Sunday, January 22, 2012


"Middle Skills"

If you know what “middle skills” are, you’re nearly as nerdy as I am.  They’re the hot new thing in discussions of both economic development and community colleges.

Broadly speaking, “middle skills” refer to workers who have some formal post-high school education, but who don’t have a four-year degree.  That could mean a two-year degree and/or some sort of certificate.  Jobs that require specific sets of “middle skills” include all manner of technicians, alllied health positions, certain kinds of office work, and even -- in some jurisdictions -- law enforcement.  

This New York Times story about why the iphone isn’t built in America (even though it was designed here) takes the popular position that the deal-breaker for Apple was a lack of workers among the ranks of the middle-skilled.  If only we had a ready supply of technicians, it suggests, Apple might have stuck around.

Well, yes and no.

Yes, “middle skill” positions have been largely ignored in the popular and political discussions of the economy, and that’s a mistake.  It’s great fun to highlight the story of the up-from-poverty kid who became a cardiologist and established a charity to help others do the same, but the far more common story is of the up-from-poverty kid who got an associate’s degree in criminal justice and became a cop.  And there’s nothing wrong with that; we need police (and nurses, and technicians...), and a solid working-class life beats the crap out of poverty.  It’s an attainable goal, and one that community colleges in particular have helped millions fulfill.  It’s reality, it’s welcome, it’s underappreciated, and it’s a real contribution to the public good.

But no, it’s not the entire story.

The Apple story refers to middle skills, but it’s really about the ability to make major changes quickly.  In China, the entire logistics chain is already there, as are tremendous numbers of qualified employees.  Perhaps more importantly, those workers have no meaningful workplace rights.  They’re at the mercy of the employer at a level that Americans would find inconceivable.   The wages are lower, but the real issue is the ability of the employer to stop on a dime and change direction as the market dictates.  That’s just not culturally possible here, at least for now.  

For a counterexample, take Kodak.  It was so tied up in the life of its home city that it couldn’t bring itself to make difficult changes.  Last week it finally filed for bankruptcy.

What killed Kodak wasn’t a lack of middle-skilled workers.  It had plenty of those.  What it didn’t have was the ruthlessness to say ‘no’ to internal constituencies as the market shifted from under its feet.  

I’m happy to see community colleges get some recognition for the valuable work they do in helping prepare some vital parts of the workforce, and in providing a realistic and non-exploitative way for students from economically challenged backgrounds to get a foothold in the middle class.  And it shouldn’t surprise anyone that I’d like to see more support for that role, especially as older options for entry into the middle class -- unionized factory work, for example -- fade away.  Besides, some of these jobs need to be done here -- law enforcement, say -- and really can’t be sent to China.  

But at the end of the day, as important as education is, it’s only part of the picture.  Asking it to do more than it ever could is just setting it up for failure.  I don’t want to see it get punished for not being able to do more than it ever should have been asked to do.  Kodak didn’t fail because it lacked an educated workforce.  For that matter, the economy didn’t fail because it lacked an educated workforce.  The issues, and failings, were far more complex than that.  By all means, let’s give the developers of middle skills the respect they (we) deserve, but let’s not mistake one good idea for the solution to the economy.  It just isn’t.

That is a really interesting article. What they describe in China is how my elders describe American manufacturing during WW II. A comparison of B-29 development with the MRAP is, perhaps, instructive.

It (apropos your observations) also reminded me that US technical high schools used to produce the kind of industrial 'engineers' that seem to be referred to in the article: specialized training, but not anywhere near the level required to get a BS degree in the US. If US companies really need that kind of training outside of the health professions, they have done a poor job of signalling it to our students.

Finally, I was particularly struck by this from the article: "When one Apple executive arrived during a shift change, his car was stuck in a river of employees streaming past. “The scale is unimaginable,” he said. " I can imagine it, because I grew up in a GM city and know what shift change was like back when GM had 400,000 employees. Yes, those days are gone ... at least for now.
IIRC, the labour cost to build an iPhone in the US was $22, in Taiwan $4. Cheaper, but compared to the cost of the phone not a huge factor.

Flexibility is a big factor. China's business environment right now resembles America during the Gilded Age.
@Anon 7:38

Apple sole about 73million iphones last year.

