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What Japan Can Teach Us About the 'Rust Belt Revolt'

After talking with my friend Harry Spence about the election the other day, it occurred to me that you might be as interested as I was in what he had to say.  Spence, an attorney who has never practiced law, is the most accomplished public administrator I have ever met: He earned national recognition as receiver of the Boston Housing Authority and then the City of Chelsea near Boston, Deputy Chancellor of the New York City Schools under Rudy Crew and Commissioner of the Massachusetts Department of Social Services. Most recently, Spence was asked by the state's Supreme Court to become the first Court Administrator of the newly reorganized Massachusetts court system.   

Early in our conversation about the election, I observed that the great divide was along education lines.  Though there was certainly support for the President-Elect from people with a college education, the core of his support came from the people in the middle, not the poorest Americans, but those with just a high school education or some college. This, as the record now shows, was a number large enough to swing the whole election. Was this vote the result of the economic insecurity resulting from globalization? 

To which Spence replied that what had happened to many American workers as globalization accelerated was not inevitable.  Consider, he said, Japan.  Like the United States, Japan's economy was heavily dependent on manufacturing back in—let's say‐the 1980s. But they responded to the same global economic context very differently.

As China became a global magnet for manufacturing because of the low price of its labor, American manufacturers outsourced more and more manufacturing work to China.  In many cases, all that was left in the United States was research and development, marketing and sales.  It was in this way that many American manufacturing firms were hollowed out.  The nameplate was American.  Investors did well, management kept their jobs, but millions of workers lost theirs.

But, Spence points out, the story was different in Japan.  Some of us from NCEE saw that difference first hand, when we visited Toyota City in 1989.  On American assembly lines, workers painted car bodies, lifted car doors up and fit each one to its car body by hand, shaving the metal here and there until it fit the opening, and put the components in one by one as the car wended its way down the assembly line.  Workers swarmed over the car from the beginning of the line to the end. Each worker did just one task, and almost all the tasks required very little education or training and often only modest skill.

What we saw on the Japanese lines in 1989 was very different.  The line started with giant rolls of sheet steel being fed automatically into machines four stories high that forced the sheet steel into molds.  Robots lifted the molded steel in the shape of parts of fenders, doors, hoods and trunk lids and put them on another line on which robots welded them together.  These finished parts were then loaded by robots onto another line, where they were painted by robots.  And so it went, with most of the hard physical work being done by robots that did the work to a higher quality standard by far than the standard achieved on American automobile assembly lines.

There were humans on the Japanese lines, but the Japanese workers were mostly minding the robots and maintaining them.  They were trained to do each other's jobs and operated as a team.  The work required much higher skill levels than the American assembly line required and there were fewer workers.  When we inquired further, we discovered that the whole system worked because the Japanese auto companies were hiring workers from the vocational programs in their high schools, many of whom had a good grasp of calculus, statistics and probability.  They had a strong enough command of physics, electronics and mechanics to read and understand textbooks in electro-mechanics set to a reading level typically found in university engineering textbooks in the United States, far above the level usually found in American high school texts.

This enormous difference between the capabilities of high school graduates in the United States and Japan had made it possible for Japanese manufacturing firms to leap forward to a whole new and vastly more efficient strategy not just for manufacturing cars but many other things as well.  They were able to compete with the Chinese on quality rather than price.  They needed fewer, but much better educated workers to do that, and could pay them much more than we could pay ours.  It turns out that American manufacturing moved to China not just because Chinese labor was cheaper but because that cheap labor could do everything the much more expensive American workers could.  Because that was not true of Japanese workers, because the Japanese workers were much better educated and more highly skilled, Japanese companies could move on to advanced forms of manufacturing that made Japanese manufacturing workers much more competitive than their American counterparts.  So manufacturing jobs stayed in Japan while they were leaving the United States for China.

The advantage that the Japanese gained from having a high school education vastly superior to that of the United States did not end there.  The robots that the Japanese auto companies used were made in Japan, which gave Japan an enormous lead in what has turned out to be a crucially important field as more and more work is automated.  The point is most vividly made in China, which is now importing literally millions of robots from Japan that will replace Chinese manufacturing workers.  That will create jobs for Japanese robot makers while at the same time destroying Chinese jobs.

Spence's argument is simple.  If, in the 1970s and 80s, the United States had put the same effort into raising the standards of its schools and its expectations for students that Japan did, the outcome for the American workers in the Rust Belt who lost their jobs and often the dignity that comes with a good job at the turn of the century would have been very different.  The desperation of millions of American workers might well have been replaced by the solid satisfaction of rising incomes and real pride in their contribution to their country and community.  Japan is not unique.  We see the same story in Hong Kong and Singapore, as the leaders of both city-states let go of low-skill, low-value-added manufacturing and replaced it with high-skill, high-value-added industries, working night and day to raise education and skill levels as they did so. With few exceptions, the United States failed to follow suit.

But Spence's tale does not stop there.  As the new century gathered steam, better-educated Americans increasingly got the message that education would be more and more important to their future in every way.  Indeed, they got the larger message that there would be much less job security in the future than there had been in the past, that technological change, especially advances in artificial intelligence, natural language processing, neural networks and robotics would create an environment in which only the best-educated and most highly trained could be sure of making it.  The demand among the children of privilege for a university education and the press to get into the best schools and universities exploded. 

But no one, Spence points out, explained any of these dynamics to those with the least education, those who, in increasing numbers, would be put out of work by advancing automation.  No one explained that the education that enabled them and their parents to lead the good middle class life would now guarantee them and their children nothing. They still don't believe, Spence said, that their children have to work harder and smarter in school to be part of the 21st century economy and compete with driven Chinese and Indian children. They still don't understand that the major function of high school cannot be winning football games if their children are to flourish economically. They still think that if the major trade treaties could be revoked, illegal immigrants sent home and the borders closed, they could get their old jobs back.  They were not told by either candidate—even during a bruising Presidential campaign that was ostensibly about this very topic—that the old jobs are never coming back and there will be no jobs for them unless they have much more education and much better training.  Imagine how blindsided and abandoned Trump's supporters will feel when the trucks, buses and limos they have been making a living driving no longer need human drivers.

It is as if the better-educated Americans are running scared and the less-well-educated Americans are running angry.  The better-educated, those who understand the kind of competition they are up against, are not only eager to get as much education and training as possible, but they are working harder than ever, Spence observes.  They know that their competitors all over the globe are very, very good and are willing to work very hard, and so they do, too.  But American manufacturing workers, who are now working as many hours as before, but often at much lower pay, if they can get a full week's work at all, are just angry. 

But running angry is not going to help.  Raising the price of low-skill labor by raising the minimum wage, or forcing companies to offer more full time jobs with benefits and reduce their use of contingent labor will simply increase employers' incentives to purchase robots and other devices powered by artificial intelligence, natural language processing and the cloud to replace human workers.

The point, as Spence—and I—see it, is that Japan had it right.  There is an alternative to  the social and political costs associated with massive job loss to outsourcing and automation.  If we want to avoid more rage and division in America, everyone is going to have to work hard and get as much education and training as possible.  

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