Economies must adapt to technological advancement

More than a month has passed since the historic upset that took place during the US Presidential Election of Nov. 9, 2016, in which Donald Trump against all odds defeated Hillary Clinton and has become the 45th President of the United States. One major group often credited for Trump’s shock victory is the working class of America, particularly in the Rust Belt.

For some time now, millions of workers and their families have been left reeling from the collapse of commodity manufacturing employment and despondent due to no longer having a way to provide for themselves. Enter Trump, who boldly claimed to bring back manufacturing jobs from China and an assortment of other places, through rejecting the Trans-Pacific Partnership, repealing NAFTA and challenging China with tariffs and other trade barriers.

Of course, as many economists and scientists have pointed out, it isn’t that simple. For one, robots–not trade–account for an increasing number of lower-skill job losses in manufacturing, easily taking on repetitive tasks. A recent study by the Center for Business and Economic Research at Ball State University pegged productivity growth (largely automation) as the cause of 85 percent of manufacturing job losses (5.6 million in total) from 2000 to 2010.

In comparison, only 13 percent of the jobs lost were the result of trade. According to the Boston Consulting Group, it costs only $8 to use a robot to do spot welding in the auto industry, as opposed to $25 for a human worker (about thrice as much). Business employers are in it to make profits, and forcing them to pay thrice as much severely cuts into their profitability. When discussing the relative effects of automation and trade on American jobs, Lawrence Katz, a Harvard economics professor who researches labor and technological change had this to say: “Over the long haul, clearly automation’s been much more important — it’s not even close.”

In fact, manufacturing jobs have decreased nearly everywhere including China, dubbed one of the “largest losers of manufacturing jobs,” as Charles Kenny noted in his Bloomberg piece, “Why Factory Jobs Are Shrinking Everywhere.” Robots have played a role here, even in China.

According to the South China Morning Post, Foxconn Technology (a supplier for Apple and Samsung, infamous for horrific cases of workplace abuse and worker suicide) has replaced at least 60,000 workers with robots in one factory alone. It’s not as simple as bringing jobs back from China, when workers even there are being replaced by the thousand with robots.

While research conducted by the Massachusetts Institute of Technology pinpoints a quarter of the job losses from the 1990s to 2007 as a result of trade with China, other records indicate that manufacturing jobs were decreasing before China’s rise as a manufacturing superpower.

According to the Boston Report, even as U.S. manufacturing employment falls, the industry itself has only grown stronger. Output has risen by around 40 percent, whereas yearly value added by American manufacturing factories is higher than it has ever been, accounting for inflation. It was also noted that had the US manufacturing sector been a nation itself, it would be the seventh richest. So much for the oft-repeated myth that US manufacturing as a whole is under attack.

What is also often ignored is that the number of job vacancies in the United States is actually a staggering two million, a 15-year high, when it comes to high-skilled manufacturing jobs, according to the Manufacturing Institute. Few skilled workers, in spite of factory owners’ best attempts to find them (even paying more than the market wage), exist to take on these jobs.

Among the causes for these vacancies are boomers retiring, younger generations looking at the manufacturing industry in a negative light, a shortage of workers possessing STEM (science, technology, engineering and mathematics) skills and declining technical education programs in public high schools. The Wall Street Journal states that even as skill requirements have increased with modernization, education and training of workers have not.

The Manufacturing Institute also reported that 80 percent of manufacturing executives have claimed that six out of ten manufacturing job positions remain unfilled due to this skill shortage, 82 percent report a moderate or serious skills gap in skilled production and 74 percent report that the skills gap has hurt their company’s ability to expand operations.

Connecting the issues of automation and skill demand is the fact that many manufacturing companies have already returned to the US from China and elsewhere, only to bring back fewer human jobs due to having robots to take on the more repetitive and lower skill-oriented jobs.

One example is the private Michigan manufacturing company Ranir. As described in the Los Angeles Times, Ranir returned a fifth of its production of toothbrush heads from China to the United States. However, automation ensured that only four human workers would be required to perform the same work that dozens were required to do in China, so fewer jobs came back.

There are ways in which the government can address this issue. For one, the government could invest more in technical education and STEM-oriented programs in public high schools and colleges, as well as provide economic and transitional support to displaced workers.

Retraining should be provided so that lower-skilled workers can move into new careers if they choose. On the flip side, both displaced and potential workers alike should be encouraged to pursue higher-skilled positions in the manufacturing industry. In addition, workers and potential workers should be encouraged to enter trade schools or perhaps gain a technical degree.

President Obama and others have already suggested making community college (where manufacturing companies increasingly look for potential workers to fill gaps) free for all. Others have suggested primarily directing this benefit at American students who truly need the financial support, are training in skills or degrees in high demand among American employers and attend community colleges that have a relatively high retention rate (many of them apparently do not).

Community colleges and manufacturing companies have teamed up in providing personalized training to displaced or potential workers, allowing them to easily secure well-paying jobs. When 10,000 jobs were lost in the St. Louis auto industry, the St. Louis Community College trained workers in using new technologies, enabling many to acquire jobs assembling Boeing jets.

Another example would be Northeast Wisconsin Technical College’s cooperation with the North Coast Marine Manufacturing Alliance in training ship-building workers. One of the companies that was a part of the Alliance was given a contract to build ten US Navy ships, creating 1,000 new jobs in Wisconsin that may have gone elsewhere if trained workers didn’t exist to take them.

There is no question that working class Americans have suffered immensely. However, trade is not the true problem and trade protectionism not the solution. Increased productivity is what has swallowed up so many lower-skilled jobs, and increased productivity is actually a good thing for the American manufacturing industry, the American economy and the United States as a whole.

As such, attacking international trade with China may seem appealing to politicians on the left and right who care about being elected or re-elected as a simple “solution” for the problems of the working class Americans (as opposed to robots, which they conveniently never mention, and ultimately do more harm than good to that very same working class in the long run. Recent and continuing improvements in technology simply mean that the “good old days” remain in the past. The solution should be to assist displaced and potential manufacturing workers in either accepting and adapting to American manufacturing as it is today or pursuing work in a different albeit still prosperous industry. In any case, a stronger social safety net, increased access to community colleges and investments in STEM training will all do far more to help potential and/or laid-off manufacturing workers than senseless, counterfactual protectionism ever will.

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