“A particular kind of human being”

The post by Patel, the founder and president of Interfaith Youth Core, about the increasing value of liberal arts degrees, is based on an understanding that Michigan Future shares about the new realities of our economy. Increasing globalization and automation mean that the greatest job security comes from being highly skilled in capacities that computers will not be able to replicate. Right now those uniquely human capacities include empathy and listening, creativity and innovation, and the ability to apply expertise in decision-making. Managing people and connecting knowledge to social interaction are not things computers will do. Drawing from a number of articles, Patel writes:

A computer can undoubtedly give you the right pill for pain, and a robot can provide electrical-stimulation treatment, but for the interaction, creativity, and judgment that a therapeutic conversation requires, a particular kind of human being is needed. Where are we going to get these knowledgeable and caring “relationship workers”?

The value of liberal arts degrees

Not only are these the jobs that are least susceptible to automation, they are also the jobs that are growing. A McKinsey report cited by Patel shows that between 2001 and 2009, jobs requiring human interaction grew by 4.8 million. Fortunately, liberal arts degrees, formerly the bogeyman of practically-minded parents, are already designed to prepare students for this impending economy. Patel goes on,

The hallmarks of a liberal education — building an ethical foundation that values the well-being of others, strengthening the mental muscles that allow you to acquire new knowledge quickly, and developing the skills to apply it effectively in rapidly shifting contexts — are not luxuries but necessities for preparing professionals for the coming transformation of knowledge work to relationship work.

Michigan’s education system, from pre-K to college and beyond, needs to be reflective of this reality. At every level, we need to be growing the skills in our people that our robots cannot replace.

The post Job Security: Or How To Prepare For Jobs That Can’t Be Automated appeared first on Michigan Future Inc..

The post Lou Glazer’s interview on Stateside: Higher education at the core of Michigan’s revival appeared first on Michigan Future Inc..

At the core of our work is the basic belief, since we were founded more than two decades ago, that globalization and technology are mega forces that are transforming the economy. And that those forces are far more powerful than politics and policy. That there was little that Washington or Lansing can do to stop – or even slow – the fundamental changes brought on by these mega forces. So the inescapable conclusion we reached was that what made Michigan prosperous in the past is no longer a path to prosperity. Either we adjust to the new realities or Michigan would get poorer.

New York Time columnist David Leonhardt writes about the importance of raising the country’s standard of living in a terrific new column. He writes: “Many of the bedrock assumptions of American culture — about work, progress, fairness and optimism — are being shaken as successive generations worry about the prospect of declining living standards. No question, perhaps, is more central to the country’s global standing than whether the economy will perform better on that score in the future than it has in the recent past.”

Leonhardt too finds that globalization and technology – not politics – are at the core of our standard of living decline. He writes:

By last year, family income was 8 percent lower than it had been 11 years earlier, at its peak in 2000, according to inflation-adjusted numbers from the Census Bureau. On average in 11-year periods in the decades just after World War II, inflation-adjusted median income rose by almost 30 percent. … The causes of income stagnation are varied and lack the political simplicity of calls to bring down the deficit or avert another Wall Street meltdown. They cannot be quickly remedied through legislation from Washington. The biggest causes, according to interviews with economists over the last several months, are not the issues that dominate the political debate. At the top of the list are the digital revolution, which has allowed machines to replace many forms of human labor, and the modern wave of globalization, which has allowed millions of low-wage workers around the world to begin competing with Americans. …  In particular, job growth and wage growth have been weaker in sectors exposed to global competition — especially from China — than in sectors that are more insulated. Automation creates similar patterns. Workers whose labor can be replaced by computers, be they in factories or stores, have paid a particularly steep price. The American manufacturing sector produces much more than it did in 1979, despite employing almost 40 percent fewer workers. Workers with less advanced skills have also suffered disproportionately. The pay gap between college graduates and everyone else is near a record. Despite the long economic slump — and the well-chronicled struggles of some college graduates — their unemployment rate is just 4.1 percent.

What policy makers can do to counteract such powerful forces which tend to drive wages down is unclear.  Leonhardt finds unconvincing many of the solutions offered by candidates from both parties. As Leonhardt notes this is a global, not American challenge. Across the globe policy makers are struggling to come up with those policies.

