Dell: U.S. job growth is in services, not manufacturing

Brookings report details manufacturing losses

WASHINGTON -- Michael Dell, the chairman of the company that bears his name, does not see manufacturing as a big job creator for the U.S. To him, job growth will be in services and adoption of new technologies.

"Manufacturing is not very labor-intensive, and it's getting less and less so," said Dell, at a forum Tuesday sponsored by the Technology CEO Council, which he heads. "You go into one of our large factories today and you don't see large numbers of people."

This has not stopped Dell from growing. Four years ago, Dell employed about 70,000 people and today it has 110,000, with about half of its workers in the U.S., Dell said. Some of that growth came from Dell's acquisition of Perot Systems in 2009, which employed about 23,000. About half of the company's business is outside the U.S.

"If you're looking for manufacturing to be the engine of job growth -- right idea, wrong century," Dell said. "I think the job growth is going to be in services; it's going to be in technology."

The overall trajectory of U.S. manufacturing has been grim, according to a February report by The Brookings Institution. The U.S. lost 41% of its manufacturing jobs from June 1979, when manufacturing employment peaked, to the end of 2009, the report said.

But since 2009 through September of last year, manufacturing jobs have increased by 2.6%. At this rate of job growth, "it would take until 2037 for the nation to regain all the manufacturing jobs it lost between January 2000 and December 2009," the Brookings report said.

Manufacturing is important because it "is essential for innovation in the service sector," the report states. Manufacturing firms are "far more likely" than non-manufacturing firms to introduce new products. The exception is in IT-intensive industries, which invest heavily in R&D, including software, telecommunications and other computer-related categories, the report said.

Dell said he expects to see significant job growth in companies that effectively use new technologies. The council is calling for reforms to encourage this, especially for start-up companies.

Earlier this year, President Barack Obama pitched his own ideas for increasing U.S. manufacturing. The administration said the U.S. has added 300,000 manufacturing jobs since 2009, partly due to companies that are returning jobs to the U.S that were being performed abroad. The administration wants some specific tax reform and job training measures to encourage the trend.

In 2000, tech manufacturing employed 1.8 million people in the U.S., but that number had fallen to 1.27 million by June of last year, according to the TechAmerica Foundation's annual Cyberstates Report. Tech manufacturing is shrinking thanks in part to automation.

IBM fits that model as both a manufacturing and software development company, with approximately $6 billion in annual R&D spending, and is the U.S. leader in the number of annual patents, with more than 6,000 last year alone. But IBM has also been something of a paradox by cutting its U.S. workforce while expanding overseas.

Sam Palmisano, who recently stepped down as IBM CEO and continues as its chairman, argued at the forum that job growth, in part, will come through the supply chain by large companies helping smaller ones. He said that "there is a lot of motivation" for his company to help smaller companies become successful, which he characterized as a symbiotic relationship.

"We want them to be better because we're more competitive if they are," said Palmisano, explaining that IBM can assist by helping smaller companies scale around the world.

"I just would encourage everyone to look at the system as a whole, and not as a piece," he said.

Patrick Thibodeau covers cloud computing and enterprise applications, outsourcing, government IT policies, data centers and IT workforce issues for Computerworld. Follow Patrick on Twitter at @DCgov or subscribe to Patrick's RSS feed . His email address is pthibodeau@computerworld.com.

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