitiveness still far outweigh the benefits of lower taxes.
The ugly truth is American companies have little reason to bring jobs home, the logic that lowering corporate income tax will create a massive flow of jobs to our shore is flawed. The tax bill does little to level the playing field when it comes to issues such as healthcare costs and over-regulation. This means these factors continue to act as barriers to doing business in America. Still, a lot of reasons exist for American companies to locate manufacturing here. With automation and less need for human workers change is on its way. Over the last three decades, robots have become far more common in factories. In many manufacturing facilities, robots do most of the work.
Today, a typical factory may contain hundreds of robots working on fully automated production lines, often as it rolls by on a conveyor a product can be welded, glued, painted, and finally assembled at a sequence of robot stations. Robots have replaced humans in the assistance of performing those repetitive and dangerous tasks which humans prefer not to do or are unable to do due to size limitations. These robots can even work in places such as outer space or at the bottom of the sea where humans cannot survive the extreme environments. Industrial robots are also used extensively for placing products on pallets and packaging manufactured goods, for example for rapidly taking drink cartons from the end of a conveyor belt and placing them into boxes, or for loading and unloading machining centers. This is changing the way manufacturing is done and rapidly reducing the need for humans on the factory floor.
Many people blame the decline of manufacturing jobs in America and other rich countries on outsourcing and the movement of factories to countries where labor is cheaper. That has indeed been the case but with new less expensive robots entering the game even this “cheap labor” is being replaced by machines. The US like almost every other rich country on the planet manufactures more stuff than it ever has. The fact is by manufacturers replacing workers with machines they are now replacing labor with capital.
The big driver for free trade has always been big companies wanting to expand their markets and exploit ways to reduce labor costs. Factories have gotten spectacularly more efficient. They produce more goods with fewer people, their “productivity” is rising. Manufacturing employment is shrinking not mainly because jobs are moving “offshore”, but because fewer workers are needed. In most advanced countries, even those with strong export sectors, manufacturing’s share of jobs has plummeted. For example, from 1973 to 2010, manufacturing’s proportion of employment fell from 22 percent to 10 percent in Canada.
As software and robots improve they will be able to expand the number of functions that they can perform. It suggests that sooner rather than later, the only people working in factories in rich countries will be those who had the time and money to get college degrees. In the past a large slice of America’s middle class used to consist of people who started out working in factories, having only a high school degree and would learn on the job. There are concerns about the increasing use of robots and their role in society. Robots are blamed for rising unemployment as they replace workers in some functions.
What has happened in manufacturing is part of a larger paradox at the heart of the economy here in America but throughout the world. While more wealth is being, at the same time, millions of people are being left behind. After adjusting for inflation, the median worker in the US is poorer now than in the mid-1990s. Still, not everyone is suffering, skilled workers, for example, are earning more than ever and so are the very rich. The big beneficiaries have been those who own the capital that can be put to work in the world’s increasingly person-free farms, mines, and factories.
China’s largest private employer, Foxconn, which manufactures the iPhone and many other consumer electronics has been busy installing over a million manufacturing robots. This new wave of technology is leading to more automation and rapidly replacing off-shoring as the least expensive way to produce products. Already, China is losing jobs to countries with even lower wages. But eventually, “you run out of places to chase the (cheap) labor,” says Rodney Brooks, chief technology officer of Rethink Robotics. Years ago, thanks to some very clever engineering, a robot named Baxter ran about $22,000. Today the price is falling and the Baxters of the world are getting better.
In the US, a person working full-time at a low-wage factory might make $20,000 a year. The biggest difference is that Baxter will work 24/7 whereas its human counterpart does not. Brooks argues that, in its current incarnation, Baxter isn’t capable enough to replace a human worker. “The robot is not a one-to-one replacement,” says Brooks. “We see it as a tool for ordinary workers to do better.” The goal of Rethink, says Brooks, is to bring manufacturing back to the US by replacing with automation some of the repetitive tasks that are currently shipped to China and other emerging markets. It’s not a bad thing when we get more stuff for less work, the issue is, can we reinvent and redesign our economic institutions to keep pace with this change so not all of the benefits accrue to a very small number of people?”
Simply put, this is the way of the future and the possibility of robot autonomy and potential repercussions that have been addressed in fiction are a growing concern. One thing is certain, robots are taking our jobs and learning new tricks far faster than we humans. Automation and improvements in robots are job killers, when you add in the dropping cost of replacing often unreliable human workers one must take a dim view of the employment picture going forward. Still, as a matter of policy, if robot factories are the future then let us be wise enough to try everything we can to encourage them to be located in America.