“Foreign nations will be worried about losing their jobs to America,” former president Donald Trump declared at a rally in Savannah, Ga., last month, promising a “manufacturing renaissance” by walling off U.S. markets with high tariffs and punishing American companies that make stuff overseas.
By the Editorial Board
The idea that a bunch of countries (or one big Asian country, China) are hoarding industrial jobs that rightfully belong to the United States rests on a misunderstanding of the dynamics shaping manufacturing around the globe. The United States did not lose jobs primarily to countries with cheaper labor. It lost them, mostly, to technology.
Much has been made about the “China shock” in the decade after the Asian giant joined the World Trade Organization in 2001, which devastated communities in the South that relied on manufacturing of textiles, furniture and other low-value-added goods. One research paper estimated that nearly 1 million manufacturing jobs were lost to China over those 10 years. The loss, however, was a small share of the 5.8 million manufacturing jobs lost nationally over the period. Over the long term, in fact, it’s hard to detect the effect of the China shock against the long-term erosion of manufacturing’s share of total employment.
The more important trend visible in the “China shock” decade is this: Even as manufacturing employment declined, manufacturing production rose by 13 percent, driven by a 38 percent increase in labor productivity. While American politicians cling to the notion that American prosperity requires “reshoring” what was once “offshored” (and there is some evidence of incipient reshoring taking place), technology will largely determine what kind of manufacturing jobs the United States will have. No matter what Washington does, the country is not going to have many more of them.
Over the past four years, the federal government has embarked on a monumental effort to attract manufacturing to, or keep it in, the United States. The bipartisan Infrastructure Investment and Jobs Act, the Chips Act and the Inflation Reduction Act earmarked hundreds of billions in subsidies for the sector. The policies also erected forbidding tariffs to wall off the American market from foreign competitors. Spending on the construction of manufacturing structures surged, to nearly $240 billion in August — three times as much as in December 2019, before the covid-19 pandemic struck. But all this policymaking added only a bit more than 100,000 manufacturing jobs.
Perhaps it is frustration over these numbers that led Mr. Trump to promise to take some employment from overseas. Yet when he tries to “recover” the million jobs China “took,” he won’t find them: Just as in the United States, China is losing manufacturing employment to automation and productivity gains.
Richard Baldwin, a professor of international economics at the IMD business school in Switzerland, notes that, altogether, the world lost about 20 million manufacturing jobs from 2013 to 2018. That was mostly in China. India lost manufacturing jobs, too. “Where in the world did the jobs go to?” Baldwin asked. “Productivity gains ate them.”
Automation is taking over manufacturing jobs everywhere, including in the cheap labor markets Americans view with such disregard. Even chipmakers in the Philippines are threatening to go on strike to stop their jobs from being automated. One study forecast that the number of manufacturing jobs worldwide will fall to 311 million in 2050, from 377 million in 2018. The share of manufacturing employment in middle-income countries such as China and Mexico will fall from 17.8 percent to 9.9 percent of total jobs. In the rich world, where robots started replacing people long ago, it will remain relatively constant.
If he cares about Americans’ job prospects, Mr. Trump — and, for that matter, the Democrats who have pushed a pro-manufacturing agenda — might forget manufacturing and focus instead on services. Jobs in the service sector are still growing. But technologies that enable remote work — think Zoom — will permit the outsourcing of all sorts of things people typically have had to do in an office, including accounting, IT support, tax preparation and human resources management.
Rather than stealing back manufacturing jobs that are not there to be taken, politicians should prepare policies for a service-sector employment shock that might be coming. As with manufacturing, the goal should be to adapt to changing economic conditions — not to spend billions in a losing war against technological change.
