Health of an economy is measured in multiple ways. The easiest way is your export to import ratio. Put simply, “How much do you send out versus how much you take in?” In order to export something you must make it. How many stickers say “Made in America”?
When something says, “Made in America” was it made with people or machines?
Most truths are simple. Most falsehoods are complex. Manufacturing is facing a double frontal assault in America.
On one end you have President Trump’s trade war, declining purchases from Europe, China and other countries. The other end you have quantitative facts. The Washington Post reported the PMI (Purchaser Managers’ Index) has declined so steeply it is at near recession levels. IN 2008 the PMI dropped to as low as 31. Prior to the free fall it sat at 50.1.
Guess where America’s PMI is at?
You guessed it. We are sitting at 50.1.
According the Bureau of Labor Statistics, manufacturing jobs have gone from an average of 22,000 new jobs a month to 8,000. This is a drop of sixty three percent (63%). Mainstream economist appears to be under no stress on manufacturing. The view of economist is due to America’s focus as a service based economy.
What’s happened in America over the last forty years?
FROM 1979 TO PRESENT
Over the past forty years a decline in American manufacturing jobs occurred. In 1979 twenty two (22) percent of all American families worked in factories. As of 2019 the number is only eight (8) percent of workers. America’s shift from a manufacturing economy to a service economy took us from “tangible” goods to “intangible” services. A good is something you can hold that has intrinsic value. A service is time of people whose quality is determined by third party perception.
If someone thinks you are worthless…you’re worthless.
America is treading on a catastrophe some say. Politicians say removal of government obstacles to free exchange is the solution. Politicians think policies will solve the issue. The truth is found in things like: costs of goods sold, the margins charged by corporations (sometimes in excess of 400%), increase pay of workers, devaluing of the dollar, automation and the overall rise in cost of living.
A huge contributor to job loss is the old labor market not adapting to the new labor needs reality.
The decline in manufacturing jobs is indisputable. Based on the Bureau of Labor Statistics nearly 19.5 million US factory workers were employed in 1979. The number of manufacturing employees has steadily declined to a recent low in 2010 of 11.6 million workers before rebounding to slightly more than 12 million employees in 2014.
The steady rise of population means proportionately the US has lost jobs.
In 1979 there were 225.1 million people reported by the US Census Bureau living in the United States. As of 2017 the US had a population of 324.4 million.
The US population has increased by nearly one hundred million people but about 7 million manufacturing jobs are lost. Ratio wise we are losing jobs at an exponential rate in manufacturing.
HOW TECHNOLOGY IS MAKING THE OLD LABOR MARKET POOR
Whether people who have limited income are subsistence farmers, salaried workers, or self-employed entrepreneurs, poor people derive most of their income from work. This basic fact means level of employment, the quality of jobs, and access which poor have to decent earnings opportunities are crucial determinants of poverty reduction.
Jobs matter for development and the vast majority of national development strategies look to employment generation as a major channel for poverty reduction.
Studies, such as a scholarly paper from Loyaza and Raddatz (2006 “The Composition of Growth for Poverty Alleviation” Washington DC: World Bank) demonstrate sector patterns of growth affect the extent of poverty reduction. Specifically Loayza and Raddatz (2006) find that growth in unskilled intensive sectors contributes to poverty reduction. Another study by Satchi and Temple (2006 “Growth and Labour Markets in Developing Countries” Department of Economics, University of Bristol Discussion Papers. Bristol, U.K) find that growth in agriculture may increase poverty while growth in the urban sectors may cause it to fall.
What happens when there is no unskilled labor in a developed country? The gap between rich and poor widens.
The gap between the rich and poor widened largely because automation, machinery and robotics contributed to manual & unskilled labor job elimination. A Fedex Driver may soon find their job threatened by self driving technology. A clerk at Walmart is seeing her job transition to supervising self check out stations. Soon the clerk will be required to run diagnostics on the computer system to fix software issues. If the clerk doesn’t know how to run diagnostics the clerk won’t have a job. A janitor will soon observe a robotic scrubber mopping the floor. If the Janitor can’t disassemble the machine and fix it — they too won’t have a job.
The age old assembly line was eliminated by machines who construct cars in lieu of people. Manufacturing is under threat of by machines, automation, corporate margins, non adaptable labor pools and technology not trade policies.
CORRELATING THE NEW LABOR POOL TO ECONOMIC HEALTH
Creating better and more productive jobs is a daunting task in developing countries. The task is difficult to fill because labor markets have to absorb a large number of people within a short time period. A shortage of jobs increases migration pressures, which can drain societies in developing countries of both well-educated and unskilled people.
Poverty rates remain at intolerable societal levels and a sense of urgency to plan for steady retirement is resulting in developing countries giving deference to employment and labor market issues.
Underemployment is an important factor people are not discussing.
Improving employment outcomes in developing countries means people are concerned about productivity gains, i.e. job improvement, rather than job creation.
It’s important to emphasize the importance of skills development, to enhance the employability of the poor and to improve their chances of finding wage employment. Facilitating access to productive assets, such as land or capital, is pursued as another way of generating more productive self-employment opportunities. Recent research conducted by the French Development Agency (AfD) shows that these interventions have more sustainable employment outcomes when they are implemented together.
What we need is a higher skilled labor force that is capable at basic levels to conduct everything from programming to writing code. Our labor force must be one of technical sophistication versus manual labor. We are at a stage where human intelligence, consciousness and capability must be utilized to its maximum to retain our global advantage.
HOW YOU CAN CHOOSE A SAFE PATH FOR THE FUTURE
Choosing how you educate yourself, and what skills you learn is important. The certainty of future will be determined by knowledge of environment. Our environment is a technological revolution. As a society we are excelling past the time of manual labor, unskilled work and non intellectual appetites.
All people are capable of learning, exercising intelligence and accomplishing high IQ tasks.
It is up to people to realize hard work has to translate to hard mental work. Back breaking labor is being phased out by machines that don’t their break backs. Hopefully this newfound knowledge will take you into the future. Follow me on Medium or subscribe to my newsletter to learn more insightful advice.
To your knowledge success!
About Christopher: Christopher Knight Lopez is a Professional Entrepreneur. Christopher has opened over 7 businesses in his 14-year career. Christopher’s purpose is to take advantage of various market-driven opportunities. Christopher is a certified Master Project Manager (MPM) and Accredited Financial Analyst (AFA). Christopher previously held his Series 65 securities license. Christopher also has his General Lines — Life, Accident, Health & HMO. Christopher has managed a combined 286mm USD in reported Assets Under Management & Assets Under Advisement. Christopher has work experience in 29 countries, raised over 50mm USD for various businesses, and grossed over 7.5mm in his personal career. Christopher worked in the highly technical industries of: biotechnology, finance, securities, manufacturing, real estate, and residential mortgages. Christopher is a United States Air Force Veteran. Christopher has a passion for family, competitive sports, fishing, martial arts and advocacy for entrepreneurs. Christopher provides self-help classes for up-and-coming entrepreneurs. Christopher’s passion to mentor comes from belief that entrepreneurs need guidance. The world is full of conflicting information about entrepreneur identity. See more at www.christopherklopez.com.