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Where the Jobs Are(n’t)

It's time again for that discussion. Which discussion, you ask? I am talking about the discussion regarding the onward march of technology, automation and job creation and destruction. If international observers are mystified by President Trump, know you are in good company because he also mystifies many Americans. But he represents a trend that is not just American as seen by the Brexit vote and similar "national interest first" thinking in other parts of Europe and the world. 

A large concern in America is the perceived decline of manufacturing in the USA. An article last month in Mechanical Engineering magazine "The State of American Manufacturing 2018" brings up some complicated issues that got me thinking.

So, let's start at the beginning.  

Back in 2013 I also wrote this article Are Technology and Automation Really Destroying Jobs? There I discuss the start of the "anti-automation movement" often credited to the Luddites. In that article I have this link from Mechanical Engineering 2012: 
Interesting, but if automation explained 2012's high unemployment, then what explains today's low unemployment? Automation has only increased over the last six years.

Last year I wrote this after Trump was inaugurated: America's Wacky New President...and Technology. President Trump seems to spend a lot of time shooting himself in the foot (an American expression meaning someone whose actions inadvertently end up hurting themselves). One thing he has been consistent on is his intention to protect American jobs and (re)negotiate foreign trade deals that better favor American workers. This came up at the G-7 Summit in Canada a few days ago. 

When Americans talk about the decline of American manufacturing, they mean the decline in manufacturing jobs. Because American manufacturing has not declined but is very strong. But the loss of jobs (one-third of them over the last 20 years) is real.

The main point of contention typically comes down to the cause of the decline in jobs. Is the decline in jobs due primarily to lower cost manufacturing (in Asia and Mexico)? Or is it due to improved automation? Or other?

Here were the highlights of the "The State of American Manufacturing 2018" article that got me thinking
  • One American researcher (Michael Hicks of the Center for Business and Economic Research or CBER) says automation is responsible for 88% of all manufacturing job losses
  • A different researcher (Robert Atkinson of the Information Technology and Innovative Foundation or ITIF) says the metrics used by CBER in the 88% claim are flawed and based on computer chip processing speeds and not units sold
  • It appears that most of the growth in manufacturing output has happened in computers, pharmaceuticals and medical devices – other industries totaled together have been flat 
  • Some of the job loss data is misleading because many manufacturers have grown the service side of their business using technologies like digital sensors and wireless technology – this does not count for manufacturing jobs but is directly related to it
  • Many manufacturing companies have outsourced jobs from engineering design to cafeteria services – so these do not show up in manufacturing job totals whereas in the past they did
  • There had been a genuine decline in manufacturing jobs for those without a college degree – today's "blue collar" jobs more and more require computer savvy to oversee automated processes – relative pay has declined

Mixed in with all the wacky behavior and frequent misdiagnosis (in my opinion) of the problem, President Trump does have some valid points regarding international trade. One of these is a case discussed in the article. Atkinson of the ITIF says that China subsidized their domestic solar panel industry, illegally copied American technology, drove American manufacturers out of business, then bought the American solar panel manufacturers at a discounted price. Through this process they increased their market share from 5% to 70%. This disturbs me and stories like this help fuel American skepticism about international trade (especially with China) and support for President Trump's protectionist policies.

Below is a summary of where I land in all of this. I think:
  1. Protectionism will cause much more harm than good
  2. America should focus much more on first level education and retraining of senior laborers to support automated manufacturing
  3. American government and industry need to create a better partnership and take some lessons from countries such as Germany
  4. Innovation is something America does better than any other country and that needs to continue to be our focus
  5. We do need to pay attention to trade disputes like what happened with solar panels and, if proven true, take more action

President Trump understands #5. He does not seem to understand #1. I think he partially understands #2-4.

What do you think?

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Tuesday, 28 March 2023
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