Andy Grove: How To Make An American Job Before It's Too Late

The optimistic scenario is that world population self-regulates down over time as more manual work is automated and a larger fraction of the population moves into intellectual work. The more pessimistic scenario is that the underclass population explodes into poverty and anarchy and eventually brings the affluent elites down with it.

We need to create and become the leaders of Manufacturing 2.0 which incorporates environmental and social externalities. Companies who don't operate along these principles should be taxed and those monies put toward continuously improving global standards.

btw, do you ever think we'll reach a point where it will be common to have 99.9%+ automated factories? (robotic, possibly even full input/output lifecyle & distribution, etc.)

The American standard of living is higher than China. In order for a worker in the US to continue to enjoy his standard of living and salary, she must contribute to creating something of value equal to what she consumes that is then exchanged at a market price(which determines it's value relative to goods/services created by others). When the US is a leader in technology and innovation, we create things that are very valuable, because rare and productive people make them, and trade them for other, largely commoditized goods, from poorer countries. The reason these commoditized goods are produced in poorer countries is because they can... The ability to produce them is well known so there is more competition, and therefor demand, and the price drops, along with the wages. If you work in a factory cheaply, you do so because replacing your skills in that factory is easy. There are many other people with that set of skills to replace you. The value you produce is cheaper, therefor you are paid less and have less to consume .

Now, back to Mr. Grove's statements. The factory jobs left the United States because wages were higher here than there. It's that simple, but where he goes wrong is say that "managers were happy", which is not quite as harsh, but very close to the usual line, which attributes the offshoring to "greed". Not quite. If an American company has to produce it's goods in a factory where people make 2x the salary of the same good in China, the goods will cost more to buy. If the American company, doesn't outsource, and a Chinese company is able to produce the same or similar good(think commodity again), then they will be undercut in the market and go out of business. Not only will management be un-"happy", but the US as a whole is worse off because the profits now go to a Chinese company instead of an American one. The US has now lost not only the manufacturing jobs, but the high value add jobs as well. Mr. Groves proposes the "solution" that we tax imports and use the proceeds promote American production. This merely shifts the money around. Those imported goods were cheaper than their American counterpart. Assuming current wages remain the same, it now cost more dollars to purchase that good because of the tariff and American's have less stuff because it is more expensive relative to their salary. The other option(without the tariff), is that the American factory worker cannot find other work that will pay him more, so he agrees to accept lower wages for performing that same job here and can therefor buy less stuff. I believe that these, as a whole, offset one another and are probably net a wash.

As for unemployment, I believe that it is caused by many different things, probably many reasons that are poorly understood, but I'll address a few of them that I think are important here. Unemployment can be caused by temporary mismatches between market demands for goods and supply of those goods. Demand changes, prices change, companies don't require as many employees to produce the goods(this can also be caused by changes in the efficiency of production), and people are fired. There may not be a job in their previous line of work. If there is some other skill set which is in demand, that person can learn a new skill and make whatever salary the market demand supports for that skill. It is also possible that the market will not support the workers previous salary. Labor costs go down, but here is where people usually go wrong. When labor costs drop, it becomes affordable to pay people to do things that you might have automated(for a high cost in machinery or software for example). Or, the market might now support the cost of producing a good which must be done with tedious manual labor. Or, if the American worker is more efficient than his Chinese counterpart, then it might be cheaper to start doing manufacturing in the US again. In other words, as wages drop, the unemployment rate will go down, and less will be outsourced. This is just the tradeoff. The fact that jobs are sent to China means that cheaper goods are available here in the US. Mr. Groves states that the trend is towards an economy where there are high value add jobs and high unemployment. This is true only if current wages hold. If wages drop, then outsourcing makes less sense and unemployment picks up. What we really want is lots of high value add jobs here. This comes through innovation, creativity, a highly skilled and motivated workforce and outsourcing production(if it makes sense) to cheaper markets.