It’s not about the workers


The supposed motivation for the manufactured manufacturing crisis is jobs.

But it’s not about the workers.

Rob Hosking explains it’s really about power plays between left wing parties.

There is a massive Indian leg-wrestle going on not only between Labour and the Greens but within Labour, and the Engineering, Printing and Manufacturing Union is one of the most important power brokers on the left.

With the change in Labour Party rules last year, the EPMU will have a very large say in who the next leader is. There is also a battle on for support, at the next election,  of voters who work in this sector.

It is also about protecting the size of the EPMU by trying to keep manufacturing jobs. Shedding lower skilled jobs and employing higher-skilled workers is not so welcome by this group as such workers are less likely to be unionised. . .

If it was about the workers, those behind the manufactured crisis would be delighted that people were improving their skills, and earning ability.

But parties whose modus operandi is to tax and redistribute need people staying in low-paid jobs who will benefit more from redistribution than those in higher paid ones who will benefit less and pay more.

Jobs come, jobs go


The opposition couldn’t have picked a worse time to be wasting their time and our money manufacturing a crisis about a manufacturing crisis.

New Zealand manufacturing activity rose in May to the highest level since June 2004, led by new orders and production, stoking optimism the economy may be picking up pace.

The BNZ-BusinessNZ performance of manufacturing index rose 4 points to 59.2 in May, the highest level in nine years and the strongest reading for May since the survey began in 2002.

The monthly survey suggests manufacturing may not be as weak as suggested in government figure this week showing sales volumes fell 0.6 percent in the first quarter and indicates companies are confident enough to take on more workers.

Machinery and equipment manufacturing led gains in May, with a reading of 67.4. . . .

The good health of manufacturing was on show at last week’s National Fieldays:

Prime Minister John Key says the National Fieldays are a perfect example of why New Zealand’s manufacturing sector is at its highest level in nine years. . . .

“New Zealand is well placed to be doing well in manufacturing,” Key said at Fieldays.

“What you’re seeing here at the Fieldays is actually a lot of innovative manufacturers who are developing products.

“I think we’re (New Zealand) a good place to do business. We’ve got a good, stable democracy, we have an English court and law system and we’ve got a competitive economy,” he said.

Those who think we’ve got a crisis here might take a look at India:

As many as 14.08 million jobs were lost in the five-year period ended in 2009-10 in the agriculture sector which engages almost 60 per cent of the workforce in the country.

The job losses in the manufacturing sector during the five year period from 2004-05 to 2009-10 was 5.03 million as per the draft 12th Five-Year Plan approved by the country’s apex policy making body National Development Council (NDC) in December last year.

According to the data analysed in document, employment in the agriculture sector in absolute terms was 237.67 million in 1999-2000 which increased to 258.93 million in 2004-05 and then fell to 244.85 million in 2009-10.

Similarly the workforce engaged in manufacturing sector was 44.05 million in 1999-2000, which increased to 55.77 million in 2004-05 and then came down to 50.74 million in 2009-10. . .

Jobs come and jobs go. In spite of all those losses, there were gains in some areas and overall employment increased:

 . . . However, the employment in non-manufacturing sector increased from 20.84 million in 1999-2000 to 29.96 million and 48.28 million in 2004-05 and 2009-10 respectively.

The workforce in electricity, gas and water supply also saw a decline from 1.30 million in 2004-05 to 1.25 million in 2009-10. The other sector broadly in services sector saw a surge in employment.
The overall employment in the country has jumped from 396.76 million in 1999-2000 and 457.46 million in 2004-05 and it was 460.22 million in 2009-10.

In 1841, over one in five workers (22%) were in the Agriculture and fishing industry.

This has now fallen to under 1%. But we produce an awful lot more food than we did back then.

In 1841, a third of the working population (36%) worked in manufacturing and in 1901 this was at a similar rate of 38%.

This has now fallen to 9%. And we do indeed still manufacture an awful lot more by value than we did back then.

How can that be?

