K-12 Tax & Spending Climate: American Labor’s Real Problem: It Isn’t Productive Enough

Greg Ip:

For the United Auto Workers, it makes perfect sense to demand more pay and better work-life balance from Detroit’s three automakers. After all, workers throughout this historically tight labor market are getting exactly that.

But what makes sense to striking factory workers makes no sense for manufacturing as a whole. Pay is ultimately tied to productivity: the quantity and quality of products a company’s workforce churns out. And here, American manufacturing companies and workers are in trouble. The issue isn’t with labor-intensive products such as clothing and furniture, which largely moved offshore long ago. Rather, it’s in the most advanced products: electric cars and batteries, power-generation equipment, commercial aircraft and semiconductors.

President Biden might be celebrating a manufacturing renaissance based on new factories, but the share prices of former manufacturing icons Ford Motor, Intel, Boeing and General Electric suggest skepticism is warranted about the durability of this renaissance: All are at a fraction of all-time share-price highs.

Yes, American companies still lead the world in design and innovation, but the resulting products increasingly are made abroad, especially in Asia. Biden, like former President Donald Trump before him, wants to reverse this, through tariffs, subsidies and other government interventions. Japan, South Korea, Taiwan and especially China certainly intervened plenty to help their manufacturers.

But attributing manufacturing performance to government policies alone is dangerous; it underplays how far Asian manufacturers have come in cost and quality and how far their American counterparts have slipped.

“The number one reason why we like to be in China is the people. China has extraordinary skills. And the part that’s the most unknown is there’s almost two million application developers in China that write apps for the iOS App Store.” – Tim Cook