Must Apple's success equal U.S. job loss?

"We shouldn't be criticized for using Chinese workers," a current Apple executive said. "The U.S. has stopped producing people with the skills we need."

While that statement is an insult to U.S. workers, it does give an insight into how Apple, and most U.S. high-tech companies, calculate location decisions as they have determinedly moved manufacturing and increasingly engineering operations overseas. And, as the late Steve Jobs succinctly told President Obama at a Silicon Valley dinner, "Those jobs aren't coming back."

The general facts of Apple's migration are hardly secret, but the scope and consequences were laid out in an ambitious New York Times article, "How the U.S. Lost Out on iPhone Work." For a generation of laid-off experienced workers, and for new and educated jobseekers, the numbers are discouraging. For our nation, they are deeply troubling. As Intel CEO Andy Grove notes, a nation that stops manufacturing at home, stops innovating - the two are intimately connected.

Although Apple added 8,000 new U.S. jobs last year, that increase is minimal, and flows against the tide. Apple has 43,000 U.S. employees and 20,000 overseas, but it uses "700,000 people to engineer, build and assemble iPads, iPhones and Apple's other products," almost all of them elsewhere.

One important factor driving high-tech manufacturing to Asia is not only a low-paid workforce. As The New York Times reported: "For technology companies, the cost of labor is minimal compared with the expense of buying parts and managing supply chains that bring together components and services from hundreds of companies." The cost of  U.S. workers could easily be absorbed by both the company and consumers. Instead, again according to the NYT article:

"Apple's executives believe the vast scale of overseas factories as well as the flexibility, diligence and industrial skills of foreign workers have so outpaced their American counterparts that 'Made in the U.S.A.' is no longer a viable option for most Apple products."

Certainly, there are plenty of American workers eager to work making iPhones and iPads. But not under the conditions at the conglomeration of industries around Shenzhen, China. There, the now infamous Foxconn, which assembles the iPhone, has facilities which employ 230,000 people, who can be shifted and added as necessary - without much regard for labor laws and at $17 a day. As a result, Foxconn assembles some 40 percent of the world's consumer electronics.

Of course, Foxconn's efficiency and flexibility comes with a cost that's paid not by Apple or iPhone buyers, but by the workers often driven by overwork to despair, or worse. In 2010, 18 workers attempted suicide, and 14 of them succeeded. "These working hours are standard at Foxconn in Chengdu, but Chinese labor laws only allow 36 overtime hours a month. "The overtime at Foxconn often exceeds the legal limit by more than 100 percent," says Chan Sze Wan of the Hong Kong-based workers' rights non-profit Sacom," said the German news organ, Spiegel Online. Foxconn has also been the subject of scrutiny in performance artist Mike Daisey's "Mr. Daisey and the Apple Factory," featured on NPR's This American Life, and blogged on Speed Matters.

This transformation of the world's industries didn't just happen, though. Governments, particularly China, have intervened strenuously with education and effective subsidies. For instance, when one factory in Shenzhen was being considered to add the glass screens on the new iPhone, it benefited from Beijing's policies.

"The Chinese government had agreed to underwrite costs for numerous industries, and those subsidies had trickled down to the glass-cutting factory. It had a warehouse filled with glass samples available to Apple, free of charge. The owners made engineers available at almost no cost. They had built on-site dormitories so employees would be available 24 hours a day... The Chinese plant got the job."

Unfortunately, management experts in the U.S. often tend to blame worker skill levels rather than government guidance and subsidy. "In particular, companies say they need engineers with more than high school, but not necessarily a bachelor's degree. Americans at that skill level are hard to find, executives contend. 'They're good jobs, but the country doesn't have enough to feed the demand,'"  said Martin Schmidt, associate provost at the Massachusetts Institute of Technology.

A recent U.S. Commerce Department report recommends training and investment in STEM (science, technology, engineering, and mathematics) education and for regional manufacturing to focus on value-added tradable sectors. But government efforts can't be limited to training and subsidy; they must include fair trade policies, and enforceable global worker rights and environmental standards. While those may affect Apple's costs, they would certainly move to equalize costs between the U.S. and other producers, and just might increase jobs and pay here. While American efforts are often sincere, they're wildly insufficient - if the goal is to return high-tech manufacturing jobs to the United States.

But a failure to turn around the job exodus, and the resulting decline in wages has a widespread and damaging effect on the U.S. Eventually, workers won't be able to afford the kind of products Apple and other corporations produce.

Of course, Apple's impact on the U.S. job market hasn't been entirely negative. It has added work to the creators of the 1 million apps, the aftermarket equipment (covers, docks, cables, etc.), the instructors and tutorial-makers that teach Mac programs, retail store salespeople, warehouse workers, as well as increasing work at telecoms. But many of these jobs aren't necessarily living-wage jobs, nor the kind of jobs that provide for a career and family.

It's not encouraging. "Apple's an example of why it's so hard to create middle-class jobs in the U.S. now," said Jared Bernstein, who until last year was an economic adviser to the White House. "If it's the pinnacle of capitalism," he said, "we should be worried.

How the U.S. Lost Out on iPhone Work (NY Times, Charles Duhigg and Keith Bradsher, January 21, 2012)

An Inside Look at Apple Supplier Foxconn
(Spiegel Online, May 11, 2011)

Mr. Daisey and the Apple Factory (This American Life, NPR, Jan. 6, 2012)

Can we bring manufacturing jobs back to the U.S.? (Speed Matters, Jan. 18, 2012)