Chinese Manufacturers Are Scrambling To Replace Workers With Robots As Wages Soar

Tepid wage growth has been frustrating Americans for years. But if trends in China’s manufacturing sector have any bearing on the US, there’s an upside to stagnant pay: Workers get to keep their jobs – for now, at least.

In China – where real wages have doubled in the past decade – the opposite is true: Manufacturers, squeezed by rising labor costs and a paucity of skilled workers, are fueling an unprecedented boon in the adoption of automated technologies to cut down on the number of workers needed on factory floors, according to the latest findings of the China Employer-Employee Survey.

Ironically, the Communist Party’s willingness to support unprofitable businesses is compounding problems for Chinese workers, as many manufacturers are barely profitable to begin with.

As Bloomberg explains, China is no longer the cheap labor haven it once was.

“Monthly manufacturing wages reached 4,126 yuan at the end of 2015, equal to those in Brazil but much higher than Mexico, Thailand, Malaysia, Vietnam, and India.

At the same time, many firms are relying on government subsidies, while barely eking out profits or even losing money, according to the study released June 20. “Time is running out fast for Chinese manufacturers to adapt,” says Albert Park, head of the survey’s international committee and a labor economist at The Hong Kong University of Science and Technology.

The study canvassed more than 1,200 companies and 11,300 workers in Guangdong, China’s biggest manufacturing province, and Hubei, a major industrial base in central China. Some 26 percent of workers left their jobs annually in Guangdong and that turnover rate was even higher for younger workers, about 37 percent for employees below 28."

In a viral video published back in April, the People’s Daily provided a glimpse into the rapidly approaching future of China"s labor force: The video, also released by the SCMP, shows hundreds of round Hikvision robots, each roughly the size of a seat cushion, swiveling across the floor of the large warehouse in Hangzhou. A worker is seen feeding each robot with a package before the machines carry the parcels away to different areas around the sorting center. The robots sort more than 200,000 packages a day.

One factory owner explains to Bloomberg how he’s adding 40 robots to his workforce that will eventually allow him to reduce his human workforce by 25% or more.

“As he marches through a gritty factory that makes baby strollers and wheels, Hu Chengpeng says finding workers is his number one challenge these days. Turnover at the facility in Hanchuan in Hubei province in central China is running at 20 percent, even while wages have been growing by double digits for his 400-plus workers every year. “Labor costs are getting just too high,” he said.

All of which explains why Hu, 34, is embracing China’s robotics revolution. He has added 40 new robots, each costing 40,000 yuan ($5,850), this year to replace dozens of workers tasked with cutting plastic molding. Eventually the factory will use a quarter fewer workers than today, without having to reduce annual production, he said. Hu also said he plans to shift more production away from making simple components and towards producing higher-margin branded strollers.”

Engineers are rushing to replicate even the most basic advantages that humans have over robots. In a video published by Bloomberg, employees at San Francisco-based Autodesk explain how they’re designing software to enable robots to “see” their surroundings. The engineers say it will ameliorate safety issues that have been a barrier to wider adoption. Soon, they say, robots and humans will be able to work in closer proximity.

Luckily, robots still have a ways to go before they can "think" like humans, too.

Factories May Be Coming Back To The U.S., But The Jobs Aren't: McKinsey

Trump effectively owes his election to the promise of bringing factories and manufacturing jobs back to the United States.  His relentless, targeted attacks against the "Big 3" U.S. auto manufacturers for outsourcing jobs to Mexico was undoubtedly a key reason that he was able to shock the world and win Michigan, Wisconsin, Ohio and Pennsylvania...an accomplishment which has eluded Republicans since Ronald Reagan.

Unfortunately, while factories may once again be making a comeback in the United States, after chasing low wages all around the globe for decades, they"re unlikely to bring the jobs with them.  As a new study from McKinsey highlights, if a new factory opens up in the United States you can bet it"s only because most of the jobs that used to be performed by humans have since been automated.  Per Bloomberg:

American manufacturing could be poised to rebound as technological disruption shakes up global production chains, but that will offer little relief to displaced factory workers, according to new research by the McKinsey Global Institute.

