I was sceptical about various futurists' predictions that the services economy would increasingly become prevalent over the industrial economy, especially in the west, since as far back as 1979 when I first heard about it from a fellow university student.
As it has turned out of course, over the intervening years this has been the case especially in the advanced industrial countries of the west, as well as some of the developed countries and regions in the east, such as Japan, South Korea, Taiwan, Hong Kong, Singapore and Malaysia, and it's also so in advanced, resource and agriculturally-rich countries such as Australia and New Zealand, booth of which never had any major domestic manufacturing industries to speak of anyway, besides domestically-based, foreign-owned automotive, home appliance and other assembly plants, plus some domestic plants producing chemicals and parts such as pipes and materials used by the agricultural, resource extraction and construction industries.
As for the past trend where major employment had shifted from the agricultural (farming) to the manufacturing sector due to the growth of large farms where mechanised farming methods had replaced the need for a large number of human workers, as well as the preference amongst agricultural workers for industrial jobs - were much cited by these futurists as the basis of their predictions that a similar trend was taking place from manufacturing to information and services jobs, especially in the advanced countries of the west; however what these futurists did not mention is that this trend observed especially in North America and Western Europe especially after World War II, was largely due to manufacturers in the west moving their more labour intensive manufacturing operations out to lower wage countries such as Japan, South Korea, Taiwan, Singapore, Malaysia, Thailand, Philippines, Indonesia and after the end of the Cold War, to China and Vietnam, all of which were recipients of these "sunset industries" which were being moved out of the west to take advantage of cheap labour in these Asian countries.
Where these "sunset industries" moved to, there was an economic sunrise, as people who worked, even in sweatshops earned a higher income and more spending power, which in turn fueled their respective domestic economies, and some of these countries, notably Japan, South Korea, Taiwan and today China learned the technologies which came in along with the industries and developed their own home grown technologies to the extent that they became developed, advanced economies themselves which competed with the west and likewise, labour and cost of land rentals became expensive, sometimes even more expensive than in the west, and they too began to shift their labour-intensive operations ("sunset industries") to neighbouring lower wage countries, thus adding to their economic "sunrise".
Whilst countries like Malaysia and Singapore did not develop their domestic manufacturing industries to the extent that they could compete head on with the advanced countries in the west and in Asia, however wages and standards of living, as well as costs did rise to the extent that especially multinational companies also began to move their labour-intensive manufacturing facilities, such as of computer hard disks, semiconductors, cigarettes, fast-moving consumer goods and so forth out to neighbouring countries such as Thailand, Indonesia, China, Vietnam and so forth where labour is still relatively cheap and costs lower.
It was this concern, that prompted Malaysia to embark on developing its own information and communications technology industries, especially in multimedia and content creation, as well as the hosting in Cyberjaya of outsourced and shared services, such as centralised internal administrative functions such as order processing, invoicing, payments, accounting, human resource management and so forth serving either nationally-based subsidiaries of the whole enterprise worldwide or its subsidiaries across countries of a region such as the Asia Pacific. Some examples of these include HSBC and Standard Chartered, as well as Jabil's Global Business Center at Mayang Mall in Penang and others. Also, Malaysia sought to attract multinationals to base their regional or global customer service centre, or global managed services centres in Cyberjaya or other parts of Malaysia. Besides that, major call centres also set up operations in Malaysia.
For example:-
Global Business Center (GBC) affirms Jabil's commitment to Penang
Penang, Malaysia – October 25, 2018 - Jabil Inc. (NYSE: JBL) today officially opened its Global Business Center (GBC) in Penang's GBS@Mayang, after relocating from Bayan Lepas Industrial Park earlier this year. The center marks a milestone for Jabil's growth, which has continued to expand operations in Penang since 1995.