Developing a new agenda about how to raise personal income in the context of a flattening world should be the priority. This is different than just lowering the unemployment rate. As Leonhardt notes clearly increased education attainment and faster economic growth are imperatives. Beyond that the answers are not obvious.

The post Raising our standard of living appeared first on Michigan Future Inc..

But, as she writes, auto factory jobs can never again drive a prosperous Michigan economy: “But automotive investments still are front of mind, even though the new jobs that the auto industry is going to create now are a fraction of the 500,000 lost to the recession. Their economic value to these communities is far less than the jobs that were lost, given lower starting wages and fewer (if any) benefits.” Rather she continues:

As the economy recovers, there’s a very narrow window for these cities and states to shake the impression that ‘all we are’ is autos, or steel, or mining. I’ve been hearing my entire life about the need for this region of the country to diversify, and now the opportunity is finally here. Rather than seizing the moment, I fear my state is poised to wake up five years from now and somehow be surprised to find that auto sales haven’t rebounded to the levels of the 2000s. Or for that matter, that crucial infrastructure repairs still aren’t funded because of continued of budget cuts. Then, perhaps, someone will say, “Maybe we should have tried” this or that, instead of re-embracing the same old, same old. My advice to these industrial cities and states: don’t give in to the temptation to build your future based on your past. Keep focusing on what you can create anew, not recreating what was once there.

This, of course, has been the central theme of our work since our founding in 1991. That what made us prosperous in the past, won’t in the future. Not because of misguided federal and/or state policy, but because globalization and technology are reducing the need for American factory workers and lowering  wages for those who remain on the assembly line.  Just like technology at the dawn of the 20th Century dramatically and permanently reduced the need for American farm workers. No matter how much policy makers –– of both parties –– have tried to support agriculture, it has not brought farm jobs back. The same is true for factory jobs. As I wrote in an earlier post factory work in America is going the way of American agriculture: highly productive, with far fewer, mainly higher skilled, workers.

In a terrific New York Times article Eduardo Porter explains: Much of the anxiety about factory jobs is based on the misconception that job losses have been due to a sclerotic manufacturing sector, unable to compete against cheap imports. Until the Great Recession clobbered the world economy, manufacturing production was actually holding its own. Real value added in manufacturing, the most precise measure of its contribution to the economy, has grown by more than two thirds since its heyday in 1979, when manufacturing employed almost 20 million Americans — eight million more than today. American companies make a smaller share of the world’s stuff, of course. But what else could one expect? Thirty years ago China made very little of anything. Today its factory output is almost 20 percent of world production and about 15 percent of manufacturing value added. What’s surprising is how little the United States lost in that time. American manufacturers contribute more than a fifth to global value added. Manufacturers are shedding jobs around the industrial world. Germany lost more than a fifth of its factory jobs from 1991 to 2007, according to the United Nations Industrial Development Organization, about the same share as the United States. Japan — the manufacturing behemoth of the 1980s — lost a third. This was partly because of China’s arrival on the world scene after it joined the World Trade Organization in 2001. Since then, China has gained nearly 40 million factory jobs. But something else happened too: companies across the developed world invested in labor-saving technology.

University of Michigan economists George Fulton and Don Grimes have just completed for the Michigan Department of Transportation projections for the state through 2040. From 2010 through 2040 they project: “At the other end of the spectrum is manufacturing, which declines on average by 0.49 percent per year. This does not mean that the output of local manufacturing firms will decline; indeed, we are forecasting an increase in manufacturing output. But because productivity growth in manufacturing is relatively high, employment declines despite the expansion of output.” The worse job performance of the eight sectors they analyzed. The sector is projected to produce more, continue to be an important component of the Michigan economy, but with fewer and fewer workers.

As Maynard writes defining ourselves by what we did in the past is a recipe for decline. The path to growth and prosperity is to get aligned with where future growth will occur. And in an economy being reshaped by globalization and technology that is increasingly the knowledge-based sectors of the economy. Which includes pre and post production work of companies that make products. As Porter writes in his Times article:

More important, perhaps, manufacturing is not the nation’s only cutting-edge industry. Many of the most innovative firms are not manufacturers but service companies. Apple is very competitive. But so are the companies that design applications running on its iPhones and iPads. Hollywood studios and marketing companies are big exporters. These firms need highly trained workers and pay high wages. … Innovation — not manufacturing —has always propelled this country’s progress. A strategy to reward manufacturers who increase their payroll in the United States may not be as effective as one to support the firms whose creations — whether physical stuff or immaterial services — can conquer world markets and pay for the jobs of the rest of us.

The post Hanging on to the past: not smart! appeared first on Michigan Future Inc..

At the core of Michigan Future’s work, from our founding twenty years ago, has been the conviction that globalization and technology are mega forces that are continuously reshaping the economy. That by orders of magnitude they are more powerful than politics or public policy. And that the places that will do the best economically are those that align with – rather than resist – what now is described as a flattening world.

In no sector of the economy is that more true than manufacturing. Globalization, of course, means that more and more people across the planet will have the skills to compete with Americans for work. And technology increasingly invents new machines that also compete with Americans for work. Not to mention creating new industries that make obsolete old industries. The two articles do a terrific job of describing how those mega forces are reshaping what factory work can be done in America competitively and for that which remains how it will be structured with fewer workers and more machines.

As the Atlantic article describes the basic facts are:

We do still make things here, even though many people don’t believe me when I tell them that. Depending on which stats you believe, the United States is either the No. 1 or No. 2 manufacturer in the world (China may have surpassed us in the past year or two). Whatever the country’s current rank, its manufacturing output continues to grow strongly; in the past decade alone, output from American factories, adjusted for inflation, has risen by a third. … Yet the success of American manufacturers has come at a cost. Factories have replaced millions of workers with machines. Even if you know the rough outline of this story, looking at the Bureau of Labor Statistics data is still shocking. A historical chart of U.S. manufacturing employment shows steady growth from the end of the Depression until the early 1980s, when the number of jobs drops a little. Then things stay largely flat until about 1999. After that, the numbers simply collapse. In the 10 years ending in 2009, factories shed workers so fast that they erased almost all the gains of the previous 70 years; roughly one out of every three manufacturing jobs—about 6 million in total—disappeared. About as many people work in manufacturing now as did at the end of the Depression, even though the American population is more than twice as large today.

Both articles are terrific at describing the realities of global manufacturing. If you care at all about the future of factory work in America they both are must reads. Both articles explore the calculus companies go through to decide whether to make a product in American or places like Mexico and China. The Atlantic concludes the products that will continue to be manufactured here are precision products and those made in small batches. Clearly many industries – like consumer electronics – are never going to make their products in American again.

The Atlantic article adds a description of the calculus that goes into deciding when to invest in machines to replace American workers. And makes clear that there are machines today that can do even more of the work that American factory workers now do, but for the moment are too expensive to replace relatively  low wage American factory workers. But as the price of the machines go down, more jobs will be automated.

What does all of this mean for factory floor employment in America? The Atlantic article sought answers in a fuel injector plant in South Carolina. As they explain there are two types of factory workers there. Quoting the plant manager: “Unskilled worker,” he narrates, “can train in a short amount of time. The machine controls the quality of the part. “High-skill worker,” on the other hand, “can set up machines and make a variety of small adjustments; they use their judgment to assure product quality.”

The unskilled workers in the plant make $13 an hour. Their job is to work with “machines that can work in only one way and require little judgment from the operator. … Computers eliminate the need for human discretion; the person is there only to place the parts and push a button.” These jobs are still in America as the article describes 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 (a low skilled factory worker) job more cheaply, shipping fragile, half-finished parts to another country for processing would make no sense. Second, Maddie is cheaper than a machine.”

The skilled worker’s job is much different. The article describes a worker that went through two years of education at a community college that included learning algebra, trigonmetry, calculus and computer programming. That prepared him for a job that pays around $19 an hour (50% more than the unskilled workers) and involves overseeing “several machines, performing on-the-spot quality checks and making appropriate adjustments as needed.”

The inescapable conclusion from these articles is that the number of low skilled factory workers in America is going to continue to decline. And what remains will pay around than the $13 an hour that Maddie earns or lower. At the same time there is a need for more high skilled factory workers. Products will still be made here in factories which are increasingly machine driven and staffed by far fewer and higher skilled workers who will make decent incomes.

America faces the twin challenges of too many workers with the skills to do low skilled factory work and too few workers with the skills to do high skilled factory work. Our ability to tackle either challenge is hindered greatly by an unwillingness to accept these realities. Rather we continue to search for how we can recreate the high paid, low skilled, mass employment factory-based economy of the past. Not possible! Factory work in America is going the way of American agriculture: highly productive, with few, mainly higher skilled, workers.

The post The reality of factory work in America appeared first on Michigan Future Inc..

What if the 2012 campaign were actually about the world in which we’re living and how we adapt to it? What would the candidates be talking about? Surely at or near the top of that list would be the tightening merger between globalization and the latest information technology revolution. … Therefore, the critical questions for America today have to be how we deploy more ultra-high-speed networks and applications in university towns to invent more high-value-added services and manufactured goods and how we educate more workers to do these jobs — the only way we can maintain a middle class. I just don’t remember any candidate being asked in those really entertaining G.O.P. debates: “How do you think smart cities can become the job engines of the future, and what is your plan to ensure that America has a strategic bandwidth advantage.”

Friedman’s prescription: The best of these ecosystems will be cities and towns that combine a university, an educated populace, a dynamic business community and the fastest broadband connections on earth. These will be the job factories of the future. The countries that thrive will be those that build more of these towns that make possible “high-performance knowledge exchange and generation,” explains Blair Levin, who runs the Aspen Institute’s Gig.U project

Whether you agree with his policy proposals or not, the key take away from the column is that globalization and technology are mega forces that are reshaping continually the global economy and that the places that do best economically will be those that adjust to and align with those new realities. Not those who try to recreate what worked in the past. But our politics – when it is about jobs and the economy – are driven by the desire of most Americans to get back the economy that worked for them in past. No politician can do that, but they will campaign on their ability to do that as long as that is what most voters want. The Friedman article is about the Republicans, but this holds true for both parties.

As I noted after the 2010 Michigan election, Governor Snyder got elected on a platform of transitioning the state to Michigan 3.0, but nearly all the legislature ran on restarting Michigan 2.0. This dynamic is being repeated so far in the 2012 elections. As long as this is the case, the public wanting and politicians running on making the old economy work again, public policy – from either party – is not going to address the core question Friedman laid out: How do we adopt and succeed in a world driven by the tightening merger between globalization and the latest information technology revolution?

The post Politics vs. economics again appeared first on Michigan Future Inc..

He wrote: …  the missed opportunities that leaders in both parties and both branches of government failed to take to address the shifting reality of globalization, technology and rising opportunities elsewhere in the country and world. … We did not accept the new reality. Spent to much time denying it, hoping it was the typical cycle and good times would return— this exacerbated our problems.

We couldn’t agree more. This has been the core of Michigan Future’s work for twenty years: what made us prosperous in the path, won’t in the future. That first and foremost we need a new vision of what economic success looks like. Aligning with, rather than resisting, the new realities of a flattening world is the only path to future prosperity. And those realities require us to make the transition from a mass middle class built on good paying factory jobs to one that is far more knowledge-based.

The challenge is that the transition cannot happen quickly. It not only requires leadership that is honest about the need for each of us to change (rather than promising they will get others to change, so we don’t have to) but also is willing to do now what matters most even though it won’t pay off for years to come.

But back to my original post, none of this is possible if the stories we are told, by too many of our leaders, over and over again is that we got in this mess because the state went on a tax and spending spree during our so-called lost decade, when the opposite is the case. Until and unless we get over that as the dominant explanation for why Michigan’s economy is bad, we can’t get to the conversation Tom (and we) want to have.

The post Explaining Michigan’s lost decade II appeared first on Michigan Future Inc..

The article is worth reading. It covers a range of topics. Some quite worrisome, particularly the political implications. For this post I want to focus on the attitudes these global elites have about America and American workers. What these elites think matters since they are making decisions that will influence the future of jobs for many of us.

First for many of the elites America is not that important. They – and their enterprises – can make more money outside of America – largely in emerging markets. For those who are here if you are an American worker there is a lot to be worried about.

