{"id":23414,"date":"2017-11-15T02:27:33","date_gmt":"2017-11-15T07:27:33","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/ge-adapting-to-isolationist-america-and-its-workforce\/"},"modified":"2017-11-15T02:27:33","modified_gmt":"2017-11-15T07:27:33","slug":"ge-adapting-to-isolationist-america-and-its-workforce","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/ge-adapting-to-isolationist-america-and-its-workforce\/","title":{"rendered":"GE: Adapting to Isolationist America and its Workforce"},"content":{"rendered":"

GE: Adapting to Isolationist America and its Workforce<\/strong><\/h1>\n

Kylie Lucas<\/p>\n

November 15, 2017<\/p>\n

US Manufacturing\u2019s Reliance on the Global Labor Market<\/strong><\/h2>\n

Manufacturing is evolving. As factory floors are flooded with automation, digitalization, and robotics, employees must also evolve. What was once perceived as a blue-collar job now requires significant technical expertise. This transformation is particularly prominent in manufacturing companies, such as General Electric (GE), in which the complexity of production processes is increasing to match the complexity of their products.<\/p>\n

However, the US labor market is not keeping pace with US companies\u2019 demand for high-skill manufacturing workers. Without adequate supply of skilled manufacturing labor, US companies could face several challenges within their supply chains including an inability to meet consumer demand and inefficient and costly operations. To mitigate the skill gap, US companies can access highly-skilled, foreign workers either by relocating manufacturing offshore or by hiring migrant workers via the H1-B visa program. The former option of offshoring is made even more attractive by cheaper labor and lower costs overseas. Both solutions are prime examples of the global nature of today\u2019s modern supply chains.<\/p>\n

Cut Off?<\/em><\/h3>\n

The shift of US manufacturing jobs offshore has been a subject of political contention for many years, and, most recently, President Trump gained voter support by promising to bring back or \u201creshore\u201d manufacturing jobs to the US. To achieve this, the Trump administration seeks to implement policies that isolate US companies from the global economy, forcing them to adopt US-centric strategies. As the walls begin to close in around GE, it must determine how to react to the US trend toward isolationism.<\/p>\n

GE Leverages the US Labor Market<\/strong><\/h2>\n

Reshoring<\/em><\/h3>\n

While GE had shifted much of its manufacturing offshore in the latter half of the last century in pursuit of lower manufacturing costs, GE began to revive its US based manufacturing within the last ten years. Former GE CEO, Jeff Immelt, cited the advantage of having manufacturing, development, and design co-located in the US to increase the speed of innovation as the reason[1]<\/a>. In the age of isolationism, GE\u2019s reshoring of manufacturing jobs is encouraged by the US government through its tax and regulations policies.<\/p>\n

Conversely, industrial agglomeration incentivizes companies in the same industry to locate near one another to share common resources such as labor[2]<\/a>. Given that many manufacturing companies are located offshore, GE\u2019s reshoring is risky. Pioneering reshoring also creates a first mover disadvantage in which competition continues to benefit from lower costs offshore. For GE Appliances, the disadvantages of US based manufacturing proved to be too great, and GE ultimately sold the division to China based Haier in 2016 for $5.4 billion after GE Appliances could not compete with the low prices of foreign manufacturers[3]<\/a>.<\/p>\n

Upskilling<\/em><\/h3>\n

As GE reshores its manufacturing, the extent of the skills gap is felt. Exacerbating the existing skills gap, the US government, consistent with other isolationist policies, has restricted H1-B visa applications. GE is, therefore, looking to close the skills gap with US workers as a longer-term strategy to address isolationism. Recently, GE announced plans to re-train 150,000 workers[4]<\/a>. Additionally, GE is promoting STEM education through technical certification programs[5]<\/a> and universities[6]<\/a>.<\/p>\n

Door #3: Rejecting Isolationism<\/strong><\/h2>\n

Beyond getting out ahead of the isolationist movement and growing the domestic high-skill labor, GE is left with two other alternative courses of action. Rather than investing resources in promoting STEM education of US citizens, GE should lobby the government to reconsider restrictions on US manufacturing\u2019s access to foreign, high-skill workers. Increasing the supply of high-skill labor within the US would have the added benefit to GE of lowering manufacturing wages. Furthermore, the size of the foreign, high-skill labor market can be measured with more certainty than the small, but growing corresponding US labor market. It could be that GE invests in STEM education, but the US labor market does not expand adequately to substitute the global labor market.<\/p>\n

The other alternative open to GE in the face of isolationist policies within the US is to reverse course and determine whether being located within the US is the optimal side of the border to be on as the US draws firmer lines between it and the rest of the world. Offshore, GE would likely be separated from the large US consumer base by US isolationism. However, GE would be exposed to growing emerging markets while benefiting from cheaper labor and access to highly-skilled workers rejected from the H1-B visa program or otherwise deterred by US isolationism.<\/p>\n

Conclusion<\/strong><\/h2>\n

In attempting to force companies\u2019 hands into isolationism, the US government has seemingly neglected one major issue: the cheaper labor and lower cost of manufacturing offshore. If GE does remain located in the US and is able to get access to skilled labor, how can GE contend with other competitors who maintain their manufacturing offshore?<\/p>\n

