It seems like everyone is talking about jobs these days, especially in the US during this election season. CBA has always been the contrarian in the room – the one in the back when Groupthink threatens to take over, that jumps up and says, ‘Wait a minute, not so fast!’
So in this situation, again we feel we must protest the current narrative that’s unfolding in what passes for thinking in terms of the global workforce.
Here’s what we’ve been hearing: companies are sitting on piles of cash, and have job openings that go unfilled because managers can’t find people with the right skills to hire. So they post jobs on their websites, and collect resumes for months and months, but never hire anyone. Why is this? Here is the narrative:
- We need more math and science taught better at an earlier age, and the schools and universities aren’t producing enough American citizen graduates. We need people that know how to develop the future high tech products that unborn prospective customers of companies like Microsoft want so Microsoft will be innovative and competitive again and C-suite stock options will be worth what they used to be. And they need to be willing to work for $40,000/year on contract.
- It’s the government’s fault. We need more H-1 visas so we can hire the mythical PhD/MBA/MSEE 20-year old Einsteins from Asia that are getting educated in the US and are willing to work for $40,000/year on contract.
- Our workforce is too old. The engineers we have keep complaining about stupid things like, R&D funding cuts; having to work with teams that are located seven time zones away at 3 am; reaching the boundaries of the laws of physics.
- The new hires are lazy and spoiled. They want to be millionaires by the time they are 25 and complain because we don’t have free beer available at 10 am.
The alleged talent shortage issue was addressed recently in a Wall Street Journal op-ed recently by Brad Smith who is general counsel at Microsoft. He outlines ways he thinks we need to improve the education and immigration policies to address the talent shortage in high tech.
What all this doesn’t address is the fact that compared to 25 years ago, it’s more likely that the really smart kids graduating from advanced math and science programs will get sucked into the financial industry to design the latest robo-trade app and make millions, a fraction of a cent at a time. Whose fault is that?
I have news for you, Mr. Smith. It’s not the fault of the workers or the universities. It’s the C-suite leadership and the calcification and financialization of the high-tech sector. We have to start investing in people again. And by doing so, re-spark the sense of purpose and excitement that drove the high tech industry in its youth. People aren’t just an entry on the balance sheet — a potential source of improved margin.
In the old days, high tech companies did a lot more training than they do now. There was a budget for workers to go to industry training seminars, attend trade shows, informal and formal mentoring programs, join associations. There is precious little of that type of activity going on now as people are working harder for less money, doing the job of the three colleagues that were laid off in the last round of cut-backs. This is especially true in high tech hardware manufacturing, which has become an undervalued commodity.
Innovation isn’t something that can be taught. It must be identified and then nurtured over time, and that’s the role of management. However, these days, whenever big companies get in trouble, they start firing people, many times a LOT of people, e.g. Hewlett-Packard’s 35,000. This is in spite of constant annual report bromides saying people are a company’s most important asset. C-suite managers have no concept of how crippling quarter after quarter of layoff threats are to morale in a corporate culture. Once the RIF process starts, all productive work stops cold across the board. It’s a fact that is rarely mentioned in earnings calls. And you can forget about innovation in that environment. Everyone is working on their resumes, not next generation technology.
Corporations have an evolutionary cycle that is currently out of synch with the innovation cycle. It’s very difficult to create a start-up culture within a company that has had as many top level management missteps as Hewlett Packard. Volumes of business journal articles have been written about innovation, but in our industry, it comes down to this: people will rise to the challenge. If you create a corporate culture where innovative people are nurtured and rewarded, the organization will innovate. Currently, people are devalued as corporate accountant wonks chase ‘low cost labor’ across the globe for a few more slivers of margin. But that strategy is increasingly seen as a loser, even on Wall St.
Here’s some news: Asian workers are looking more and more like your college-aged neighbor living in his or her parents’ basement. As we’ve been saying for several years, the Foxconn model is unsustainable: Terry Gou is allowing news to leak about iPhone 5 production schedules that are being blown up by worker dissatisfaction. I especially like this quote:
An iPhone 5 back-plate runs through in front of me almost every 3 seconds. I have to pickup the back-plate and marked 4 position points using the oil-based paint pen and put it back on the running belt swiftly within 3 seconds with no errors. After such repeat action for several hours, I have terrible neckache and muscle pain on my arm. A new worker who sat opposite of me gone exhausted and laid down for a short while. The supervisor has noticed him and punished him by asking him to stand at one corner for 10 minutes like the old school days. We worked non-stop from midnight to the next morning 6 a.m but were still asked to keep on working as the production line is based on running belt and no one is allowed to stop. I’m so starving and fully exhausted.
By my own calculations, I have to mark five iPhone plates every minute, at least. For every 10 hours, I have to accomplish 3,000 iPhone 5 back plates. There are total 4 production lines in charge of this process, 12 workers in every line. Each line can produce 36,000 iPhone 5 back plates in half a day, this is scary … I finally stopped working at 7 a.m. We were asked to gather again after work. The supervisor shout out loud in front of us: “Who wants to rest early at 5 a.m !? We are all here to earn money ! Let’s work harder !” I was thinking who on earth wants to work two extra hours overtime for only mere 27 yuan (USD$4) !?
Who thinks Apple is going to continue to meet the financial world’s increasingly unrealistic expectations when their hardware supply chain implodes? Terry Gou has already announced he is going to build an inland manufacturing fortress in China staffed by robots. And the fact that Foxconn is leaking stories like the one above means they expect Apple to pay for it, holding the brand hostage to the bad publicity about human rights abuses, which customers are beginning to hold Tim Cook responsible for. So, why doesn’t Apple build a 21st century Green robot factory in North Carolina instead?
Another secret that has been leaked recently is the detail about Google’s regional server farms strategy, born in the US and Western Europe, and currently being exported to Asia. Who says hardware can’t be a competitive advantage? The stripped down designs by-pass traditional OEMs like Hewlett Packard or Dell, using $1500 of components. How this hardware is utilized within Google’s overall corporate objectives, including energy efficiency and speed, are what make this the kind of innovation story the industry should embrace and emulate.
Tags: global outsourcing, global trends, low labor rates, talent shortage
Outsourcing is not the whole story. The problem with US employment is some of all of the above. We do need more engineers, but when we have them we can’t just ship their jobs offshore.
The solution won’t be top down government (ask China’s workers), just as top down economics isn’t perfect.
Maybe, just maybe, if companies had to pay for employees education they would “own” the investment.
Folks:
There is truth in the 4 points of the “conventional narrative” Charlie started with but more needs to be said.
First, We need to look at education in a broad sense. Many Engineering graduates I talk to have no hands on experience or capability. Education is too computer based and they lack practical skills and experience. Ask them things like the size of a 10-32 screw, how to tolerance a part, etc. They lack basic engineering skills that are not sophisticated like differential calculus but are necessary to complete the design of a product that can be built. Many Senior engineers and C level execs do not understand the level of detail needed to produce a high quality, robust product.
We need more machinists, technicians,etc., to capitalize on the highly trained engineers. I see many C level executives that do not understand that and see technical development as a pure $$ issue. The result is that a lot of $ are wasted.
Seocond, I agree, also, with the notion technology industries are being “financialized”. We see start ups that are concerned about their “exit strategy” but have no product, revenue or profit. What happened to the idea of building a business and paying good salaries, bonuses and dividends ? We need changes in the financial rules, meaning tax structure mostly, that gives people incentive to technically innovate and provide value added rather than do financial engineering to capture a part of somebody else’s value added.
Third, the current situation brings to mind Ayn Rand’s “Atlas Shrugged”.
Fourth, how can we expect to prosper when 40% of the profits of US corporations are made by financial entities that product limited, if any value added ? Again, we need to change the financial rules if we want more innvovation and the jobs that come with it.
The financialization of not only the tech industry, but virtually all business done globally is to blame. We are creating a market that is increasingly driven by speculative profit rather than hard money tied to a product or service. As long as Wall Street is allowed to essentially place bets on anything and everything (high-risk mortgages, student loan debt, never-ending credit default swaps, and exotic derivatives), our economy will continue to churn out fully employed Americans living in poverty supporting know-nothing C-level executives who come and go with nary a difference or a bright idea between them.
In my opinion it is too expensive to do certain types of business in the US. In addition I believe there is glut of college graduates driven by a surplus of colleges built for baby-boomers – Check out closedcollege.com to see for yourself, note the dates. There are too many universities competing for too few students who are under-educated coming out of high school. These colleges are, by and large, staffed by baby boomers, many anxious to retire. They hand out easy grades and some of the programs offered are ridiculous and obvious make-work for excess staff. The product of our educational system is student debt and lower quality graduates. In reality that hypothetical student isn’t even worth $40,000 a year. Industries answer is, in part, to globalize (off-shore) and diversify staff profiles to India and China.
That doesn’t work out as you might think since these economies don’t have vertical mobility that is common in Western Countries. They also lack mature engineering cultures. Lots of schedule slips, high turn-over and pressure cooker environments – all this masked by low cost.
I agree with what Charlie started. I would like to add following. Once manufacturing is sent overseas and research is cut down no further engineers are trained. That creates shortage. In addition, these days with computerization of resume reading drops many valuable candidates in dust bin. There are many engineers available with necessary background and who can be trained with minimal efforts but nobody is looking for them. Everybody wants 110% fit with 60K salary. No wonder they could not find right people. Again this problem goes to over emphasis on quarterly results rather than long range vision and patience.
Well said, Sudhir.
There is no shortage of workers in the US, only cheap workers. There is no shortage of education in the US, only hands-on, best-practice education.
But US multinationals have held up against the onslaught from competition from 96% of the world as they can invest internationally and pay lower tax rates. Too bad our domestic tax rates are noncompetitive, making investment here non-optimal. Hong Kong had more IPOs last year, and the genius international students (and don’t discount genius too much) don’t need to stay in the US anymore.
Internet software, where English as a first language is a major advantage, and more specifically internet, where a motivated college student can pick up hands-on best-practice capability in a short time and code at globally competitive wages (free to start), is one area the US retains leadership. Will Ruby or other international languages kill that?
And Heaven help us if taxes are raised on international investment as some have proposed. Instead of complaining about Apple making so much money outsourcing, you’ll be complaining about some non-US company. Unless Apple leaves the US altogether.
One last point- people complain about our financial sector, but try living in a country with no debt banking (great if you like dirt). People complain about our financial sector, but how has risk been lowered enough to make 30 year loans at 4% feasible? People complain about our financial sector, but what is wrong about becoming rich enough to afford $3000 portable phones, $10,000 MRIs, and even indoor plumbing (heh, he wants to go bathroom INSIDE his house!) that later become mass-consumed items we need. People complain about our financial sector, but how do they think our balance of payments has been balanced these past 30 years?
Which is why I consider angry complaints about our financial sector as a reasonable marker of ignorance.
Some of the comments above seem to be losing sight of the theme of the article.
If employees are considered assets and an integral part of the inovation process, why is management not investing in them?
If you run a machine continuously with no maintenace and repairs, eventually all you have is a broken machine that cannot produce anything.
It is irrelavant if the asset is here or offshore, poor management practices are still the problem.
To argue that our financial sector has no blame in this mess is “in fact” dangerously ignorant at best. When you make more money betting against success, what do you think you get?
We used to make things? We used to breed into everyone the idea that making and improving things were how you became a productive member of society.
American greed and immediate self gratification led us here.
If you want to see a good example of how to create and keep jobs onshore, look at Germany. They do two things that has made them the most economically powerful country in Europe. One, they have established a very close partnership between research at universities and the business sector. Two, their business sector uses the apprentice method of training employees in-house for the specific skills that are neded. This is a very old and proven way of creating an efficient and skilled workforce in Germany.
We do some of number one, but virtually none of number two. Our companies don’t want to take the time to do in-house training, and then wonder why they can’t find people with the extremely specific knowledge, experience and skills that they are looking for.
We have an education crisis in our country. Our public schools have too many students per teacher and are not emphasizing science and math, many parents complain about too much homework. The “no child left behind” is a failure and we can’t test out way out of this mess. We need more funding for schools, better student to teacher ratios, and classes that challenge our students to work hard and achieve more. Unless we make these changes our future is not so bright.
If you have not read Atlas Shrugged, do it.
It takes an effort but it is economics, innovation, manufacturing, and capitalism set to a decent novel/story format. If you just don’t have the time, go to cliff notes. There is a kindle version and some free pdfs floating around and also audibles. She wrote it in 1957. You are living it in the current political and financial environment. Or see the movie(s) for at least a hint about it.
“Currently, people are devalued as corporate accountant wonks chase ‘low cost labor’ across the globe for a few more slivers of margin. But that strategy is increasingly seen as a loser, even on Wall St.”
I have said for years that the downfall of American industry is the spreadsheet cowboy.
People and morale have no columns on a spreadsheet, and these guys are typically sociopathic in their quest to save an additional 2 cents here and there.
Couple that with a sense of “profit before everything else” that has polluted our environment and send our American jobs overseas. This is, in effect, traitorous to America where individual corporate profit (and personal wealth for senior management) has destroyed the industrial and economic base here in America by being placed ahead of the consequences of such behavior.
This “Global Economy” has hurt America a lot. It used to be that if my company moved to California, I could typically follow my job there. What am I to do if my job is moved to India or China? I can’t move there!
So just why is it that Apple cannot build that robotic plant in North Carolina? The answer is that they can, and doing so would put some people here in America to work. “But it costs more…” Screw that. What cost are we all paying for the current idiocy of putting Americans out of work? Americans are (or were, until they lost their jobs and income) a significant part of the market for these goods.
Worse, in doing business with China, our “American” corporations are in effect supporting a Communist government. Ronnie Reagan is rolling over in his grave.
I have a gut feel that all this \"lack of US talent\" is just a Corporate excuse. Or perhaps Sudhir is correct in that businesses do a lousy job procuring the talent. What is further troubling is that maybe some companies have absolutely no clue of the talent they already have on hand. I was recently laid off from what I believe is a failing company. I was employed for 51 weeks as a electronic technician and tried on a few occasions (diplomatically, without condensation, treading lightly on egos)to explain to management (not to mention post BS educated engineers) that ESD was a real factor (they gave it lip service), that unprotected (internally or externally) tantalum capacitors may catch fire when subject to \"surge current\" upon connection to a low impedance source (a problem they had experienced on a couple of occasions), that X5R and X7R capacitors lose capacitance over a relatively short period when subjected to DC bias (do not use for timing circuits etc Mr. master educated engineer who thought the dielectric was the \"best\"; I admit it has its place as \"best\" somewhere), that you do not power a $3K photon multiplier tube detector circuit with a 25 cent connector (circuit was sensitive to milli-ohm change in contact resistance), that solder joints were failing because there is not enough solder fillet in the heel of the joint due to the pcb pad being too long (bad PCB layout), that, that, …….. Anyway, this was low volume mfg of semi high end research equipment and they probably are still shooting themselves in the foot. BTW, I only have 30 years hands on experience/self trained and never finished community college. In addition to \"component level troubleshooting skills (seemingly a lost art in our board sway throw away world) I have RF design, digital design, mechanical design, PCB layout design, and even some management experience. Maybe my resume is being thrown away by computers. Thanks for the insight Sudhir. I guess I need to be more aggressive.
The high tech industry may eventually get a “come to Jesus” moment when there is a severe disruption in their Asian supply chain by a political uprising or natural disaster.
For example, the disruption of Renesas supply during the Fukushima disaster, meant some automotive microcontrollers couldn’t be sourced and, as there is no code compatible second source, car shipments were delayed.
I received a phone call from a PCB material supplier, alerting me to unavailability of a particular type of E-glass used in their raw material. This glass was made at one place in in Japan that was off line, for weeks, due to Fukushima.
If an Asian supply chain disruption happens, the electronic industry will probably follow the playbook of the financial industry and ask the government (American tax payer) for large financial subsidies.
However, if one believes an earlier poster who wrote, “Which is why I consider angry complaints about our financial sector as a reasonable marker of ignorance.”
And I achieved this ignorance by reading such papers as this
http://sirc.rbi.org.in/downloads/4Cecchetti.pdf
The authors of this paper conclude that:
“In this paper, we study the complex real effects of financial development and come to two important conclusions. First, both the size and growth of a country’s financial system can be a drag on productivity growth. That is, there comes a point where further enlargement of the
financial system can reduce real growth. And, because the financial sector competes with the rest of the economy for resources, financial booms are not, in general, growth-enhancing.
Second, using sectoral data, we examine the distributional nature of this effect and find that credit booms harm what we normally think of as the engines for growth: those that are more R&D-intensive. This evidence, together with recent experience during the financial crisis, leads us to conclude that there is a pressing need to reassess the relationship of finance and real growth in modern economic systems. More finance is definitely not always better.”