In today's political discourse, it is commonplace for the left to berate major corporations for moving jobs overseas in order to pad profits through the use of cheap labor. It is an argument that easily fits into sound bites and is used to explain away rising unemployment and the death of manufacturing in America. The right, on the other hand, blames organized labor and a draconian tax code for preventing America from competing on an even playing field. The truth, however, is much more complex. A recent eye-opening article in the New York Times examines Apple, one of our nation's great corporate icons, and discusses why the company had no choice but to produce their best-selling gadgets overseas.
What I found most interesting about the article was that, according to Apple executives and other experts briefed on the matter, neither one of those political arguments carries much weight. The reality is that Apple, adhering to a sound business model, strives to make the best products possible at a quality level that is second to none. Unfortunately, the workforce and infrastructure in the United States is not up to the task.
I was surprised that there was no mention of a greedy corporate culture choosing to rely on slave labor, nor was there mention of organized labor making it impossible to have a flexible work force. The reality is that Apple simply could not find enough skilled labor in the United States to make the complex technical products that are the reality in today's gadget-hungry marketplace. When Steve Jobs told President Obama that "those jobs aren't coming back," it was not because Apple couldn't make a profit manufacturing in America, it was because America simply did not have the labor and capital resources to build an iPhone.
According the article, more than 8,700 industrial engineers are required to oversee the iPhone supply chain. In the United States, it would have taken nine months to find that many engineers. In China, it took 15 days. That is a damning indictment of the American education system if a company cannot find enough skilled workers to build an iPhone. Skilled workers are supposed to be America's strength, while the common explanation is that our lack of unskilled workers and uncompetitive wages are the real problem.
While a lack of American skilled labor is a hindrance, it is our nation's lack of infrastructure that makes managing a fast-paced, flexible, and highly technical supply chain extremely difficult. According to Apple executives quoted in the article, "Asian supply chains have surpassed what's in the U.S." The result is that, "... we can't compete at this point." That has left America to rely on its service sector, which can provide steady jobs; but it relies too heavily on domestic consumption, does not provide upward mobility, and doesn't require technical skills to add innovation to the economy.
Putting the political rhetoric aside, our nation has some soul searching to do if it really intends to compete in a globalized economy. If America's leaders want to see us regain our manufacturing dominance, the answer is not as easy as "right-to-work" laws, a changing tax code, or currency manipulation. Germany, for example, has proven that it can make quality exports and still pay decent wages and benefits to its workers.
The real answer lies in teaching Americans the skills they need to compete globally, such as vocational schools focusing on supply-chain manufacturing and a focus on the type of industrial engineering required for large-scale production. Finally, we need a public policy environment where emphasis is placed on infrastructure modernization, allowing us to produce and move goods much more quickly and flexibly. This means an upgraded rail infrastructure, smart power grids, incentives to build modern factories, and an investment in energy production that will reduce the cost of doing business.