The Jabil GBC started with just 200 employees and has since made a home in Penang employing approximately 950 professionals. Today, Jabil's GBC – combining the company's global information technology, supply chain management, centralized procurement, and finance global business solutions functions - supports over 180,000 Jabil employees around the world. It is one of the largest shared services centers in Penang. Jabil will occupy two floors measuring 72,700+ square feet, with the capacity to accommodate an additional 1,100 people as needed.
Gary Cantrell, Jabil's senior vice president and CIO, said, "We are proud of Jabil's journey in Penang. This new space brings our shared services team under one roof, while fostering better employee interaction, collaboration, and innovation. We continue to invest in technology to drive solutions for our internal and external customers. Furthermore, our new office will provide better infrastructure and accessibility with its centralized location within the Bayan Baru district."
Shared services will be driven by new technologies such as predictive analytics and big data to enable faster and more accurate decision support. And, Penang's highly skilled workforce and conducive ecosystem will allow Jabil to scale over time.
Cantrell was on-hand to formally open the GBC at GBS@Mayang, in the presence of Yang Berhormat Zairil Khir Johari, Penang State Executive Councillor for Public Works, Utilities & Flood Mitigation, representatives from the Penang Development Corporation and investPenang, as well as additional executives from Jabil.
YB Zairil said, "Jabil's move to GBS@Mayang is an acknowledgment of Penang's capabilities in providing first-class infrastructure, skilled manpower, and value-added services. It also reaffirms their continued commitment to Penang. We are pleased to be a part of Jabil's growth journey."
The Florida-headquartered Jabil provides design, engineering manufacturing and supply chain solutions for a wide range of industries including automotive, aerospace, defense, healthcare, telecommunications, computing and others and most of its facilities in Penang are involved in the design and production of circuits and solutions for these industries. The company had recently expended its operations into a plant on 20 acres in the Batu Kawan Industrial Park in mainland Penang, so R&D and production is still Jabil's main business in Penang.
Also, large computer-based graphic design and video post production have set up shop in Malaysia to take advantage of lower skilled labour costs than for similar skilled work in the west, and some of these offshore production centres, including U.S. owned ones, have contributed major parts of big-name Hollywood films which have graced our cinemas in recent years.
Many of the above operations are pretty labour-intensive and are said to "provide mass employment in the information age". However, the question remains as to whether they can provide enough mass employment to replace the jobs lost from the assembly and manufacturing plants which have and are moving out of Malaysia.
As I had written in my earlier posts, most of the production floor workers in the National Semiconductor integrated circuit assembly plant in the Senawang Industrial Park where I got my first job back in 1980, had an SPM (Malaysian Certificate of Education, Form 5) qualification or lower such as SRP (Lower Certificate of Education), whilst most line supervisors has an STPM (Higher Certificate of Education, Form 6) qualification.
When I watched the presentation about Malaysia's Multimedia Super Corridor (MSC Malaysia) initiative by Multimedia Development Corporation's (MDeC's) first Chief Executive Officer, the late Tan Sri Dr. Othman Yeop Abdullah at a Malaysian National Computer Confederation (MNCC) Annual General Meeting back in the 1990s, where he spoke about how the information and services jobs created by the MSC Malaysia initiative would replace those industrial jobs lost, I wondered whether most my former colleagues in that National Semiconductor plant would be able to upgrade their skills to participate in Malaysia's digital economy.
Perhaps my fears were mostly unfounded, since almost all the production floor workers were young women in their late teens and early 20s in 1980, who by the time of Tan Sri Othman's presentation would be approaching their 40s and would mostly be married with children by then and would most likely have left long their production plant jobs but then could their younger replacements upgrade their skills to work in Malaysia's digital economy. Tan Sri Othman did not have an answer to my question.
Meanwhile, that National Semiconductor plant in Senawang closed down around the time of the economic downturn in the late 1980s. By then, I had long moved on and was happily working as a computer service engineer.
Also, MDeC has since been renamed the Malaysia Digital Economy Corporation.
However, more recently, Western Digital closed and sold off its hard disk production factory in Petaling Jaya at the end of 2019, whilst its service centre is now in Singapore.
"After over 20 years in operation, Western Digital Corporation announced that it will be shutting down its HDD (hard disk drive) manufacturing facility in Petaling Jaya, Selangor, by the end of 2019."
Also, Seagate closed down and sold off its hard disk production plants in Penang and in Negeri Sembilan in early 2017 and moved some of its operations to Thailand. However Seagate has maintained its plant in Senai, Johor.
"US-based disk storage solutions firm Seagate Technology Plc, which is in the process of shutting down its manufacturing facilities on Penang Island and in Negeri Sembilan, is hoping to dispose of them for a total of RM130 million."
"The closure of the plants is in line with Seagate's global restructuring strategy, which includes relocating some of its Malaysian operations to Korat, Thailand. It was previously reported that Seagate was winding up its operations in Penang and Negeri Sembilan owing to weak demand."
"However, Seagate will continue to operate its facility in Senai, Johor."
Also, recent reports have said that several remaining semiconductor production plants in Penang have downsized and have laid off some of their workers.
When I visited Intel's research and development plant in Penang in 2013, I learned that whilst it was increasing its research and development operations in Penang, however it was gradually moving its production and test operations out of Malaysia.
On 22 April 2016, The Star reported that Intel had already moved its manufacturing operations of "mature products for the desktop PC market" to its facilities in Ho Chi Minh City, Vietnam and Chengdu in China.
Intel's design and development facilities employ mostly engineers and scientists with degrees in electronics, electrical and chemistry, whilst manufacturing and assembly plants mostly employ people with more intermediate skill levels such as SPM, STPM, certificate or diploma and whilst in an ideal world, everyone can even qualify with a PhD but in reality people's academic abilities tend to be concentrated mostly around intermediate levels, so it's unrealistic to imagine that everyone can obtain a science or engineering degree to be able to work in these higher skilled jobs.
Besides that, an oversupply of university graduates is evident in about 50% of university graduates being unemployed, according to the Ministry of Higher Education, and amongst them, 60% of ICT graduates are unemployed or underemployed.
Well now we read of and hear reports of a number of engineering graduates with honours degrees having to find work delivering food for services such as Foodpanda or Grab Food, driving e-hailing taxis such as Grab, working as home and office cleaners, opening small businesses selling drinks and so forth just to make a living.
I suppose the nett loss of productive facilities which provide mass employment are amongst some of the reasons why the Penang and Selangor state governments have allowed rampant property development projects, despite there already being an excess of available properties in the market, whilst the government has lowered the minimum property price for foreign buyers down to RM600,000 per property. Perhaps, state governments and local authorities hope to collect quit rent and assessment from the owners of these properties.
I suppose school levers and unemployed graduates can find work as real estate agents, though since their income is mostly based upon commissions from property sales made, if they can't sell a property, they get no income.
Perhaps more Malaysians will become. sales promoters, unit trust consultants, insurance agents, telemarketers and so forth and we can earn an income selling unit trusts, insurance policies and so forth to each other.
And let's not forget the oldest services industry - i.e. prostitution. The government should consider legalising, regulating prostitution and health-certifying prostitutes as Malaysia increasingly becomes and information and services economy. ;)
This way, Malaysians can continue to afford to by a whole lot of consumer goods, such as smartphones produced by productive industries in neighbouring countries to which these "sunset industries" have moved.
Meanwhile, an article by Helen Buyniski in Russia Today of 13 February 2020 points out that the success of services industries, such as those in the U.S. mostly depend upon the disposal income of citizens to be able to purchase these various services and wages in the U.S. have been stagnant in the past 50 years, whilst cost of living has been increasing and an increasing number of employment in the U.S. is in gog economy jobs and when 78% of American workers are living from paycheque to paycheque, they do not have the disposable income to make purchases, which support services industries, which will eventually collapse.
I have listed some key excerpts from Helen's article below:_
"a 2019 survey found 78 percent of American workers were living paycheck-to-paycheck , and similar scary figures have graced financial headlines for years."
"It's common knowledge that as cost of living has increased in the last half-century, American wages have stagnated. But the reality is actually getting worse - since 2006, median wages have actually declined 9 percent when adjusted for inflation, according to the PayScale Index ."
"While Trump may praise the country's swelling employment numbers to the sky, many of those are gig-economy positions that offer no benefits or real job security and don't come close to replacing the long-term career-oriented jobs wiped out in the financial crash of 2008."
Well, Malaysia is heading towards that dystopian future too, whatever Tun Dr. Mahathir, Lim Guan Eng or Azmin Ali may say.
The full Russia Today article follows below:_
Almost a THIRD of US workers can't live on their paychecks, spelling doom for a service economy based on discretionary spending
Helen Buyniski - is an American journalist and political commentator at RT. Follow her on Twitter @velocirapture23
Almost one in three American workers can't quite make ends meet in between paydays, a new survey has revealed. This doesn't bode well for the US' service economy, where discretionary spending is the major driver of growth.
Some 32 percent of US workers are unable to stretch their salaries to cover their needs, according to a survey published on Tuesday by Salary Finance. Nor is this inability to make one's paycheck last limited to poor and working-class individuals - the poll queried over 2,700 adults working for medium- to large-sized companies about their finances and found that even among those making over $200,000 annually, 32 percent "always" or "most of the time" ran out of cash before payday.
Certainly, the insufficient-funds problem is more severe for those making under $15,000 per year - fully 40 percent, or two in five, are unable to make ends meet on that salary. But no matter how high up the pay scale one goes, the problem stubbornly refuses to vanish.
When "living paycheck to paycheck" - once the hallmark of the stressed-out working poor - becomes an aspirational goal, it's clear the US economy is in trouble. But this isn't a bolt out of the blue: a 2019 survey found 78 percent of American workers were living paycheck-to-paycheck , and similar scary figures have graced financial headlines for years.
How, then, might Americans square the slow collapse into poverty they see in themselves and their neighbors with the vision of golden prosperity laid out by President Donald Trump at the State of the Union earlier this month, bolstered by facts and figures that surely no one could refute? It's common knowledge that as cost of living has increased in the last half-century, American wages have stagnated. But the reality is actually getting worse - since 2006, median wages have actually declined 9 percent when adjusted for inflation, according to the PayScale Index . While Trump may praise the country's swelling employment numbers to the sky, many of those are gig-economy positions that offer no benefits or real job security and don't come close to replacing the long-term career-oriented jobs wiped out in the financial crash of 2008.
Also on rt.com That's a bit rich: Biden says paycheck doesn't matter, jobs are 'about dignity'
At the same time as workers make hardly more (or even less) than they did 40 years ago, average consumer prices keep on creeping up, increasing 2.3 percent in the last year alone, according to the Bureau of Labor Statistics Healthcare costs increased by more than twice that rate. But Americans keep consuming at the same rate they have all their lives, accustomed to a certain standard of living. Shopping is second-nature to those raised in the service economy of the post-NAFTA years, taught to express themselves in their purchases. It is this cultivated need to consume as a core function of their humanity that has kept that economy alive, fed on discretionary dollars. This is not irresponsible or frivolous spending, either - a nation of perpetual customers who can be counted on to spend their surplus income on products they don't necessarily need but have been told they want and deserve has been absolutely critical to keeping the economic engines running.
And when those customers run out of surplus income? They're already out, for one thing - nearly half (48 percent) of respondents to the Salary Finance survey admitted they don't have any money set aside, even for emergencies. Consumer credit card debt hit a record $930 billion earlier this week, dwarfing the numbers seen during the 2008 crisis. Even before taking into account student debt - a crisis in itself - and mortgage debt approaching 2008 levels, the American consumer, once liberated by the ability to buy anything they wanted, is now weighed down by the hangover from a decade-long shopping spree.
This is uncharted territory. The only certainty is that business as usual - debt bubbles swollen beyond absurdity while the supposed adults in the room are literally swimming in too much money to care - can't last forever.
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No. This can't last forever and when there is such a huge property overhang, I suppose real estate agents can sell these properties to ghosts who will pay for them with Hell Money.
A couple or so years back, someone bought three dilapidated bungalows down the road from where I live, I understand for RM1 million each. They were torn down and rebuilt into three identical, modernist looking bungalows complete with a swimming pool in the front yard each and I understand their new owner is asking for over RM2 million each.
Well, they still stand unsold, with real estate agents' posters on the front gate until today.
A predominance of speculative (such as real estate), services and information industries over productive, real wealth-generating industries is a sign of an economy in decline.
Despite whatever rubbish various paperback writers, economic, business and management CON-sultants have told us, reality testifies that the economic sun sets where "sunset industries" move out from, leaving behind "sunrise industries", whilst the economic sun rises where "sunset industries" move to, such as Thailand, Vietnam, Indonesia, China and so forth.
Meanwhile, Star Media Group should be releasing its fourth financial quarterly report 2019 (Q4 2019) sometime in the last week of February 2020. It will be interesting to see if it manages to buck the series of consecutive quarterly declines in quarterly revenue and nett profit, or will it manage to make a turnaround.
Like many other media companies worldwide, Star Media Group has been adversely impacted by a commonly observed trend where despite having an online and digital platform presence in addition to its print edition, however print advertising revenue has been observed to provide the bulk of a publication's advertising revenue but at the same time has been dropping between 8 and 10 times as online and digital advertising revenue has been increasing and moreover, for most publications worldwide, online and digital advertising revenue comprises around 10% of total advertising revenue.
Once a publication goes online and/or digital, it faces competition for advertising from the likes of Google and Facbook, as can be seen in the chart below and both Google and Facebook can customise advertisements relevant to the country the viewer is in to appear based upon their IP (Internet Protocol) address detected and moreover most Internet users, including myself are annoyed by such advertisements popping up and obstructing our reading or viewing experience and many of us install ad-blockers to try and block them or just close them and get on with our reading or watching.
As for online or digital only publications, including the many alternative publications in Malaysia, for most of them, their advertising revenue is not enough to sustain their continued operations and many are propped up by un-named financiers behind the scenes - i.e. sugar daddies who keep them afloat for personal reasons or to serve their respective political agendas, whilst others struggle to survive through paid editorial deals.
Given the above media scenario, I would never advise a young school leaver to embark on a career in journalism in the hope that it will remain a viable paying career, since they could be out of work in their mid forties when they are lumbered with the burdens of a wife and of having to pay for their children's schooling, of having to pay off their car and housing loans.
Instead, aspiring writers will require a main source of income from another job, profession or business, whilst they write for free in their free time.
With few exceptions, this is the future of journalism as I see it. Thankfully, I'm an old fart enjoying my semi-retirement.
In his book, Capitalism, Socialism and Democracy, Joseph Schumpeter spoke about Creative Destruction, in which he proposed that companies need to "reinvent themselves" or upgrade their operations and workflows with new technologies, but in the case of media, the creative has proven to have been unable to make up for the destruction.
I started this blog IT.Scheiss in March 2012 to refute the nonsense about online and digital platforms being "The future of journalism" by opportunistic, self-styled, new media CON-sultants. Besides such refutations, I have also expanded IT.Scheiss to refute other nonsense peddled by Internet idealists, tech-marketers, opportunistic futuristics, authors and seminar speakers who earn fees from attendees who pay to listen to their "gems of wisdom".
Welcome to the information and services economy and the dystopian future for most which lies ahead.
Yours most truly
IT.SCHEISS