Now, McKinsey sees conditions changing in a way that could favor U.S. producers: automation is weakening the case for labor arbitrage as wages rise in emerging market economies and developing market residents are coalescing into a new consumer class, among other factors.

While the U.S. could seize on those manufacturing growth opportunities, especially if the government and companies invest to make production more competitive, there are catches. Importantly, production might bounce back without bringing a lot of jobs in tow.

“Even if we rebuild factories here and you build plants here, they’re just not going to employ thousands of people -- that just doesn’t happen,” said report co-author and McKinsey Global Institute Director James Manyika. “Find a factory anywhere in the world built in the last 5 years -- not many people work there.”

Not surprisingly, the biggest beneficiary of the decimation of the America"s manufacturing base has been China...which also means they have the most to lose as those jobs get automated.

Looking at the likelihood of automation by industry, McKinsey finds that factory employment ranks near the top of the list -- behind accommodation and food services and just ahead of agriculture. Investment in re-training could help employees who are displaced, Manyika said, but it won’t happen overnight.

"It’s a bit of a heavy lift -- in the skilling, the investment in the right places, the right skills -- it’s not going to happen by itself."

Of course, this wouldn"t be the first time that economists had prematurely predicted the demise of labor markets due to technological advances:

"We are being afflicted with a new disease of which some readers may not have heard the name, but of which they will hear a great deal in the years to come—namely, technological unemployment" - Keynes, 1930

“Labor will become less and less important. . . More and more workers will be replaced by machines. I do not see that new industries can employ everybody who wants a job” - Leontief, 1952

Arguing Immigration with a Compassionate Liberal -or- How to Twist Your Head into a Pretzel

Arguing with a liberal about the economic impact of rampant immigration will twist your brain into a pretzel. It inevitably goes something like this:

“Illegal aliens and legal immigrants are taking millions of our jobs.”

“No, they’re not.”

“Then they’re all on welfare.”

“No, they’re not. Even most undocumented workers are productive members of society.” 

“How are they productive if they’re not taking jobs?”

“Undocumented workers are only taking jobs American’s don’t want.”

“Americans don’t want those jobs because migrant workers have been taking them for so many decades that wages have remained stagnant at a level that only a totally desperate person would work for. That is exactly how they are hurting us by taking jobs. They are not just taking up jobs, but they are keeping wages suppressed because Americans would have to reduce themselves to living like many migrant workers in substandard housing and driving badly broken vehicles in order to stay alive at those wages if they accepted those jobs.”

“Migrants only live at that level because they are forced to.”

“Exactly. They are forced to because the pay for those jobs never goes up because they are willing to live at that level out of desperation if that is what it takes to stay alive, and you’re willing to exploit them.”

“And if migrant workers didn’t do that, you’d have to pay more for all the food you eat. Do you really want to pay more for everything?”

Migrant workers in a California field.

Maintaining a peasant immigrant labor class is what it is really all about

And that, you see, is the bottom line — cheap labor via a peasant class. We don’t want to pay more for everything, so both political parties turn a blind eye to the cheap, illegal labor and keep the peasants coming, regardless of the social costs of maintaining a peasant class.

They are truly peasants, not just because of their living conditions, but because they supposedly have no voting rights (debatable). They have no say in the laws that govern them so live by the rules of another class of people, and they have to keep their heads low to keep from being deported. That means they dare not complain about working conditions either, as Americans most certainly would.

Peasants have to take what they get. That’s why we keep them illegal, and why we just catch and release them, letting them stay here in spite of the fact we know they have no legal right to because we just caught them crossing the border. It all forces them to keep their heads low … until one day they rise enough in numbers that they don’t keep their heads low any longer, and the peasants revolt against their slavish conditions.

Caesar Chavez, Migrant Workers Union leader.

What about the compassionate liberal argument for immigrant labor

At this point, the liberal turns to the compassion argument, since the economic argument for immigrant labor leads to ruin. The compassionate argument runs like this, this time started by the liberal:

“You are mean and cruel for wanting to kick a million and a half undocumented workers out of this country.”

“No more mean and cruel than you are for insisting on keeping out the hundreds of millions more people who want in but are kept out because they respect our immigration laws.”

“I don’t insist on keeping anyone out.”

