Apple and the American economy

In Apple, “we have a company that’s been phenomenally successful, making products people love and directly creating nearly 50,000 American jobs in doing so, criticised for not locating its manufacturing operations in America,” The Economist writes. “It isn’t enough for Apple to have changed the world with its innovative consumer electronics. It must also rebuild American manufacturing, and not just any manufacturing: the manufacturing of decades ago when reasonable hours and high wages were the norm.”

All told, the physical production of Apple’s products accounts for hundreds of thousands of manufacturing jobs. America, which finds itself several million jobs short of where it would like to be, and particularly short of the middle-skill manufacturing positions that once powered growth in the middle class, seems to want some of those back,” The Economist writes. “Is that a reasonable desire?”

“The [New York] Times piece quotes Steve Jobs as telling President Obama that those jobs aren’t coming back, and they probably aren’t. Attracting firms back to America wouldn’t simply be a matter of helping reduce production costs in America. You’d have to replicate the convenience of the entire supply chain, which would likely be an enormously costly enterprise,” The Economist writes. “Given the quality of the jobs characteristic of these production chains, one should ask whether it might not be a better idea to invest that money elsewhere.”

“It’s worth asking how the American government might alter its policies so as to make life better for middle- and low-skill workers in America at reasonable cost. Offering heavy subsidies to Apple to get it to relocate production would reduce inequality in America; you’d increase the tax burden which would mostly affect richer households and you’d create low-wage jobs, which would mostly benefit underemployed, low-skill workers,” The Economist writes. “Now, perhaps after we add up everything Americans will decide that this kind of massive intervention in the economy and associated efficiency cost is worth it, in order to provide the dignity of employment, such as it is, to millions of workers. It’s worth asking, however, whether there might not be a different and better way forward.”

Much more in the full article – recommended – here.

[Thanks to MacDailyNews readers too numerous to mention individually for the heads up.]

Related articles:
Apple, Steve Jobs, Obama, America and a squeezed middle class – January 21, 2012
How Rick Santorum would lure Apple to move assembly from China to Charleston – January 21, 2012
Apple’s real market value: How many U.S. jobs it creates – November 21, 2011
iOS developer salaries skyrocket – November 9, 2011
How many U.S. jobs has Apple’s iPod created? – July 8, 2011

28 Comments

  1. i wish that all the factory job lovers would open up their own factory and work in it.

    As it is most people wishing for the return of factory jobs don’t want to work in one and don’t want their kids to work in one either.

    1. Americans also don’t want to see 8000 workers living in on-site dormitories woken up at 2am, given tea and biscuits, then shown to the floor for an emergency production change.

      Unions wouldn’t allow this, and rightfully so. Also, American workers don’t WANT to live in dormitories, essentially on-base barracks.

    2. Agree – however – the ways things look – Americans best adopt and survive – and perhaps before it is turned into a 3rd World Country, bringing back some of those ideas SHOULD happen. (providing less income but housing and food – to employees – as a benefit to its workforce) — JMHO

      1. No. We’ve been there before. Company towns, company stores. Distorted market forces.

        We got into the healthcare jam because healthcare became a benefit through the employers, rather than a competitor in a free market in which customers (patients) purchased directly from providers. Instead, we developed a witches brew in which employers gave contracts to lowest-bidder insurance companies, who negotiate deals with providers, who then treat patients who show up with the right insurance card in the manner which maximizes profits to all the players. The patient has almost no say in the level of benefits, the insurance company or the provider.

        Think of how good those dorms are going to be and the nutritional quality of the company chow hall meals when the consumer isn’t the person being fed or housed, but the employer trying to minimize labor costs. Bad idea.

        St Peter don’t you call me, ’cause I can’t go.
        I owe my soul to the company store.

    1. Whose work week will be 30 hours? Certainly no business owners. Talk to them and they commonly work 60 or 70, sometimes over 80 hours.

      You want them to hire people at 30 hours and pay them the same as they pay people working 40 hours now?

      Perhaps you mean government workers? Maybe you want to pay them the same as they make now to work 30 hours? That sounds like a great plan. Paid for by the people that work 50 hours.

      What planet are you from by the way? I’m from Earth, maybe I should visit yours some time. Is the weather nice there?

      1. I should add that although it does not really apply in the private sector, the culture that it encouraged in the beginning of squeezing employees to produce as much as they could and not hiring more labour have remained even after the introduction of the the myriad of complicated exemptions that have allowed private companies not to follow the 35 hour week.