The answer to how we did both is that we invented machines that did a lot of the work of those people. Yes, this did indeed mean that these people thus became unemployed: which was the very point of making the invention. The point of the mechanical hay baler is to make manual hay balers unemployed. The point of the robot riveter is to make human riveters unemployed.

And thus those made unemployed by the technological change can go off and work in services. Which is how we all become richer: we’ve now got the machines doing the food and the manufacturing, the humans doing the services and we get all three: food, manufactured goods and services.

Think about it for a moment, if we still had 22% in farming and 36% in manufacturing then that’s 58% of the people. Currently 81% of the population work in services (there’s a bit in construction, water etc as well). If we’ve 58% who cannot be in services because they’re in food or manufacturing then we’d, just as in 1841, only be able to have 33% working in services. So, which half to two thirds of the services we currently do get would you like to give up simply because we don’t have the people available to do them? OK, we all agree the diversity advisers can go but beyond that?

Quite. By mechanising agriculture and manufacturing we’ve been able to get the production of both of those that we desire and also have a vast expansion of services that we also get to enjoy. We have more thus we’re richer. And that of course is the point of doing such mechanisation: to make us all richer and long may it continue.

Machines have replaced a lot of jobs. They’ve also increased productivity and freed people to do things machines can’t.

Jobs come and jobs go and more jobs come. It’s not a recent phenomenon, it’s been happening for centuries as new inventions make it easier to do old jobs.

Instead of manufacturing a manufacturing crisis the opposition should be putting their energies into finding solutions for the problem of people who don’t’ have the skills, and sometimes the will, to do the new jobs.

Which manufacturing crisis?


The Labour/Green/NZ First/Mana opposition has been doing its best to manufacture a crisis about a manufacturing crisis.

Which crisis it is they’re concerned about is unclear because manufacturing here kept growing in the December quarter despite falls in sheep and dairy industries.

Total manufacturing volumes rose for the December 2012 quarter, despite a small fall in meat and dairy product manufacturing, Statistics New Zealand said today.

After adjusting for price changes and seasonal variations, the volume of total manufacturing sales rose 1.5 percent, while the meat and dairy manufacturing sales volume fell 1.1 percent.

“While still an increase, this is something of a reversal from the previous quarter, when high meat and dairy manufacturing sales more than compensated for falls in other manufacturing industries,” industry and labour statistics manager Blair Cardno said.

“This quarter, seven of the other 12 manufacturing industries contributed to the overall increase.”

The largest increases this quarter were:

  • metal product manufacturing, up 5.4 percent
  • petroleum and coal product manufacturing, up 6.4 percent.

These two industries partly recovered from decreases in recent quarters.

The trend for the manufacturing sales volume, which gives a longer-term picture of movements, has been rising since late 2011.

In current prices, the total manufacturing sales value was flat, up just $1 million to a seasonally adjusted $22.8 billion.

Other figures support the case for optimism.

Doug Steel, economist at Bank of New Zealand, said the increase in volumes continued the trend of the past three quarters, though “prices were not all that flash.”

“The rundown in stocks give you a bit of optimism for 2013 if demand does strengthen on construction,” he said.

The official government figures come the same day as a New Zealand Manufacturers’ and Exporters’ Association survey showed an increase in export sales in January compared to a year earlier.

The NZMEA has been a vocal critic of the government and Reserve Bank for not providing more support for local firms competing with cheap imported rivals and reduced competitiveness abroad due to the strength of the currency.

Last month, the Bank of New Zealand-Business NZ performance of manufacturing index showed the sector grew at its fastest pace in eight months in January, with the strongest growth in Canterbury/Westland probably reflecting demand for building materials.

Some sectors aren’t doing so well, some are doing better.

That’s normal and while a decline in a sector and job losses are hard for those involved they’re not symptoms of a crisis.

Many factors in manufacuring malaise


Reserve Bank Governor Graeme Wheeler says the decline in manufacturing is much more than an exchange rate story.

