12/1/2017 Most 

US manufacturing jobs lost to technology, not trade

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Most US manufacturing jobs lost to technology, not trade
Increasing protectionism is unlikely to override forces of automation
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DECEMBER 2, 2016 by: Federica Cocco

A focal point of president­elect Donald Trump’s campaign, that manufacturing jobs have left the
US in droves as a result of bad trade deals, could be based on a faulty premise.

“America has lost nearly one­third of its manufacturing jobs since Nafta and 50,000 factories
since China joined the World Trade Organization,” says Mr Trump’s official site, citing research
from 2007 by the Economic Policy Institute (http://www.epi.org/publication/webfeatures_snap
shots_20070221/).

According to this narrative, the US’s trade policies, growing trade deficits with Mexico and
Canada, and China’s “unfair subsidy behaviour” are to blame for the US’s “deindustrialisation”

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and its disappearing middle class (http://www.usatoday.com/story/opinion/2016/03/14/donald
­trump­tpp­trade­american­manufacturing­jobs­workers­column/81728584/).

The US did indeed lose about 5.6m manufacturing jobs between 2000 and 2010. But according
to a study by the Center for Business and Economic Research at Ball State University, 85 per cent
of these jobs losses are actually attributable to technological change — largely automation —
rather than international trade (https://www.foreignaffairs.com/articles/2016­06­13/truth­abou
t­trade).

The think­tank found that although there has been a steep decline in factory jobs, the
manufacturing sector has become more productive and industrial output has been growing.

“Simply put, we are producing more with fewer people,” notes Mireya Solís, a senior fellow at
Brookings.

US factories have been achieving this by gradually replacing human labour with robots.

“Automation has transformed the American factory, rendering millions of low­skilled jobs
redundant. Fast­spreading technologies like robotics and 3D printing will exacerbate this trend,”
says Ms Solís.

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12/1/2017 Most US manufacturing jobs lost to technology, not trade

The Boston Consulting Group has estimated that while “a human welder today earns around $25
per hour, including benefits, the equivalent operating cost per hour for a robot (https://www.bcg
perspectives.com/content/articles/lean­manufacturing­innovation­robots­redefine­competitiven
ess/) is around $8”.

The extra cost of maintaining a robotics system — installation, maintenance and the operating
costs — should be amortised, according to the group, over a five­year period. “In 15 years, that
gap will widen even more dramatically,” it says. This process, as many have pointed out (http://w
ww.oxfordmartin.ox.ac.uk/downloads/academic/The_Future_of_Employment.pdf), is
irreversible.

This is not to say that trade with China and other countries has not contributed to job losses.
Research by the Ball State University found that 13 per cent of the overall job losses in
manufacturing had resulted from trade. Another, more recent, MIT study estimated that rising
Chinese imports from 1999 to 2011 cost up to 2.4m American jobs.

Overall though, what this suggests is that one of the new administration’s main policy aims,
increasing trade protectionism, is unlikely to override the larger forces of automation and the
transition to a digital economy.

Print a single copy of this article for personal use. Contact us if you wish to print more to
distribute to others. © The Financial Times Ltd.

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