By Greg Mills
I wrote a piece (http://www.macnews.com/2011/01/11/gregs-bite-what-if-apple-assembled-its-products-usa)a couple of weeks ago citing an interesting study (http://www.adbi.org/files/2010.12.14.wp257.iphone.widens.us.trade.defici…) done by the Asian Bank Institute that posed the rhetorical question, “What if Apple assembled products at home instead of China?”
I got feedback that ranged from strong support of the idea to absolute ridicule. Massage the numbers any way you like, but the result is a slightly lower profit at Apple with a major benefit for the US economy. Assembling Apple products in the USA would put up to half a million assembly workers on the national payroll.
Apple has incredibly high gross profit numbers on its hardware and the demand and sales numbers are defying even the most enthusiastic analyst forecasts each quarter. Apple stock has reached levels that will soon make our favorite little fruit company the most valuable in the world. Decisions Apple makes can have a powerful effect on the US economy. Obama knows that is a fact no one can deny.
There has been a lot of press about Steve Jobs meeting for dinner with the President and a number of other industry leaders. Steve was seated next to Mr. Obama. The President was recently quoted widely as saying that we needed to get Americans back to work and fix the poor employer climate in this country. I submit that Mr. Obama has it wrong, backwards if you will. The problem isn’t fixed until the underlying issues are first resolved. Make the USA a more predictable and affordable employment zone and let nature take its course.
The trend of moving assembly “off shore” has its basis in the raw numbers. The study cited above used numbers of about US$6.50 per iPhone to assemble in China vs $68 per iPhone to assemble in the USA. The assembly costs include a whole lot more than just labor costs. Unions and unreasonable employment related laws, as well as an overall more expensive economic environment in the US, have made assembly here prohibitive. What is wrong can be fixed and only then we will see the current 9% unemployment rate drop to a more sustainable level.
One feature that isn’t well cooked into the cited study is the likelihood that much more of the assembly process would be automated in the US due to our higher labor costs. Each generation of iPhone has improvements in part count reduction and streamlined final assembly. Should Apple make the fundamental decision to bring assembly back to the USA, planning products that lend themselves to more to automated assembly would help reduce the high cost per product differential we see now. Labor is so relatively cheap in China robotics isn’t as viable an alternative as it is here.
Fixing the fundamental problems that have pushed assembly jobs overseas can be fixed with some reasonable sacrifices all the way around. The government can make employment of Americans affordable and predictable by streamlining federal laws that cost employers a bundle and don’t work anyway. Longer term federal tax credits for hiring the unemployed and moving assembly back the USA need to be considered.
States can compete to provide the best legal environment and bring jobs to their state. There is already considerable competition for new factory construction with long term tax relief. That needs to be applied particularly to those companies that return assembly jobs to the USA.
Unions can back down on demanding typical inflationary benefits and ever higher wages or just plain not be allowed to force unionization under federal law. There was a time when unions were needed to overcome serious abuses of employees, but I think the tail is now wagging the dog and union membership has declined as even the rank and file tend to agree. The balance of power needs to be reset to restore jobs to the unemployed who are willing to work. The undocumented need to be deported and the chronically unemployed put to work.
Companies might make some sacrifices at the bottom line to return to the “Made in the USA” fold. Tax credits for moving assembly back to the USA need to economically viable. It isn’t going to happen if there aren’t enough incentives that are real and dependable long term. The export of goods made in the USA can help the balance of trade to the benefit of us all.
Employees can make the decision that a assembly job for less money than they are used to is far better than no job at all.
Finally, consumers need to return to the habit of seeking the little “Made in the USA” label. While the final cost matters a lot, there was a time patriotic citizens sought the domestic product. We are still very productive and inventive in this country and need only the structural changes required to restore prosperity to our country by producing more of what we consume.
Whatever corrections are made need to have a predictable period of effect since business plans years in advance and moving assembly back to the USA won’t happen overnight. What has taken years to go wrong will also take years to repair, but outsourcing our jobs has got to stop. Let’s reverse the trend.
That’s Greg’s Bite for today.
(Greg Mills is currently a graphic and Faux Wall Artist in Kansas City. Formerly a new product R&D man for the paint sundry market, he holds 11 US patents. Greg is an Extra Class Ham Radio Operator, AB6SF, iOS developer and web site designer. He’s also working on a solar energy startup using a patent pending process for turning waste dual pane glass window units into thermal solar panels used to heat water see: www.CottageIndustySolar.com Married, with one daughter, Greg writes for intellectual property web sites and on Mac/Tech related issues. See Greg’s art web site at
www.gregmills.info He can be emailed at firstname.lastname@example.org)