In a speech to the New Zealand Manufacturers and Exporters Association in Auckland, Graeme Wheeler said factors such as globalisation, outsourcing and international supply chains, along with competition of low cost producers and rising global demand for services meant that the relative importance of manufacturing had been declining in all but the poorest countries for the past 40 years. New Zealand was no exception.

Mr Wheeler acknowledged the New Zealand dollar was significantly overvalued in terms of economic fundamentals, and this was a headwind for some in the manufacturing sector. But he said there are no simple solutions available to the Reserve Bank.

“Some of the strength in our real exchange rate is due to global financial imbalances and the weakness of the US dollar in particular.”

Near-zero interest rates and quantitative easing by other central banks have pushed up currencies like the New Zealand dollar, and domestically, New Zealand’s poor savings record is also to blame. . .

There’s little we can do about globalisation, outsourcing and international supply chains, competition from low cost producers and rising global demand for services.

But improving our savings record is entirely in our own hands.

That probably won’t have much impact on manufacturing because it won’t counter all the other factors which are making it difficult, but it would be much better for us as individuals and for the economy.

Exporting Industry Saves Power


The Listener  asks why manufacturers have had to cut production in four of the last seven years.

If there is a silver lining in New Zealand manufacturers packing up and shifting offshore, it must be that some other country has to provide their electricity. Right now, it seems certain that if we manufactured rather than imported many of the products we depend on, the current electricity generation capacity would fall far short.

The Bluff aluminium smelter reports it cut production by nearly 300 tonnes last month in response to the record highs reached on the electricity spot market. Similarly, Pan Pac pulp and paper mill in Napier reported it had shut down three of its five pulping machines.

This indicates the spot market is working properly – it is deterring consumers when prices reveal a risk to supply. But what sort of economy do we claim to have when in four years out of the past seven some of our biggest industrial companies have had to cut production for fear the electricity will run out?

We’re supposed to have a first world economy. But exporting industry and the jobs which go with it should be a long way down the list of strategies for saving power in a first world country.

This can hardly inspire overseas investment. But it is not only the economic picture that looks tarnished when the electricity situation is closely examined. The clean, green brand takes a hit too. For example, the start of this year has seen the most electricity ever produced by gas-fired stations in a March quarter.

The March quarter covers summer for at least part of which hydro lakes should be at their peak because of the snow melt, so why didn’t we have enough generation to meet demand then?

Demand has increased – more poeple, more electrical appliances and a lot more irrigators – our summer power bill is tens of thousands of dollar because of irrigation.

But in a first world country capcity should expand to meet demand. The expensive and torturous RMA process is one reason it hasn’t – a farmer I know has spent more than two years and hundreds of thousands of dollars getting consent for a private hydro scheme, on his own property, which will provide enough power for more than 1000 homes.


Meat & Dairy Boost Manufacturing Stats


The positive influence of primary production is evident in the latest manufacturing statistics from Stats NZ.

 Seasonally adjusted manufacturing sales volumes were up just 0.2 percent, during the March 2008 quarter but without meat and dairy product manufacturing industry, volumes decreased 1.4 percent.

The meat and dairy product manufacturing industry seasonally adjusted sales volumes rose 5.0 percent ($181 million) in the first three months this year while wood product manufacturing decreased 4.7 percent ($48 million), furniture and other manufacturing was down 11.0 percent ($46 million), and transport equipment manufacturing fell 6.3 percent ($36 million).

Seasonally adjusted manufacturing sales increased 3.7 percent, reflecting the contribution of increased prices. This is the third largest increase since the series began, and was dominated by the manufacturing of meat and dairy products, which rose 13.0 percent.

This follows the record 26.2 percent rise in the December 2007 quarter. Excluding this sector however, seasonally adjusted manufacturing sales decreased by 0.1 percent.
The total manufacturing sales trend continues to record general increases, however it has been stronger in the past year, up 12.8 percent, because of the influence of the manufacturing of meat and dairy produce.

%d bloggers like this: