Physical work and knowledge work
In many developed countries, there is a shift away from physical work to knowledge work. The trend is more obvious if we look at the development of the knowledge industry in quantitative terms. Today, 60% of the population in developed countries is working in the knowledge industry. This industry represents about 80% of the U.S GDP and about 60% of the G8 group's GDPs. This industry includes the technology area; the engineering area; the medical and healthcare area; the business and finance area; and the services management area etc. All of them require several years of college education or higher.
The shift from physical to knowledge work begun in the 1970s where many factories in the U.S. were moved to Mexico. The main reason was to take advantages of the lower labor costs but the real reasons were to avoid the pollution issue; to focus on the transition and modernization of U.S. industry; and to increase profits for companies. The same things are happening in Europe in recent years when many factories are moving from western to eastern Europe. Between 1980s – 2000s, factories in developed countries are being modernized and automated where machines are replacing labor workers. As the demand for labor workers decreases, the need for knowledge workers are increasing. People who used to work on assembly lines were being retrained to control and operate automated machines. Instead of use their muscles, they are now using their brains. Instead of using tools, they are collecting machine data to determine the efficiency of the operation so they can improve productivity. Of course, during this transition period, companies still have to rely on the old ways of building products. That is why many factories are relocated to developing countries until their modernization of factories and training of workers are completed. What will happen then? They will close old and obsolete factories that are relying on labor workers as they open their modern automated factories that use computer control with knowledge workers who operate them. What will happen to these labor workers? They will leave it to local governments to deal with their large unemployment of labor workers.
This situation already happened in Mexico. In 1970, the U.S and Mexico government signed an agreement known as “Maquiladora policy”. This policy allow U.S companies to set up manufacturing plants in Mexico, along the border between the two countries where materials and parts are shipped there for assembling. The finished product is returned to the U.S. for sale without any import/export taxes. In this special zone, U.S. companies hired Mexican workers to do most of the labor works. The U.S benefits from lower labor wages and less restricted laws on pollutions. Mexico benefits by having works relocated to their country. Within few years, thousands U.S. companies moved to Mexico and several million Mexican had jobs. Mexico enjoyed the economic prosperity and U.S companies received significant profits due to the labor cost differences. (Average $12/hour in U.S vs. $1.8/hour in Mexico). However, in 1990 when China offered a better deal by building similar manufacturing plants in special zones along their coastal with labor workers working for an average $.0.57/hours then many U.S. companies closed factories in Mexico and moved to China for better profits. What happened in the Maquiladora zone? It has thousands empty factories plants with polluted land that is no longer suitable for agriculture and millions unemployed people. The Maquiladora industry lost over 1.5 million jobs in just a few years. Rolando Gonzalez, president of the National Maquiladora Industry Council bitterly complained: “This is the most serious crisis that our nation has seen in the last 35 years. We lost our jobs, lost our land, and lost our prides”. With unemployment reached 38% of the total labor force, the economy collapsed, and the government lost the election. Even now Mexico has not recovered from this crisis.
Today we are witnessing the same thing all over the world when developed countries move manufacturing plants to developing countries. Few people understand the trend of shifting from physical work to knowledge work or learn anything about what happened to countries where manufacturing plants moved out. Not long ago, when I was in Eastern Europe, I saw their newspapers praised the development of special economic zones where western European moved their manufacturing assembly plants there. People were so happy about the number of jobs that it created, many required no trainings, only physical works. I wondered how many of them know what has happened in Mexico's Maquiladora? During my lectures at one university about the need for education improvement, a student commented “Why do we need to invest in college education when we can easily get jobs in the special zones?” This was probably the same thinking of many students as I found out later that the dropout rate among college students was quite high as many were lured to work in these special zones. How could we blame them when their friends all have the latest laptops and iPhone by working in those special zones? How could we convince them to go to university for a better future when there are so many jobs available today that do not require any training?
Last year, when I was in China I saw the closing of some U.S. manufactures in Shanghai and Shenzheng. According to the local newspapers, facing with rising costs, GE, NCR, Caterpillar, and Ford were moving some its manufactures back to the U.S. because Chinese wages and shipping costs have risen so quickly so they were no longer profitable. When returned to the U.S. I read that some of these companies' modernization and automation programs have completed with robots and numerical machines take over labor works. It is much better, cheaper, and faster to do it in New Jersey, Alabama, and South Carolina than anywhere else. A manager told me that a welding robot in car manufacturing may cost over a million dollars or about ten labor workers' yearly wages. However, the robot works 24 hours a day and has better quality and higher productivity so it just few months, the company already break even the initial investment and the rest is profits.
In the knowledge industry, technology plays a vital role. With the highly automation of all manufacturing processes and the use of information technology to collect and process specific data, advanced education is needed. Clearly, workers cannot be trained for this kind of work in the same way as they are trained to plough the land or assemble a sheet of steel into cars. These new jobs require new knowledge such as problem solving, process analysis and decision making. It requires a different mindsets and different trainings that only few countries have. That is the reason why the fast growing knowledge industry is experiencing a significant shortage of skilled workers in the medical area, pharmaceutical area, engineering area and information technology area etc. Unless these skills are widely taught and produce more knowledge workers, the shift from physical to knowledge work will take much longer than many people have hope for.
Sources
- Blogs of Prof. John Vu, Carnegie Mellon University