    2. Sure, why not? It’s worked so well for the French that they are planning on going from a 35 hr work week to…a 40 hour work week. Because they’d go broke from all the compensation time they have to pay to people who end up working 40 hr weeks anyway in critical jobs like medicine.

    3. That was enacted in France, my home country (I live now in the UK). It was and is a disaster. It no longer really applies in the private sector. It is enforced rigorously in the public sector.

      There are many reasons why it did not work. The main one is because of the cost of labour. If the work of 10 employees is reduced so that 20 employees perform the same work but work for half the hours, that increases costs. That is because the cost of one employee involves not merely wages but tax, insurance, training, health insurance, pension contributions, employment rights etc. For each additional employee, the marginal cost of hiring them may be higher than the profit generated.

      The consequences of the 35 hour week have been as follows. First, French firms are less willing to hire new employees – because they are limited in the hours they can work. Instead, second, they try to squeeze those employees to produce as much as they can within the 35 hours, thereby increasing stress, pressure and suicide rates. Note that France now has one of the highest work-force efficiency rates in the developed world – and the consequent misery it causes. Third, wherever possible, French firms automate work so that low-paid manual work has been eliminated in favour of robots and machinery. Fourth, the public sector has become sclerotic, expensive and even more unresponsive.

      1. I should add that although it does not really apply in the private sector, the culture that it encouraged in the beginning of squeezing employees to produce as much as they could and not hiring more labour have remained even after the introduction of the the myriad of complicated exemptions that have allowed private companies not to follow the 35 hour week..

  2. There’s an idea – tax the top to subsidise the creation of 1000s of jobs and bring back high quality manufacturing to the fair isles of the US.

    How will that fly with the 1%? (like a pig into a bridge, I would imagine)

  3. All you have to do is get Apple’s competitors to move their manufacturing back to America. Until that happens, there’s nothing to talk about. Apple has to compete.

    Lets also not forget that roughly half of Apple’s customers are outside the U.S.

  4. This is not as simple as it sounds. First, the American education system has failed. Second, Government and regulations is just to much of a burden in this country. Try and open a plant here, every freak’n regulation strangles any attempt. Then, you have taxes and lining the pockets of politician and special interest group just to get permits.
    SJ was right, these jobs are gone and are NEVER coming back with all the red tape and government interference. Not to mention a large group of American’s are lazy and want everything given to them for free. I don’t care what political party you subscibe too, government won’t be able to take care of you when the jobs are gone.

  5. Do the Chinese that make Apple products buy American-made products? Chances are, no. Maybe some cars, aye they fly on Boeing planes but they don’t. Apple could make more in America. It would be good for the company and god for the American economy. The groupthink that makes up American’t is done by a generation of billionaire baby-boomer CEO’s that moved production abroad to make more money from the same price. America cannot sustain itself on being the world’s designers only. We must have something for the not-so-bright to make or the country will die. Apple MUST move more low-level work into the markets where they make so much money. That will only help them make more. The NC server farm was a good move. Efforts like that shoud be ten-fold. What is a $10 billion invet net into the American economy for Apple? Maybe $20 billion more in profit per year in a few years.

    1. The government needs to help this situation by making America a more business-friendly environment. It takes forever to get through all the red tape, and then you have the unions to contend with. Why would businesses create jobs here when we make it so hard to do so. We’re slitting our own throat and complaining because it hurts.

      1. I doubt America has any more red tape than China. The point is that the mundane assembly jobs done in China would not be desirable work for Americans these days. This isn’t the the early 20th century anymore. Nobody wants to be put on an assembly line doing the same task thousands of times over in a day.

    2. The only reason the server farm was put in NC (or America in general) was due to geographic realities affecting network latency. Americans are still Apple’s primary customers. They would be using Siri and iCloud the most. If you located the server in China or other cheap-labour country, you’d be pushing and pulling huge amounts of American internet traffic through a much smaller number of internet cables across the Pacific.

      Try loading a Hong Kong news website. I tried a few random ones, they downloaded in a reasonable amount of time, but was noticeably slower than American ones.

      Now think about the number of times people have run into Siri not being able to connect, due to network congestion. And imagine all of that traffic doing a round trip literally halfway around the world.

  6. Secrecy is one of the key ingredients to Apples success. 100s of thousands of young workers in China keep secret what they are working on. In the US, where most young people text every detail of their lives to one another, complete with pics and video, is the level of secrecy exhibited by the Chinese possible?

    Just one more reason no one should expect these jobs to be returning to the US.

