Manufacturing Jobs, Automation and Future Assumptions

Anyone who is interested in how manufacturing jobs are evolving (and disappearing) should be sure to read Adam Davidson’s excellent article in the current issue of The Atlantic: “Making it in America.”  The article is based on interviews with workers and executives at Standard Motor Products, a manufacturer and distributor of auto parts with a factory in Greenville, South Carolina.

Here’s a a quote from the article, focusing on the future prospects for an unskilled worker named Maddie:

Tony [the factory manager] points out that Maddie has a job for two reasons. First, when it comes to making fuel injectors, the company saves money and minimizes product damage by having both the precision and non-precision work done in the same place. Even if Mexican or Chinese workers could do Maddie’s job more cheaply, shipping fragile, half-finished parts to another country for processing would make no sense. Second, Maddie is cheaper than a machine. It would be easy to buy a robotic arm that could take injector bodies and caps from a tray and place them precisely in a laser welder. Yet Standard would have to invest about $100,000 on the arm and a conveyance machine to bring parts to the welder and send them on to the next station. As is common in factories, Standard invests only in machinery that will earn back its cost within two years. For Tony, it’s simple: Maddie makes less in two years than the machine would cost, so her job is safe—for now. If the robotic machines become a little cheaper, or if demand for fuel injectors goes up and Standard starts running three shifts, then investing in those robots might make sense.

“What worries people in factories is electronics, robots,” she tells me. “If you don’t know jack about computers and electronics, then you don’t have anything in this life anymore. One day, they’re not going to need people; the machines will take over. People like me, we’re not going to be around forever.”

As the article makes clear, Maddie has a job largely because she is still cheaper than installing automation equipment — assuming a two-year payback period for the equipment.  But now consider that just last year the Boston Globe reported that start-up company Heartland Robotics expects to introduce a manufacturing robot that will sell for around $5,000. The cost of automating jobs like Maddie’s seems likely to fall quite dramatically in the relatively near future.  At a cost of $5,000 — or even $10,000 — a robot could easily pay for itself within a matter of months.

Now here’s another quote from the article focusing on a skilled operator named Luke. Luke runs computer-controlled “Gildemeister” machines, which cut precision parts used in fuel injectors:

After six semesters studying machine tooling, including endless hours cutting metal in the school workshop, Luke, like almost everyone who graduates, got a job at a nearby factory, where he ran machines similar to the Gildemeisters. When Luke got hired at Standard, he had two years of technical schoolwork and five years of on-the-job experience, and it took one more month of training before he could be trusted alone with the Gildemeisters. All of which is to say that running an advanced, computer-controlled machine is extremely hard. Luke now works the weekend night shift, 6 p.m. to 6 a.m., Friday, Saturday, and Sunday.

When things are going well, the Gildemeisters largely run themselves, but things don’t always go well. Every five minutes or so, Luke takes a finished part to the testing station—a small table with a dozen sets of calipers and other precision testing tools—to make sure the machine is cutting “on spec,” or matching the requirements of the run. Standard’s rules call for a random part check at least once an hour. “I don’t wait the whole hour before I check another part,” Luke says. “That’s stupid. You could be running scrap for the whole hour.”

The conventional wisdom, of course, is that while Maddie’s job may well be in danger at some point, Luke has little to worry about. Demand for skilled machine operators is strong and is likely to increase in the future. But is that really the way things will play out?

Any time workers are highly paid and in short supply, there is a clear incentive for innovation that will either eliminate those workers or “dumb down” the job so it can be done by less skilled people.  Currently, Luke spends a lot of effort testing parts to make sure they remain in spec, and then recalibrating the machine as necessary. Is it possible that machines like the Gildemeisters will someday be able to automatically test parts and then make the required adjustments? Perhaps it might be possible to use precise computer imaging technology to analyze parts and then auto-adjust the machine to produce consistent results. Since this hasn’t happened yet, we can assume the technology probably isn’t there. But what about five or ten years from now?

