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A desperate request for President Trump: please stop promising to bring manufacturing jobs back into the United States. While blaming America’s free trade agreements serves as an easy scapegoat, we must accept a bleak reality: automation and technological advances of the supply chain means these low-skilled labor jobs will not return. Instead, we should focus on utilizing existing economic adjustment programs that retrain these workers and integrate them back into America’s technological and service-based economy. Throughout the duration of his presidential campaign, Trump made trade a focal point.
He branded trade agreements like NAFTA and the TPP as reasons for manufacturing job loss, going so far as to say, “NAFTA is the worst trade deal maybe ever signed anywhere, but certainly every signed in this country.”
This anti-trade rhetoric resonated with a large percentage of the American population, turning out to be a deciding factor in Trump winning the Presidential election—he swept the crucial ‘rust belt’ Midwest states where a bulk of manufacturing jobs are concentrated.
It is understandable that Americans are angry about trade. Although supporters of free trade argue the benefits outweigh the negatives for consumers, firms, and workers in terms of cheaper goods, increased productivity, and overall job gains, the 5 million people who have lost their manufacturing jobs over the past two decades don’t want to hear it.
Midwest towns that once boomed as auto manufacturing centers of the country have experienced massive and widespread job loss. The increasing imports of low-cost goods from countries such as China and Mexico—where our manufacturing jobs have been outsourced—have caused permanent damage to American workers.
Trump continuously promises to rejuvenate the manufacturing industry by altering the landscape of free trade: renegotiating NAFTA, implementing tariffs on Chinese imports, and ripping up the Trans-Pacific Partnership. However, this misses the larger picture.
By most metrics, the U.S. manufacturing industry has been succeeding. Looking at the chart below, manufacturing output—measured by the total value of all goods U.S. factories produce adjusted for inflation—is at an all-time high. On the other hand, manufacturing employment has moved in the opposite direction. The increasing disparity of these two lines highlights a major hole in Trump’s promise to re-shore millions of manufacturing jobs: the changing landscape of how manufacturing facilities operate. While the golden age of manufacturing jobs has ended, the golden age of manufacturing output has just begun. It’s simple—we need less people to produce goods and services. With low-skilled labor jobs increasingly being replaced by industrial robots, jobs won’t be coming back, or at least not most of them—even if Trump wants them to.
Boston Consulting group estimates that it costs $25 an hour to employ the average car manufacturer worker. How much for a robot? Only $8. In order to produce $1 million in manufacturing output in 1980, it required 25 jobs. Today? It requires merely 5 jobs. The automated, technology-intensive production floors nowadays signal a shift in the job landscape that will be extremely difficult to reverse. In 1994 more than 3.5 million worked in the manufacturing sector compared to retail. As seen in the chart below, the relationship has switched and continues to widen. With over 80 percent of private jobs now located in the service sector, politicians such as Trump need to accept the new reality: The United States is a service-centric economy that revolves around technological innovation and automation—like it or not.
The stark decline in manufacturing employment has eliminated good-paying jobs and benefits for those without college degrees. Now is the time for politicians and policymakers to shift the focus on allowing the economy to work for the helpless victims of automation and outsourcing, involuntarily losing their jobs. That focus should revolve around bolstering and reforming a program that garners minimal media coverage: The Trade Adjustment Assistance (TAA) program administered by the Department of Labor, which provides income subsidies, job-search guidance, and transitional support to workers who have seen their jobs displaced due to foreign competition.
The current state of the TAA doesn’t serve the unemployed all that well. Multiple studies have found that a majority of workers who have lost their jobs to international trade rely on Social Security benefits instead of the retraining support offered by TAA. The TAA’s wage supplement program allows workers to receive a maximum of $10,000 a year for up to two years during a transition period of training and searching for a new, long lasting career. This is not sufficient–especially for families who rely on one income.
Compared to other industrialized countries, the United States spends significantly less on labor adjustment programs. For a country that is at the forefront of technological innovation and globalization, the United States should increase funding for these programs that are at least equivalent to our economic counterparts. Currently, the U.S. allocates .11 percent of GDP to labor market adjustment programs, while France and Germany allocate .99 and .66, respectively. It is evident more funding is necessary, especially as labor jobs continue to decline.
In addition, the umbrella of those covered by the TAA needs to expand beyond just ‘trade’ adjustment, by including those who have been impacted by automation and the new ‘gig economy.’ Increasing funding and access to the TAA will ensure that workers are retrained and moved into industries where they add value—narrowing a widening skills gap. Over the next decade, over 2 million jobs will go unfilled due to a skills shortage. America must tweak its approach to education—costly, four year degrees are not suitable for everyone. Instead, young adults without a college degree—as well as the millions of workers that have been displaced— must focus on modern, cutting-edge apprenticeships and vocational schools that quickly equip them with the necessary skills to earn a decent income for the foreseeable future.
Until the current administration, as well as the American people, get serious and accept the new reality of our job landscape, little progress will be made. What is necessary is a unified, persistent effort to assist the mass number of displaced workers adjust to a changing economy that is constantly disrupted by technology. Not even ‘the best’ trade deals will fix that.
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