Monday, November 7, 2016

Why Donald Trump won’t be able to bring US factory jobs back — unless he can negotiate with progress and technology

From Mark Perry.
"The chart above [I put it below-CM] shows the percent changes since January 2000 for: a) monthly US Motor Vehicles and Parts Production (data here from the Federal Reserve via the St. Louis Fed) and b) the monthly number of  Production And Nonsupervisory Employees in the US for Motor Vehicle and Parts Production (data here from the BLS via Economagic), which should reflect the number of American manufacturing employees who are actually working on the “factory floor” producing cars and auto parts. As the chart indicates (verified here), America’s production of “Motor Vehicles and Parts” reached an all-time record high in September of this year and was 21.2% above the January 2000 level. In contrast, the number of American factory workers involved in the production of motor vehicles and parts has declined by nearly 34% since January 2000, from nearly 1.1 million (the peak level of employment since the BLS started tracking and reporting these data in 1990) to 722,700 in September. And if we start from the end of the Great Recession in June 2009 when the percent changes since 2000 in both variables were at their lowest levels, the percent increase since then in the production of motor vehicles and parts (+165%) has been about 3.5 times greater than the percent increase in auto manufacturing workers of +47.5% over that period — reflecting what might be one of the greatest surges ever in auto worker productivity for any 6-year period.

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The chart was inspired partly by the article in yesterday’s USA Today by Brent Snavely (Detroit News) and Chrissie Thompson (Cincinnati Enquirer) titled “Why Donald Trump will fail to bring back factory jobs,” here’s a slice (emphasis mine)

Bring back jobs. It’s a message Donald Trump has trumpeted in his presidential campaign and one that resonates with working-class voters across the country.
The reality is more complicated: Manufacturing jobs haven’t disappeared just because of trade deals and imports and foreign tariffs. Today’s manufacturers use everything from robots to product-tracking systems to trim costs and increase efficiency and quality. That often means fewer jobs than companies needed to do the same work years ago (see chart above).
“Even if manufacturing exploded, there’s no reason to suppose that the new factories would look anything like the ones even from 2005,” said Michael Hicks, an economist at Ball State University.
Take the J.M. Smucker jam plant in Ohio. In 2012, the company replaced a 60-year-old factory with a new one, but the facility does the same work with 30% fewer employees due to “new technologies and efficiency improvements.” It trimmed its workforce from 425 to 300 using a retirement incentive and by not refilling positions when people left the company.
“This really is the new manufacturing. The old days of beating and banging are gone,” said Rob Devota, process technology manager at Magna Electronics.
In fact, 80% to 90% of the manufacturing jobs lost in the U.S. since the peak in 1977 have been because of productivity gains —- not because of trade deals. Much of the efficiency at today’s factories comes from lower-cost power supplies and ways to track and manage the inventory from the moment it comes off the production line until the time when it goes to the customer.
Industries known for “beating and banging” have become more efficient, too. Trump has wooed steelworkers near Pittsburgh by saying he plans to bring steel jobs back to the region. But that’s just not possible, said Frank Giarratani, an economist who recently retired from the University of Pittsburgh.
When Pittsburgh’s iron-ore-based steel mills were closing in the 1980s and 1990s, new plants were opening elsewhere in the country, in locations with nonunion workers, low-cost electricity, and fast-growing populations that needed new buildings, such as the Midwest, South and Southeast. Those newer factories make steel differently. A majority of steel made in the U.S. today is recycled — melting down existing steel to form it into new metal. Recycling plants are highly automated and need hundreds of employees, but not thousands as at ore-based steel plants in the 1970s.
MP: So Donald Trump can bloviate all he wants about “bringing manufacturing jobs back to the US from the countries that stole them from us.” But most of those jobs are never coming back and other countries are not responsible for “stealing” them for us. Instead of blaming China, Japan and Mexico for America’s loss of manufacturing jobs, Trump should instead blame the innovative “Made-in-the-USA” technologies that have increased the productivity of the typical American factory worker to record highs.

It’s the steady march of technological progress that has allowed the US to manufacture output at record levels in recent years with the same number of factory workers as in 1941 — about 12 million. Amazingly, the US is producing today about 10 times more manufacturing output than in the early 1940s with the same number of factory workers (about 12 million), reflecting the exact same trend that has brought US agricultural production to new record highs year after year with fewer and and fewer workers. So if The Donald really thinks he’s going to bring factory jobs back to America, he’s going to have to try to hone his skills and negotiate really hard with the forces of technology, not re-negotiate trade deals with countries like Mexico. And maybe while he’s engaged in those negotiations with technology, he can also try to negotiate bringing back the millions of US farm jobs that have been lost to the forces of technological progress as well…. Good luck with that Mr. Trump!
And here’s another trade-related chart below for Mr. Trump to ponder, should he become our next president. The US has been running consistent and growing trade surpluses for services with the rest of the world for at least the last 25 years. According to Trump’s childish and uninformed view about international trade, he should be able to take great pride in the fact that we somehow must have negotiated great trade deals that have allowed us to export more services than we import, to the tune of an accumulated trade surplus of $3 trillion over the last quarter-century. He can preach to Americans how we’ve been doing such a great job of absolutely crushing, killing, and ripping off our trading partners for services, and encourage us to laugh at the many countries like Japan, China, France, Brazil, Canada and Mexico that spend many millions of dollars more purchasing services from America every year (tourism, telecommunication, consulting, financial, banking, medical, consulting, engineering, architectural, insurance, education, etc.) than we buy of theirs. And then maybe if Trump wants to exhibit some truly ethical behavior, he can fix the unfair trade practices and trade deals that must have allowed us to take advantage of our trading partners for services and run surpluses with them for the last 25 years!

surplus"

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