A Letter to President Hockfield

Ernst G. Frankel

Susan Hockfield
President of MIT
77 Massachusetts Avenue
Cambridge, MA 02139

Dear Dr. Hockfield,

I read your Op-Ed in The New York Times on the impact of the loss of manufacturing on the U.S. economy with great interest [“Manufacturing a Recovery,” August 29, 2011]. I take the liberty of sending you two of my recent books that address this issue, among others.

While we lost much of our manufacturing to countries like China because of lower labor costs, we must recognize that other large manufacturing countries, such as Germany, Japan, and now also South Korea, continue to maintain a healthy manufacturing base though their labor costs are at least as high as ours, particularly in Japan and Germany. The reasons are therefore largely in the fact that we do not have an adequate, properly trained, skilled labor force nor do we, like other large manufacturing nations, maintain a good life long retraining program.

For example, when a former student and renowned Greek shipbuilder, Sotiris Emmanuel, tried to open the Quincy Shipyard, we found that the major reason preventing a successful reopening was that the only skilled labor force ready to work in the yard were older workers who had retired from the Bethlehem/General Dynamics yard 10-20 years earlier. We could not find young trained workers.

While much of the outsourcing of manufacturing was done by U.S. companies such as GE and others because of lower costs abroad in the past, increasingly, as our experience with Quincy Shipyard showed, the reason is lack of availability of trained, skilled, American labor.

One reason for this appears to be the ill-conceived government policy of college for all which tries to encourage all high school graduates to continue with a four-year college education, whether they are qualified for college or not. As a result, we now have nearly 83% of high school graduates continuing their education in a college (often a for-profit college). Most of these college students have no idea why they are in college or what use they expect to make of what they learn. At the same time, enrollment in trade schools, community colleges, etc., has dropped. Not only did this generate a subprime student loan crisis which will soon parallel the subprime mortgage crisis, as an increasing percentage of college students fail to find jobs in their field and default on their loads, but our manufacturing finds fewer and fewer qualified workers.

Another result of this is that our economy suffers from the fact that the average age at which Americans join the work force has increased from less than 19 years to well over 22 years, depriving our economy of three years’ of output and contributions to social programs such as Social Security and health care. In fact, a simple calculation shows that if we had people join the workforce on average at age 19, as assumed when the Social Security program was established, the program would be financially sound and self-sufficient.

Another important issue that affects our manufacturing competitiveness is remuneration. I worked in Japan for Mitsui & Company for an extended period and found that not only were all workers affected by changes in technology involved in the technology change decisions – unlike the U.S. where such decisions were and are imposed from above – but remuneration was and is also more egalitarian, with the highest paid person at Mitsui limited to 50 times the total remuneration of an average technical worker.

By comparison, many U.S. manufacturers are mimicking financial service companies by paying their executives obscene salaries and bonuses which bear no relation to their actual contributions.

Finally, I should mention that in other countries, such as Germany and Japan, economic planning not only includes industrial but also educational planning, which implies that future skills and professional needs are predicted and training/educational programs, support, etc., adjusted to assure availability of the required trained/educated work force. This, as a result, not only assures greater employment, but also a greater balance between supply and demand. While many of our politicians may object to such planning, I feel that unless we start to move in this direction we will not only continue to lose more manufacturing but also jobs, and we will continue our economic decline.

I am at your disposal to supply further details on this subject which I believe is of enormous importance for the revival of the American economy.

With best regards and wishes.

Ernst G Frankel
Ph.D., DBA, MBA
Professor Emeritus
Department of Mechanical Engineering

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