JONATHAN COHN JANUARY 23, 2012
This is one of those Mondays with too much news to cover. South Carolina and the Republican primaries. The State of the Union. Ryan Lizza’s fascinating look inside the Obama administration. And two incredible football games. But I want to talk about a feature story from Sunday’s New York Times, which isn’t about any of those things except that, in a sense, it’s about all of those things. Well, all of them except football.
The article is about the iPhone and why Apple, which once upon a time built its computers in the U.S., decided to manufacture the devices elsewhere. Apple still employs 40,000 people in the U.S., comprising about two-thirds of its total direct workforce. But that’s a small fraction of the 700,000 contractors who work on designing and producing the iPhones. Nearly all of those workers are overseas.
The article, by Charles Duhigg and Keith Bradsher, is difficult to summarize. If you care at all about the economy and future of the American workforce, you should read it for yourself. But the main takeaway is that other countries, particularly China, offered Apple something not available here: A cheaper, more compliant workforce. This anecdote captured the situation well:
One former executive described how the company relied upon a Chinese factory to revamp iPhone manufacturing just weeks before the device was due on shelves. Apple had redesigned the iPhone’s screen at the last minute, forcing an assembly line overhaul. New screens began arriving at the plant near midnight.
A foreman immediately roused 8,000 workers inside the company’s dormitories, according to the executive. Each employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into beveled frames. Within 96 hours, the plant was producing over 10,000 iPhones a day.
“The speed and flexibility is breathtaking,” the executive said. “There’s no American plant that can match that.”
Actually, it would be easy to rouse American workers at midnight for this sort of thing – if you were willing to pay them enough. But it would probably cost a lot more here in the U.S. and you probably couldn’t push them as hard. (For the record, Apple spokesmen disputed the account, saying it would have violated the terms of their contract and Chinese labor law. Make of that what you will.) Apple executives also say they can't find enough skilled workers in the U.S. But, as the Economic Policy Institute has pointed out, plenty of college graduates are out of work right now. That suggests, again, the problem may not be a lack of skilled labor, at least entirely. It may be a lack of cheap skilled labor.
Of course, this is the ongoing, headache-inducing dilemma of the global economy. Cheaper, more compliant labor will always be available overseas. How do we stop corporations from relocating, when it means not just higher profits for executives but also cheaper goods for consumers? How hard should we try? Among other things, the jobs lost here are jobs gained overseas, for people who in many cases are struggling to pull themselves and their families out of abject poverty. (For more on that, keep an eye out for Katherine Boo’s forthcoming book, Behind the Beautiful Forevers.) In an ideal world, the fortunes of workers here and abroad would rise in tandem.
I’m giving a very simplistic version of a very complicated set of issues that, frankly, others can address more competently. But I do know that these issues are at the heart of our biggest political debates right now – from the controversy over Mitt Romney’s work at Bain Capital to Obama’s campaign for a “fair” society, about which we’ll hear more on Tuesday night. The jobs going overseas are the jobs that once supported our middle class. If we don’t figure out a way to replace them, the middle class will continue disappearing with them.
Postscript: The story also makes clear that an additional lure of China is the hi-tech supply chain, which has relocated there. It reminds me of a major argument for the bailout of General Motors and Chrysler: The need to save our auto supply chain, which is concentrated in the Midwest and which would likely have disappeared if those two companies had liquidated. At the time, many conservatives (and even a few liberals) suggested the domestic auto makers were beyond saving. But the automakers are now expanding again and, according to the Wall Street Journal, its suppliers are too. Political implications aside, it's a reminder that industrial policy has its virtues, particularly in a world where other countries practice it without hesitation.