Executive Search Firm Specializing in the Plastics Industry

Good News for the American Worker

I see something going on in the world economy. Like a shape in the distance on a foggy day, maybe it’s not what it looks like. History is virtually impossible to ‘see’ as you’re going through it in real time, but it feels like we are in the beginning stages of a sea change when it comes to the global economy. There are lots of anecdotal data points that we can see, but since we were all just Irish for a day, let’s look at their economy as an example. Unemployment in Ireland stands around 7%, down from 8.5% a year ago, and 15% in 2012. US Federal Reserve Governor Lael Brainard, at a recent Harvard address, noted “We are closing in on full employment…foreign growth is on more solid footing, and…the external environment currently appears more benign than it has been for some time”. Doesn’t it seem like just yesterday that Greece was bankrupt, Europe was dealing with Brexit, and slowing growth in China was going to drag down the rest of the world? What the heck is going on, and what changed all that?

Here’s my theory, and I’m talking primarily about the manufacturing sector: For a couple of decades, business leaders in the US had an easy path, which was to ship production to low cost countries. There is a tendency in humans to take the path of least resistance; the easy way; to be ‘lazy’, especially if that approach is getting you results you can live with. For anything that couldn’t be economically outsourced, there was still a good supply of labor in the US. I’m a dyed-in- the-wool capitalist, but let’s face it, that lead to stagnant wages for most American workers and great profits – not much incentive for businesses to change.

Fast forward to 2017. Per Oxford Economics, China’s labor costs today are only 4% cheaper than those of the US, when productivity is factored in. Chinese wages have risen much faster than their increases in productivity, while the US has made significant productivity improvements. With cheap labor rapidly disappearing and worldwide unemployment rates continuing to fall, I see no alternative for US businesses other than to invest in technology. In addition to information systems, this means industrial automation. We should also see much firmer increases in real wages for US workers, which will lead to further GDP growth, as 70% of GDP is driven by the consumer.

At KLA we are seeing increased demand from our current client base for professionals in the automation space. We will be at the Automate 2017 show in Chicago on April 5-6. If you are going to be there let us know so we can stop by and say hi.

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