Jobs, Unions and Schools

The last post about manufacturing jobs generated some excellent comments from my colleagues.

Barry explained the difference between manufacturing and assembly: Ford, Chrysler and GM have been assembling overseas for sale in the U.S. since the 1970s. Meanwhile, Toyota, Honda, Nissan, Mitsubishi, BMW, Mercedes-Benz, Volkswagen, Isuzu, Mazda (and soon Hyundai) are assembling in the U.S since the 1970s. It seems like we win there.

Manufacturing means where are the parts made that are later assembled. Look at the window sticker. Most cars sold in the U.S. are made with the vast majority of parts fabricated in North America.

Barry also noted why Ford is in trouble: Labor costs pure and simple. Between the unions and the union pensions, Ford, GM and Chrysler pay something like $1500 per car MORE in labor than any of the “foreign” car companies assembling cars in the U.S.

Fetching Jen pinpoints the source of the jobs problem: Working for a manufacturer, I've witnessed the supposed "job loss." It is employees who refuse to update and upgrade their skills as the jobs become more technical. We phase them out and hire people who are trained more technically.

Lynora agrees that re-training is the key but questions the responsibity: I believe that jobs exist, they have just shifted and the simplest way to cope with this shift is through training and education. Who pays for that? That's another topic for another day, right? Yep!

And Jim makes the argument for free markets: U.S. corporations need to concentrate on new product innovation (what we do better than anybody) with the realization that within two years of introduction, that new idea will came back to us from the East better and cheaper..... great for the consumer.

But Vic worries that individual productivity in practice means that techniques allow a person to do the job five did a few years ago more effectively now. GREAT. But that means one employee working and four out of a job. How do you fix that?

Well…. the fabulous American productivity growth (3.4% per year) means that productivity is up 18% since five years ago. Thus one man can do the work of 1.18 men (roughly, 5 can do the work of 6); not exactly a catastrophe for the worker. And you “fix” that by re-training … or by starting a business (perhaps on the internet) or becoming a realtor or selling software or … whatever.

The schools and the unions have created this unfortunate situation and changes must be made if we want to remain a prosperous nation.

The poor performance (and lousy productivity) of our education system is well known. From John Stossel’s “Stupid in America” TV special: At age ten, American students take an international test and score well above average. But by age fifteen the Americans place twenty-fifth out of forty countries. The longer kids stay in American schools, the worse they do in international competition.

This is a serious problem that deserves several posts. (See “So What’s Wrong with the Public Schools,” 1/8/05; “Reforming Public Education,” 2/10/05; “Blowing up Boxes at Starbucks,” 3/12/05; Fixing Public Education at Aspen,” 7/25/05; “Beware Liberal Colleges,” 10/25/05) I’ll have more to say soon.

Unions once had value while now they are harmful and a drain on the economy. Everyone understands the significant extra cost (eg. $1500 per car) imposed by unions, but the real harm is to the workers themselves. By maintaining a system based on guaranteed raises and lifetime job security they provide a refuge for students of the lower economic classes who forgo advanced education in favor of factory jobs. When the global economic competition overcomes the unionized companies, the workers are out of luck. (The union bosses do fine.)

In the public sector, the unions maintain the failing school system and the beat goes on….and on….and on.