Manufacturing Coming Home, But Jobs Still Prove Elusive

At the same time as the UK is tentatively starting to have a debate about immigration and industry continues its long-term gripe about outsourcing of jobs to Asia, we now have a third dynamic — rising inflation in low-wage centers like China beginning to impact their ability to compete as the lowest-cost manufacturing base, according to this article. What could this mean for engineering and manufacturing companies in Europe and North America? One popular wave of enthusiasm being expressed in the US and Europe, supported by stories of textile manufacturing coming back to the UK from Asia and near-shoring of aerospace jobs to NAFTA, is that rising costs in Asia (among other dynamics) will encourage firms to bring manufacturing “home; in other words, that jobs will be created here by firms seeing the cost advantages of low wages gradually eroded by rising salaries in China and other parts of Asia.

Well, in the UK at least, a different trend has been exposed by the interplay of two dynamics currently in the news. The first is a debate about social engineering as the government tries to force universities to accept a higher proportion of applicants from poorer/disadvantaged backgrounds. The authorities contend the universities are being elitist in having a disproportionate intake from private school backgrounds. The universities in turn defend their position by saying the applications process is background blind, that they offer places on the basis of academic merit alone and the fault lies with successive governments since the 1960s dumbing down and meddling with state secondary school education, resulting in poor quality graduates from state high schools. Industry in turn complains that not enough science and engineering graduates are coming out of higher education, causing a dearth of talent for firms looking to expand.

The second dynamic is the new coalition government is finally and tentatively trying to stem the flow of uncontrolled immigration into the UK, instigated by the last socialist government as an act of social engineering back at the start of the last decade. According to a Telegraph article, as of June last year, the UK population stood at 61.14 million. Of that, 6.97 million were people born overseas, or 11.4 percent, the highest proportion on record, of which 4.7 million were from outside the European Union. Note, this is born overseas, not born of parents from non-native UK backgrounds, which would be a vastly higher figure. The proportion had been rising steadily year on year and was almost double the 6.7 percent recorded in 1991 when the foreign-born population stood at just 3.85 million.

To such a background, the new coalition has been trying to limit immigration to a few thousand a year from over 200,000 a year — in itself not particularly noteworthy for a metal blog you would rightly say — but this has stimulated a strong backlash from industry because as immigration rules have been tightened and quotas put in place, firms have found they cannot hire the staff they need to expand. Hidden within these massive immigration numbers has been a small but still significant subsection of highly qualified engineers from all areas of industry. Manufacturing companies claim that their ability to expand, to even continue to compete, is being hampered by lack of skilled engineers brought on by immigration controls. As a result, government is reviewing the system and looking to relax rules for qualified visa applicants.

One can only draw the conclusion that as British manufacturing profits from a weak pound, as manufacturing activity is encouraged back to the UK from Asia, the only jobs it will generate are semi-skilled. The tide may have turned for loss of jobs to Asia, but the net benefit to British university graduates will be severely diluted by lower-cost engineers brought in from abroad. For the economy as a whole, selective immigration makes much more sense than mass immigration, but for anyone thinking it will spur the creation of home grown engineering talent, think again. We live in a much more mobile world.

–Stuart Burns

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