Monday, January 23, 2012

Job Market Blues

The New York Times has run several articles over the past few days that have provided a glimpse into some of the reasons behind our stubbornly high rate of unemployment.

The Times had a long piece "above the fold" on yesterday's front page discussing technology giant Apple.

Apple is valued by the stock market at roughly $400 billion, which makes it essentially tied with Exxon Mobil for being the largest company (by market cap) in the United States. 

According to the article, Apple earned nearly $400,000 per employee last year, a level of profitability that surpasses Google, Exxon or Goldman Sachs.

However, rather than focus on Apple's "insanely" great products, the authors discussed the company's manufacturing facilities, most of which are located in at a place called Foxconn City, located in China.

Here's a brief description of Foxconn:

To Apple executives, Foxconn City was further evidence that China could deliver workers — and diligence — that outpaced their American counterparts.
That’s because nothing like Foxconn City exists in the United States. 

The facility has 230,000 employees, many working six days a week, often spending up to 12 hours a day at the plant. Over a quarter of Foxconn’s work force lives in company barracks and many workers earn less than $17 a day. 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.

It's not just that Chinese workers will accept miserable working conditions for low pay; they also offer foreign companies an incredibly deep poor of engineers and other technically-trained workers that this country simply cannot:

Another critical advantage for Apple was that China provided engineers at a scale the United States could not match. Apple’s executives had estimated that about 8,700 industrial engineers were needed to oversee and guide the 200,000 assembly-line workers eventually involved in manufacturing iPhones. The company’s analysts had forecast it would take as long as nine months to find that many qualified engineers in the United States. 

In China, it took 15 days. 

In a depressing contrast, back at American colleges and universities, more attention is being paid to athletics, at the expense of academia.

Ohio State, for example, just hired famed football coach Urban Meyer at a salary of $4 million per year, and numerous perks including the use of a private plane.

Meanwhile, research grants are being reduced by university administrations looking for ways to contain costs.

Here's an excerpt from the Times this morning:

{Ohio State Physics Professor Gordon} Aubrecht says he doesn’t have enough money in his own budget to cover attendance at conferences. “From a business perspective,” he can see why Coach Meyer was hired, but he calls the package just more evidence that the “tail is wagging the dog.” 

Dr. Aubrecht is not just another cranky tenured professor. Hand-wringing seems to be universal these days over big-time sports, specifically football and men’s basketball. Sounding much like his colleague, James J. Duderstadt, former president of the University of Michigan and author of “Intercollegiate Athletics and the American University,” said this: “Nine of 10 people don’t understand what you are saying when you talk about research universities. But you say ‘Michigan’ and they understand those striped helmets running under the banner.”

The article goes on to describe the near-fanatic following that successful big-time collegiate athletics has engendered on many college campuses today, often at the expense of students studies.

Meanwhile, in the Far East, colleges and universities pay scant attention to athletics, believing that students should focus on their studies.

Finally, this whole move to manufacturing offshore has reduced the negotiating power of the typical American worker.

Lockouts have apparently become more common in many businesses, as company management has gained the upper hand in many wage negotiations:

“This is a sign of increased employer militancy,” said Gary Chaison, a professor of industrial relations at Clark University. “Lockouts were once so rare they were almost unheard of. Now, not only are employers increasingly on the offensive and trying to call the shots in bargaining, but they’re backing that up with action — in the form of lockouts.” 

The number of strikes has declined to just one-sixth the annual level of two decades ago. That is largely because labor unions’ ranks have declined and because many workers worry that if they strike they will lose pay and might also lose their jobs to permanent replacement workers. 

Lockouts, on the other hand, have grown to represent a record percentage of the nation’s work stoppages, according to Bloomberg BNA, a Bloomberg subsidiary that provides information to lawyers and labor relations experts. Last year, at least 17 employers imposed lockouts, telling their workers not to show up until they were willing to accept management’s contract offer.

Little wonder, then, that attacks by presidential candidates on countries like China have hit a very responsive nerve among the electorate.