  7. How about stopping companies like GE, Westinghouse and Boeing and every other manufacturing company that is US domiciled from giving away intellectual property to India and Chinese government, where access to this is demanded as the price of entry!!!!!

    It won’t because there is too much money to be made by selling our IP and plowing some of it back into Washington and CEO’s pockets!!!

  8. The genesis of America’s present morass begun 30 years ago. The blame should lie with policymakers, politicians, think-tanks, economists and Wall Street. All of them bet on the wrong horse:

    1) At the time when America’s dollar was still strong, it was wrongly used as a leverage to manipulate the world’s currency markets and to force other economies to dance to America’s tune. Politicians are too lazy to think of other ways to face the challenge that the country would face but instead use brute force to maintain the status quo;

    2) America’s foreign policy dictated that the economies of friendly countries should be strengthened with the export of American technical know-hows and production techniques to the extent that it was alright to let many of its “sunset” industries die in order to win and influence friends. Anyway America was always resilient and can invent its way out of every difficulties or so they thought; this was the hubristic thought prevalent among policymakers and initial successes bolstered a mantra that America is invincible and can afford to give away the jewel in the crown;

    3) The tome of hubris among America’s liberal intellectual think-tanks and economists that America can survive from a manufacturing base to that of a service-based economy was one of the false beliefs that America is the glue to an utopian world whereby every economy guided by America’s prowess could work harmoniously like clockwork. Other economies could do the grunt and dirty work while America could provide the “clean” services to make this relationship happen. America could also be the ultimate consumer society that would be the engine of growth for the world’s economy;

    4) The use of buzzwords such as globalization, downsizing synergy, bottom line, competitive advantages, etc. in the hope that America can still rule the roost was the death knell that worked against and accelerated the decline of America as the leader;

    5) The belief that savings was no longer appropriate for growing and sustaining an economy and that the dynamic of debt financing would be the new panacea for financing unlimited growth was the ultimate insult to every rational system;

    6) The belief among opportunistic Wall Street’s financial institutions and sevice industries that America should use its financial wizardry and forte in exchange for foregoing its industrial advantage in order to entice other countries’ financial and service sectors to open and accommodate to American banks and other financial institutions;

    7) The elevation of foreign policy to the detriment of domestic policy from both the Democratic and Republican parties was a long-term injury to America’s wellbeing. From Nixon to George Bush foreign policy was the easier route to burnish personal weaknesses. Trillions of dollars that could have gone into domestic improvement of the economy was squandered in foreign adventures in order to project America’s power.

    8) The corruption of America’s political democracy have made America’s politicians into purveyors of greed and self-interest. This is the main cause for the decline of every powerful empires in history.

    Don’t merely look at the symptoms but more importantly realize the causes. It’s too late to shut the stable door after the horse has bolted. Americans have been fooled by politicians and those highly paid think-tanks and greedy Wall Streeters.

    Just because Apple was so successful it is fashionable to believe that it should take all the blame for America’s shortcomings. Apple was not the reason for America’s decline but it was forced by the policies of short-sighted leaders and vested Wall Street’s bankers to reinvent itself.

  9. I’ve been in widget mfg. for 40 years. I’ve seen high school dropouts turn up their noses at simple assembly work for $12-15/hour. They are arrogant enough to say “I deserve $20/hr.” and I am not kidding.

    What people with zero skills, politicians and “news” reporters don’t realize, but manufacturing managers DO KNOW, is that when jobs come back, they are going to be HIGHLY SKILLED!

    Steve Jobs was right when he essentially said good paying assembly jobs are gone forever.

    Manufacturing brought back to the US is going to hire highly skilled people who design, build, program, setup, diagnose, maintain and repair the AUTOMATION EQUIPMENT.

    Think like programming, CAD-CAM precision machining, controllers, screens, actuators and precision sensors and motion control as the primary work to be done.

    The high school dropout or minimally capable HS grad is going to be flipping burgers or doing tricks, because that level of education won’t get them into automated manufacturing.

    1. I have to agree. When I was studying to be an engineer in the 80s, even then the writing was on the wall. It was forecast that most of the manufacturing jobs, long term, in the developed world were going to be highly skilled, very technical in nature, and frequent re-education would be necessary. And fewer people would be needed.

      In part, this forecast was based on the historical perspective that it would be very difficult for North American and European economies to compete with parts of the world where costs were much lower. Yes, hindsight is 20/20 but for most of recorded history, China has been the world’s largest manufacturer. It was only after many of the world’s economies were destroyed by the actions of World War II that the United States became the world’s largest manufacturer.

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