Dieter Adam, NZMEA
We have recently talked about various Western countries positioning themselves to take industrial and manufacturing policy more seriously. It is worth further considering the future of manufacturing in relation to technology, productivity and jobs to help think about what policy moves may work, and those that may not be successful.
The biggest criticism of such industrial policies currently is that some of the rhetoric is around bringing back “jobs of the past”– this has been most obvious in the United States. But it can’t be about bringing back ‘old jobs’. In most cases, those jobs are gone for reasons that can be understood, be that in the US, or here at home.
All our industries have faced intense competitive pressure as manufacturing capability around the world increases, while at the same time as a country our productivity has lagged behind, and our companies have faced some relative cost increases, while our competitors have sought positions to better fit into supply chains, for example – commercial logic still dictates largely what jobs disappear overseas.
What this really means is we need to look hard at taking measures to improve the competitive positioning of manufacturing in New Zealand. For our Government this means creating a set of policies and conditions that help our businesses grow and adapt, while facilitating the move into new niche areas, be that by existing companies or start-ups.
Remaining globally competitive, and getting even better at it, means relentless innovation in a world where we see accelerating change in everything from consumer behaviour to product technology, methods of production and methods of doing business.
How technological change effects future production will have a big part in determining what industrial jobs in the near future will look like. We continue to see automation becoming increasingly accessible, with associated industry 4.0 technologies further adding to increases in productivity.
There have been numerous reports on this subject, attempting to estimate how technological change will impact jobs. Such estimates suggest an increase in jobs, but in different areas and with high skill levels, while others envision a decrease in job numbers.
It is too early to tell what will be the reality, but one certainty is that skill requirements will continue to change. This is an area where government as the owner and manager of most of our education and training infrastructure has to take a leadership role.
The second part of this discussion, is what businesses are doing themselves to stay competitive and remaining manufacturing and providing jobs in New Zealand. Since the GFC, our manufacturers have gone through a particular tough set of circumstances: slow global demand for many products, and a period of considerable overvaluation of our currency – our manufacturers have had to become leaner and adjust business models to survive – relentless innovation. That is not going to change, and the industry is facing some structural challenges beyond our overvalued dollar. Lack of scale is one of them.
In one sense smaller manufacturers are more nimble and able to change quickly, but innovation is a resource-hungry activity and SMEs often struggle to get things changed on top of dealing with every-day challenges. The age structure in our manufacturing leadership, combined with and sometimes insufficient succession planning, is another factor we cannot ignore.
Having said all that, there remains the important factor in manufacturing of an ecosystem of capability and supply chains. While supply chains are more global than they have ever been, local supply chains remain vital to the success of manufacturing. This means that we need to maintain a solid base of diversified manufacturing capability capacity in New Zealand.
Without that, it will be nearly impossible to grow other forms of advanced manufacturing and production in the future that we need to create well paid jobs and earn export income.