In a previous post, I wrote about the new “cloud robotics” strategy being pursued by Google, Willow Garage and other companies. Cloud robotics involves migrating much of the software that controls robots or other machines into centralized servers. Could something similar be done with computer-controlled machine tools — so that perhaps dozens of machines are controlled by advanced software that incorporates artificial intelligence, eliminating the need for individual operators?

Yet another possibility involves offshoring. Jobs in areas like customer service can, of course, easily be outsourced to low-wage countries. Could skilled machine operator jobs also be offshored?  If the parts are moved around robotically so that the entire job consists of analysis, programming and control, then those tasks could potentially be done from anywhere. China currently has a huge surplus of college graduates — a high percentage of whom have studied science and engineering — and for jobs of this type, English language skills wouldn’t necessarily be critical. Moving an entire factory to China results in major transportation costs and logistics issues. Moving specific jobs offshore electronically, as is currently done in the service sector, might someday prove more cost effective.

In other words, our conventional assumptions about the jobs of the future are not necessarily all that reliable. While Maddie’s job is certainly at risk, even Luke may not turn out to have the level of job security we expect over the longer run.

A final quote is from a discussion with the CEO of the company:

To keep the business of the giant auto-parts retailers, Standard has to constantly lower costs while maintaining quality. High quality is impossible without good raw materials, which Standard has to buy at market rates. The massive global conglomerates, like Bosch, might be able to command discounts when buying, say, specially formulated metals; but Standard has to pay the prevailing price, and for years now, that price has been rising. That places an even higher imperative on reducing the cost of labor. If Standard paid unskilled workers like Maddie more or hired more of them, Larry says, the company would have to charge its customers more or accept lower profits. Either way, Standard would collapse fairly soon.

The main point here is that when a company is squeezed between rising costs for commodity inputs and an inability to raise its own prices, the only significant variable it really has to work with is labor.  This dynamic is not limited to manufacturing companies like Standard Parts; previously, I made a similar point about the fast food industry.

Fast Food (or beverage) workers are classified as service workers by the government, but from a technical point of view, fast food is really a kind of just-in-time manufacturing. As automation technology gets better and cheaper, and as the price of food commodities continues to rise in response to ever increasing global demand, it seems likely that the rate of job creation in fast food as well as in a variety of other service areas may be in danger of falling short of expectations.

When it comes to the jobs of the future, beware the conventional wisdom. A great many widely-held assumptions seem to be based primarily on simply projecting the continuation of existing trends, rather than on any meaningful analysis of what the industries of the future might really look like.

15 thoughts on “Manufacturing Jobs, Automation and Future Assumptions

  1. If companies like Tesla Motors are successful, Maddie’s and Luke’s job will become obsolete anyway – no matter how sophisticated robots are in 5 or 10 years. 😉

  2. Isn’t this precisely a confirmation of Marx’s analysis of capitalism? What happens when everything is able to be automated and almost no one is of any value to production? Are masses of people supposed to lay down and die? The only social solution is voluntary labor in science and art, and a legal conception of a human right to an existence on the planet at the highest sustainable standard of living. Money will be obsolete, and I see no reason why any government should coerce anyone to “earn” a living. Perhaps if socialism had been able to improve workers’ lives in the 20th century while maintaining the growth engine of capitalism, this would have been necessary for a time. But that didn’t happen. The social rights envisioned by socialist countries are what need to be preserved (or granted) and extended. They must be to avoid economic collapse by rebellion, riots and chaos. At present we seem to be heading in the opposite direction by an ideologically blinded momentum, overawed by the productive capacity of a transient economic system that digs its own grave, that has a proven track record of catastrophic instability. What use is the profit system (which can only produce incentive by employing human labor power) as a growth engine when machines and AI can be the next and more powerful growth engine, and without all of the negative social and ecological side effects of capitalism?

    1. Jeffery,
      I believe your analysis is correct. Humans will increasingly be removed from the wealth creation process regardless of their skill level. The $64 thousand question will be how to fairly distribute the goods an services that will be created with little or no human participation. Current economic models will not surfice. This is an extremely important issue with hugh social implications. We should start having this converstion now. This shift has already begun and we are ill prepared for it.

      1. As my earlier assumption said, what motivation would there be to distribute wealth and goods? Even more evident is why is there even a need to keep 6.999999 billion people on the planet alive at all?