 <\/p>\n

(Word Count: 792)<\/p>\n


\n<\/strong><\/p>\n

\u00a0<\/strong><\/p>\n

Bibliography<\/strong><\/h2>\n

Brennan, Morgan. \u201cAs General Electric upgrades factories closing the ‘skills gap’ is a top concern.\u201d Yahoo! Finance, April 6, 2017. https:\/\/finance.yahoo.com\/news\/general-electric-upgrades-factories-closing-144428101.html, accessed November 2017.<\/p>\n

Carrick, Gardner and Anne Kim. \u201cShortage of Skilled Workers Threatens Manufacturing\u2019s Rebound.\u201d GE Reports, August 3, 2015. https:\/\/www.ge.com\/reports\/post\/115317859023\/a-shortage-of-skilled-workers-threatens-manufacturings-r\/, accessed November 2017.<\/p>\n

Conerly, Bill. \u201cU.S. Manufacturing Needs Immigrant Engineers.\u201d Forbes Business, February 9, 2017. https:\/\/www.forbes.com\/sites\/billconerly\/2017\/02\/09\/u-s-manufacturing-needs-immigrants-engineers\/#3486851e27f9, accessed November 2017.<\/p>\n

Ellison, Glenn, Edward L. Glaeser, and William R. Kerr. \u201cWhat Causes Industry Agglomeration? Evidence from Coagglomeration Patterns.\u201d America Economic Review, June 2010. http:\/\/www.aeaweb.org\/articles.php?doi=10.1257\/aer.100.3.1195, accessed November 2017.<\/p>\n

Giffi, Craig, Ben Dollar, Michelle Drew, Jennifer McNelly, Gardner Carrick, and Bharath Gangula. \u201cThe skills gap in U.S. manufacturing 2015 and beyond.\u201d Deloitte corporate brochure. http:\/\/www.themanufacturinginstitute.org\/~\/media\/827DBC76533942679A15EF7067A704CD.ashx, accessed November 2017<\/p>\n

Hanson, Gordon H. and Matthew J. Slaughter. \u201cHigh-Skilled Immigration and the Rise of STEM Occupations in U.S. Employment.\u201d NBER Working Paper No. 22623, October 2016. http:\/\/www.nber.org\/chapters\/c13707.pdf, accessed November 2017.<\/p>\n

Immelt, Jeffrey R. \u201cThe CEO of General Electric on Sparking an American Manufacturing Renewal\u201d. 性视界 Business Review, March 2012. https:\/\/hbr.org\/2012\/03\/the-ceo-of-general-electric-on-sparking-an-american-manufacturing-renewal, accessed November 2017.<\/p>\n

Riley, Charles. \u201cChina’s Haier buys GE’s appliance unit for $5.4 billion\u201d. CNN Money, January 15, 2016. http:\/\/money.cnn.com\/2016\/01\/15\/investing\/ge-haier-appliances-sale\/index.html, accessed November 2017.<\/p>\n

St. Martin, Greg. \u201cNortheastern to partner with GE in new federal education innovation program.\u201d News @ Northeastern, August 16, 2016. https:\/\/news.northeastern.edu\/2016\/08\/northeastern-to-partner-with-ge-in-new-federal-education-innovation-program\/, accessed November 2017.<\/p>\n

Sussman, Anna Louie. \u201cAs Skill Requirements Increase, More Manufacturing Jobs Go Unfilled; Number of open positions highest in 15 years, with many workers not possessing skills to do today’s jobs.\u201d The Wall Street Journal, September 1, 2016, via Factivia, accessed November 2017.<\/p>\n

[1]<\/a> Immelt, Jeffrey R. \u201cThe CEO of General Electric on Sparking an American Manufacturing Renewal\u201d. 性视界 Business Review, March 2012. https:\/\/hbr.org\/2012\/03\/the-ceo-of-general-electric-on-sparking-an-american-manufacturing-renewal, accessed November 2017.<\/p>\n

[2]<\/a> Ellison, Glenn, Edward L. Glaeser, and William R. Kerr. \u201cWhat Causes Industry Agglomeration? Evidence from Coagglomeration Patterns.\u201d America Economic Review, June 2010. http:\/\/www.aeaweb.org\/articles.php?doi=10.1257\/aer.100.3.1195, accessed November 2017.<\/p>\n

[3]<\/a> Riley, Charles. \u201cChina’s Haier buys GE’s appliance unit for $5.4 billion\u201d. CNN Money, January 15, 2016. http:\/\/money.cnn.com\/2016\/01\/15\/investing\/ge-haier-appliances-sale\/index.html, accessed November 2017.<\/p>\n

[4]<\/a> Brennan, Morgan. \u201cAs General Electric upgrades factories closing the ‘skills gap’ is a top concern.\u201d Yahoo! Finance, April 6, 2017. https:\/\/finance.yahoo.com\/news\/general-electric-upgrades-factories-closing-144428101.html, accessed November 2017.<\/p>\n

[5]<\/a> Carrick, Gardner and Anne Kim. \u201cShortage of Skilled Workers Threatens Manufacturing\u2019s Rebound.\u201d GE Reports, August 3, 2015. https:\/\/www.ge.com\/reports\/post\/115317859023\/a-shortage-of-skilled-workers-threatens-manufacturings-r\/, accessed November 2017.<\/p>\n

[6]<\/a> St. Martin, Greg. \u201cNortheastern to partner with GE in new federal education innovation program.\u201d News @ Northeastern, August 16, 2016. https:\/\/news.northeastern.edu\/2016\/08\/northeastern-to-partner-with-ge-in-new-federal-education-innovation-program\/, accessed November 2017.<\/p>\n","protected":false},"excerpt":{"rendered":"

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