“Of course you do. Otherwise, you’d spend all this protest energy trying to get the government to declare open borders to the whole world and let in everyone who wants in so long as they’re not criminals.”

“There wouldn’t be that many that would come in anyway.”

“Eliminate all immigration laws, except those barring criminals, and find out.”

“That is ridiculous. We have to have some reasonable limits because we cannot absorb hundreds of millions all at once.”

“So, you only want to keep out the ones who are respecting the legal process but keep in all the ones that jumped ahead of them in line? I want to kick out 1.5 million or more who jumped ahead in line, but you want to keep out hundreds of millions, and that makes you more compassionate?”

“Yes, it does. We cannot absorb hundreds of millions. It’s ridiculous. I would if we could, but it’s not even possible.”

“So, there is nothing wrong with having immigration laws, but just with enforcing them?”

“Yes, that’s mean and cruel because you are breaking up families.”

“Didn’t they know that was the huge risk they took in breaking the law and coming into the country illegally — that it might be really messy when they’re forced to leave?”

“You’re a racist with no heart.”

“What if I’m of English decent and also don’t want 1.5 million illegal aliens from the UK?”

“You’re English? See, I knew you were racist.”

“What if I just don’t want more people of any color, including my own, because we already have too many people in the US?”

“Why don’t you just leave the country and solve the problem then?”

“Aren’t you the one who promised you would leave if Trump was elected? Why should I just force the problem onto some other nation? You see, at one time, we had a vast land we wanted to occupy in order to keep the Indians from having it all, so bringing in immigrants was the only way to occupy all of it. But I think we’re full, and we can stop now.”

“See, you’re a racist.”

“No, I love Indians and even have some as relatives; but I’ll bet the Indians would have been glad to have a lot fewer migrants, too, starting with the Mayflower. Look, my point is that there was once a lot of land available. Now the land is overstrained. We don’t need more housing developments all over the countryside. Don’t need more congested streets and more auto pollution and more petroleum consumption. Don’t need more landfills filling up faster and more sewage, and we don’t even have enough potable water in the places that want immigrants the most. There is simply no way to bring in millions more people without adding to all those problems because we’re full now. The land simply cannot absorb more without it having a negative impact.”

“That makes no sense. We’d have no economy if we stopped immigration. We have to keep bringing in people so that we have people to build housing for. Building those developments is what keeps the economy perking.”

“So, we need all of our cities to endlessly grow like Mexico city or like California has been doing and never stop increasing the population because that is the only way to sustain a healthy economy? Is that the Californian version of sustainability? California has grown to where it doesn’t even have enough water for all of its people without going to another state to get it. So, doesn’t water, at least, force a point at which you say population growth is enough already? Yet, California wants immigrants more than any state. That"s why they"ve made themselves a sancturary against immigration law enforcement. Where is it going to get the additional water?”

“That is ridiculous. Haven’t you seen that it is raining in California now? They’ve solved this problem. They now need more people in order to drink the water fast enough to keep their reservoirs from overflowing and breaking their damn dams.”

“Maybe they just want to use all those people to fill the holes in the dam and plug the damn leaks.”

“That’s horrible. They want them because they are compassionate.”

“Then why are they so uncompassionate toward the millions of others that they keep out with immigration laws? Maybe they just don’t need all those others to pick their oranges for a penny each and mow their lawns at a nice low price. Maybe they just want enough to keep the price stable and low.”

“That is a racist comment that assumes migrant workers are only good for mowing lawns and picking crops.”

“It’s not me bringing them all in and then paying them poorly for mowing my lawn. I mow my own lawn. Isn’t that the situation you’re keeping all of them in? Why don’t you pay them more so they can live like you in a house right beside you, instead of mow your lawn and then return to their trailer? You know, open the community gates.”

“That is ridiculous. Why is that my responsibility? I pay my gardeners fine. I pay them as much as anyone else does. I cannot help what the economy will bare.”

“Of course you can, because maintaining such a huge supply of immigrant workers, especially the cheaper illegal ones, makes sure the cost of their labor stays low for you.”

And there we are, full circle. It’s all about maintaining a peasant class for the privileged. How else will they enjoy a liberal lifestyle?