  3. Clearly, the author has missed something important in his ruminations about the employment. He has considered how the technological advances have contributed to the worsening of the employment situation only in the supply side but never considered how the characteristics of the real market (or supply chain) process as the bloodstream of the market/economy has been changed due to the technological advances and how it has caused the changes of the economic environment in the Modern Information Age. If the existing too heavily efficiency-oriented functional supply chain process remains unchanged, most of his claims will be right. But if we change it into a new synergy (or more effectiveness-oriented) supply chain process, I believe much part of the existing dilemmatic situation between productivity and employment will be easily solved. Please take a look at: “Job Creation in the Modern Information Age”

  4. The obvious impact of technology replacing humans is the economic downturn that occurs when mass people loose financial income. It won’t matter how cheap your car parts are if no one wants them. Imagine all that sophisticated technology setting idle because of it’s own optimization eliminating the demand for it’s use. Without consumers, there will not be enough market to sustain vast production. Money makes the world go round, the lack of it makes the world stop. Innovation has always had a presence in the economy, and has eliminated a host of jobs which in turn degrades consumerism. Until now these effects have been subtle, but a severe imbalance between supply and demand ends in catastrophe for both the consumer and the supplier.

  5. Luke, your “theory” boils down to:

    “A more efficient global supply chain software system would reduce the (i) working capital needs and (ii) transaction costs of individual businesses –> frees up more cash for businesses to pay employees better wages and/or hire more employees.”

    This is not a solution at all. It merely increases the capital owners’ profit $’s and lowers their working capital needs. This is no different than what has already been going on for the last few decades.

    Your “system” would reduce the amplitude of business cycles, but who cares? Martin’s entire thesis is not about the *short-run* ebbs and flows of the macroeconomy — it is about the *long-run* when workers are *not needed*, causing Aggregate Demand to fall as a result of no wages being paid.

    If you had spent 2 minutes thumbing through Martin’s book, you would have already known this. Instead you wasted everyone’s time with a marketing advert for your consulting outfit in a poorly veiled gibberish comment + blog.


  6. There is an unpleasant unexplored third option.

    It has been humanity’s answer to over population for the past 10000 years.

    Conscription, then some sort of nasty infantry war.

    Or just a limited nuclear exchange.

  7. I just got into a discussion with someone on Facebook about this. I have been in the software development business for 25 years or so. I hear the argument that people were worried about the decline in agriculture but jobs moved manufacturing. Next, people worried about jobs in manufacturing being lost and then we had the rise in the service sector. I admit that all of this is true. But if we are not eliminating service sectors jobs, what sector is left? While this theory that jobs are always replaced by something else held true and may still hold true for awhile I think we are making a mistake thinking this can last forever.

    1. Yep, society is going to get blindsided by Watson and other “thinking” machines. For the last thirty years we’ve seen automation take the worker out of the plant but now software is taking the worker out of the office.

      Still no plan from the top on how humans/society will survive after all of the jobs get turned over to mechanization…I desperately hope for someone at governor level (USA) or higher to come right out and say that at some point within our lifetime humans will no longer be able to compete in the workforce and here is my solution to that eventuality…nope, no one is stepping up and that is very scary.

  8. A clever combination of socialist and capitalist modes can solve the problems of matching production and consumption. The crisis, unfortunately, has to increase before elected representatives rise to the occasion. Not even FDR ran-up sufficient debt to end the depression. It took WW II. Next time let’s treat the depression just like it was wartime. The issue of automation will require different measures including a guaranteed annual income unrelated to work, reduction of lower-class population (voluntarily – motivated by financial rewards) and management of both wages and prices. But I think all this will be possible BECAUSE of the computing power that precipitates the automation crisis.

  9. In this way you can educate yourself in determining the problems you may face
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    Every time you play this mode the map is going to be completely new,
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  10. As I was reading your article, you state that people still have jobs in the industrial and manufacturing industry because people are less expensive than automated equipment. I had no idea that there was such an imposing need for automated robots in the manufacturing industry. I’m hoping that automated systems don’t overrun us.

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