A bit off-topic today, perhaps, but a good time to get real about manufacturing, trade and the jobs impact in view of today’s political rhetoric. So please bear with me…
As specialists in manufacturing and suppliers of advice and solutions to manufacturing firms for nearly three decades now, it’s clear that the very topic of manufacturing is near and dear to our hearts. And so it is fitting perhaps that we comment on the current state of manufacturing and trade as we approach the peak of this ‘silly season’ of politics. Because as silly as the posturing and as intemperate the rhetoric, it’s good to be reminded that we have real problems, requiring anything but simple solutions. But there are potential solutions out there – not all easy – but very much worth discussing.
We are reminded of this in a recent article from The Economist (“Open Argument,” 4-2-16) that discusses the nuances of trade and job losses, and what more might be done both to balance trade overall with its inevitable displacements and job losses.
Free trade has been producing winners and losers since before the U.S. Civil War. Back then of course, it was more agricultural losses than industrial, but these were employment losses just the same. Talk of embargoes and tariffs were common in prior centuries, and supposed bulwarks against the damaging effect on jobs due to imports from lower-cost producers.
Even today, Economist editors point out that in any given month, we gain and lose about 5 million jobs through the ebb and flow of the marketplace. Jobs are lost in aging industrial sectors, and gained in new ones (though not always in equal or equal-paying measure).
Indeed, in roughly the first decade of this new century, America lost about 6 million jobs net just in manufacturing alone. And as The Boss once sang: “Them jobs are goin’ boys, and they ain’t comin’ back.” Well over a million of those displaced in manufacturing simply sought unemployment or left the workforce permanently. And so it is that today, nearly 5% of working age Americans receives some form of disability, largely as a substitute for those previous jobs and wages. That’s one in every twenty job-eligible Americans.
The loss of those jobs is being hotly debated in our politics today. A lot of the rhetoric has turned ugly, with talk of walling out immigrants and constructing barriers to trade among nations because the results appear to have been so devastating here at home. Nearly all sides are poised to back away from any sense of cooperation (or capitulation?) to the nobler aims of global free trade. This is despite the fact that freer trade was one of the key engines of prosperity in the decades after World War II.
The latest research makes clear, according to Economist editors, that American losses from free trade are both more concentrated and longer-lasting than had been assumed. Mostly, this reflects the speed of China’s rise, as its share of world exports soared from 2% to 19% in two decades (1991-2013), much of it at the expense of the American economy and factory worker. And as it turns out, workers are far less willing to relocate – as they would in the past –to newer jobs when the old ones were displaced, as they always have been by the march of progress or by the dislodging effects of economic competition.
Part of this is explained by the rise in home ownership, making a move for a new job less practical and more costly. Add to that the rise in two-earner families, and relocation becomes yet more problematical. People end up more anchored in place to declining areas and often priced out of vibrant new ones. Free trade can indeed impose big costs on a few places.
Meanwhile, cheap imports from the rise of China and the East, while displacing jobs, simultaneously improved the average American consumer’s buying power, while China saw its middle (and lower) classes experience a large rise in their own spending power from the inflows. These in turn improved the fortunes of exporters to the Chinese market (think Apple and BMW, luxury goods makers and tech providers), thus creating a boomerang-win effect – but only to certain sectors.
So while in the short run, there have been winners and losers to be sure, trade remains one of the key global stimuli to improving fortunes everywhere.
But the question remains: what to do about all those displaced workers?
In our next and concluding post, we’ll put forth a couple ideas. Stay tuned…