Donald Trump has been claiming that he's going to get
As Tyler Cowen has pointed out, the assembly of the iKit can either be done by Chinese robots or American robots but it's just not going to be done by humans. This is reflected in the manner in which electronics assembly has been a low-paid job ($13 or $14 an hour, well below U.S. median wages) for some years now. It is also proven by the manner in which even Chinese labor is becoming too expensive to do the work--Foxconn has just replaced 60,000 workers with robots:
Apple and Samsung supplier Foxconn has reportedly replaced 60,000 factory workers with robots.
One factory has 'reduced employee strength from 110,000 to 50,000 thanks to the introduction of robots', a government official told the South China Morning Post.
Xu Yulian, head of publicity for the Kunshan region, added: 'More companies are likely to follow suit.'
More companies will indeed follow suit. Chinese manufacturing labor costs around $6,500 a year or so these days (depending on exactly where in the country) so a little over $3 an hour. That's not work that any American would be willing to do, and rightly so. The greater general productivity in the U.S. economy means that they've very much better things to do with their time. But if even at $3 an hour those jobs are being replaced by robots there's no way at all that those jobs are ever going to come back to the U.S.
Automation is fast becoming a reality for workers of many of the world's biggest corporations, which are finding the falling costs of purchasing robots and programming those robots to be more attractive than retaining human labor. In the US, the debate is playing out in the form of a $15 an hour minimum wage, with former
McDonald's USA CEO Ed Rensi saying, 'It’s cheaper to buy a $35,000 robotic arm than it is to hire an employee who’s inefficient making $15 an hour bagging french fries.'
That is exactly what's happening--but there's more to it. In any proper economic sense Apple does manufacture in the U.S. The part of the process that we want to be doing is the one that adds value. Apple's margin (gross) on iPhones is something like 35%. That's larger than any other part of the cost base and exactly the part of the process that we'd like to be doing. The design and engineering work that leads to that profit margin is what is being done in the U.S. The actual assembly of the phones, the part done in China, adds some $8-$10. It's a trivial portion of the cost base in comparison, 2% maybe?
The automation of part of the manufacturing process could lead to cost savings for companies and, looking at the bigger picture, could signal the return to prominence of the 'Made in the USA' tag.
Manufacturing businesses in the United States have fallen off due to the lower costs and more advanced capabilities of suppliers abroad. However, with the continued rise of automation, manufacturing may soon be brought back to the United States, albeit with robots taking most of the mundane work instead of humans.
It could be true that the manufacturing might come back, but those jobs won't. And that is fine if we're honest. Those jobs were low-value add, thus they also gained low pay.
And this isn't an isolated example. The nostalgia for the days of mass employment in manufacturing is just that--nostalgia. It is not something that should be guiding our public policy. The entire world is losing manufacturing jobs to automation, even China's manufacturing workforce is shrinking. The only choice now is whether the robots will be there or here.