For example Freeland’s reporting on a hedge fund CEO:

The U.S.-based CEO of one of the world’s largest hedge funds told me that his firm’s investment committee often discusses the question of who wins and who loses in today’s economy. In a recent internal debate, he said, one of his senior colleagues had argued that the hollowing-out of the American middle class didn’t really matter. “His point was that if the transformation of the world economy lifts four people in China and India out of poverty and into the middle class, and meanwhile means one American drops out of the middle class, that’s not such a bad trade,” the CEO recalled.

A CFO reflecting on the new reality that lots of work can be done everywhere has concluded that middle class Americans are over paid and to be competitive likely will need to take pay cuts:

I heard a similar sentiment from the Taiwanese-born, 30-something CFO of a U.S. Internet company. A gentle, unpretentious man who went from public school to Harvard, he’s nonetheless not terribly sympathetic to the complaints of the American middle class. “We demand a higher paycheck than the rest of the world,” he told me. “So if you’re going to demand 10 times the paycheck, you need to deliver 10 times the value. It sounds harsh, but maybe people in the middle class need to decide to take a pay cut.”

Two CEOs summed up the new realities this way:

At last summer’s Aspen Ideas Festival, Michael Splinter, CEO of the Silicon Valley green-tech firm Applied Materials, said that if he were starting from scratch, only 20 percent of his workforce would be domestic. “This year, almost 90 percent of our sales will be outside the U.S.,” he explained. “The pull to be close to the customers—most of them in Asia—is enormous.” Speaking at the same conference, Thomas Wilson, CEO of Allstate, also lamented this global reality: “I can get [workers] anywhere in the world. It is a problem for America, but it is not necessarily a problem for American business … American businesses will adapt.”

This may be the most fundamental new reality: American companies positioned to do well in a global economy, American workers not positioned well. Unless that changes we are going to see both more jobs go elsewhere and more of those that remain  here pay less.

The post Flat World Realities appeared first on Michigan Future Inc..

Two recent articles demonstrate the global nature of the challenges. The first from Reuters is titled “Lack of skilled workers threatens recovery: Manpower”. It is about the global shortage of skilled trades. In a recent post I wrote about manufacturers here and across the country having jobs available and not finding qualified candidates. Not surprising it is a global challenge. With machines now and in the future doing more and more of the work human used to, skill requirements are constantly being raised. And no country has yet figured out how to prepare, at scale, workers for those jobs.

The second from the New York Times is titled “Loss of Young Talent Thwarts Malaysia’s Growth”.  Sound familiar? Talent is increasingly mobile. And the competition is not Detroit and Grand Rapids vs. Chicago and Seattle. Talent from across the globe can and will go anywhere. Particularly young talent which is the most mobile.  And as Rick Karlgaard, the publisher of Forbes says, ” … where the go, robust economic activity will follow”.

The article quotes the World Bank reporting that a lack of human capital is a “critical constraint in Malaysia’s ambition to become a high-income economy.” It’s true for Malaysia, us and everywhere else. The places that do best will be those who retain and attract talent from anywhere on the planet. Nothing else comes close in determining how prosperous a country/state/region will be.

The post Global Challenges appeared first on Michigan Future Inc..

The result: 5, 10 20 years from now the following almost certainly will be true no matter who holds power in Lansing and Washington:

• Job growth will be concentrated in the knowledge-based sectors of the economy: health care, education, finance and insurance, professional and technical service and information.

• Factory work will be a smaller portion of the workforce

• The earnings disparity based on education attainment will grow.

• Nearly all the states and regions with the highest incomes will be those with the highest proportion of adults with a four-year degree or more.

• The knowledge-based sectors of the economy – with the greatest job growth and most of the high wage jobs – will be concentrated in big metropolitan areas.

We may not like these trends. We may want to turn the clock back, but we can’t. What made us prosperous in the past, won’t in the future! Each of us, our children and grandchildren need to adjust to these new realities or we will get poorer. There is no option. No one can turn the clock back for us.

So what we should ask of our elected officials for is to design policies and programs that will help position us to take advantage of these new realities. We can ask them to stop these trends, get us back to the good old days, and they may tell us they can. But they can’t. The only path back to prosperity is by aligning with – rather than resisting – the new realities.

The post What the Election Can’t Change II appeared first on Michigan Future Inc..