If we assume they kept their price the same with a US manufacturing plant they'd have lost about 1.8 Billion dollors in profit. They made 25 billion in profit last year so this is about 5% off the bottom line.
the comparisons with china are unfair on a lot of levels, but are also fair on others.

first, competing with chinese businesses means competing with the chinese gov't. the chinese gov't gives a ton of money to big companies to help them create infrastructure. while we somewhat have something like that here, it isn't near the scale, and i don't think americans really want such a system. but it is hard for companies here to compete with the resources of the chinese gov't.

second, chinese companies don't have to bill for medical overhead like ours do. this is a big problem in the gov't contracting world too, as non-american companies are able to put in really low bids, because the health care costs are subsidized by the gov't. again, american companies having to compete with foreign gov'ts.

third, as someone pointed out, working conditions are awful. and there are so many people in china (especially poor), it's not hard to find people to fill the slots.

those are all things to keep in mind.
Tax and regulatory burdens went unmentioned in the Times article. Not to mention open political hostility to private business. These have become overwhelming in the US. The Chinese took an initial low labor cost advantage and have leveraged it into a supply chain that would be difficult to replicate anywhere, let alone in the US.

As poor as the conditions may be in the Chinese factories, people are clamoring for those jobs. The only thing worse than being exploited by capitalists is not being exploited by capitalists.
"...Not to mention open political hostility to private business..."

This is sort of a fantasy...unless your private business is a huge investment bank. In which case you probably don't care what people think cuz you're rich.
You think hostility to private business is a fantasy? I am co-owner of a private business, and I experience hostility from local, state and federal governments every damn day. No, it's not a huge investment bank. It's just an ordinary small business that is required to jump through idiotic regulatory hoops all the time, the main purpose of which seems to be to keep bureaucrats employed. We get zero appreciation for the contributions we make, or the jobs we provide.

I wish it was a fantasy. No, the hostility, including yours, is very real.
A few weeks ago, "The Nation" published a much-needed corrective to the deification of Steve Jobs. Sure, he came up with some wonderfully innovative technology, but his $8 billion fortune came from selling Apple products--mostly made in China.

The article discussed working conditions in one Apple factory: Six or even seven-day workweeks, long, long hours of obligatory overtime (and I don't think they pay tiime-and-a-half).

Workers couldn't leave, and more than a few committed suicide by jumping out of upper-story windows.

Management's solution? Put bars on the windows.
What's lost in the conversation about Kodak is that they focused so much on their core business (film), they gave away everything else that could have allowed them the agility to continue as a company.

Kodak used to make laboratory analyzers for blood testing - or at least the films used in those analyzers. They spun that off. Kodak also spun off their digital camera division because it was such a small share of the market. Had Kodak chosen to do so, I think they could have developed film based DNA analyzers. There's two kinds of companies that are doing well now. Large companies that offer something everyone wants or needs (apple, google, J&J) or small niche companies that fulfill a specific need. Kodak was a big company with all the costs associated with that acting like a small company in terms of the range of products and businesses it supported. You can't have it both ways.
The Apple engineers had a lot of excuses for chattel slavery.

People who keep them tend to.
"Not to mention open political hostility to private business. These have become overwhelming in the US."

You have got to be fucking kidding me. The current frontrunner for the Republican nomination is a private businessman. Obama has destroyed the economy to leave the bankers unprosecuted for their fraud. And you're holding up post-Communist China as the poster child for government friendliness toward business!

Throughout the Cold War, conservatives assured us that they were opposed to Communism and totalitarianism. They never were. They were envious.
Edmund, please continue to vent as you did at 7:57AM, but without the uselessly vague context.

Describe, in as much detail as possible, the three most idiotic regulations that affect your business, being careful to tell us (a) which level of government passed those rules and (b) when and why they passed those rules. Also, please tell us how many employees you have, since that is relevant to some regulations.

I know why we have pollution regulations, zoning laws, building codes, and civil rights laws. I live in a town that had none of those 50 years ago and few of them 40 years ago. Here, you don't want to buy a house that was built more than 30 to 40 years ago unless you know exactly who built it.

PS - The countries with the most entrepreneurs are places like Norway, where all fringe benefits are handled on a national level, allowing individuals to take risks that could be fatal in the US.
This isn't to say that "hostile" regulations are not possible. It is of course possible to have terrible regulations -- one could, for example, force a huge pipeline through Nebraska with eminent domain which is certain to poison the aquifer and drive the agricultural businesses which rely on it to extinction. Or one could meet in secret to create new permitting requirements for a given organization, as is being often done with OWS. Or you could have some kind of intellectual property regime where a propertyholder could shut down a rival's distribution network without access to courts.

These things are all definitely possible. That's actually one of the big problems we face; now that we've established that our government is friendly to regulatory capture, of course businesses are going to use it against one another.
I just really wanted to say that this was a fantastically cogent response to the NYTimes piece. Much enjoyed reading this.
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