Washington Insider: The Nation's Job Losses

During the recent campaign, both parties agreed that trade was bad because it killed jobs. And, both parties argued that keeping jobs in the United States, probably by subsidies, was the way to reduce income inequality.The problem is, most economists never really believed in that emphasis. Even though some of the economic articles months ago began to ask about real causes of job losses, the image of trade as a villain was repeated at almost all levels.Now, however, the issue is rapidly becoming what national policies will be required to bolster the jobs economy? On Thursday, the New York Times carried a long article in its main section on what "really killed jobs" and raises questions that should have been raised many months ago, but, mainly weren't.The article says new technology was typically the main villain. It cites a variety of examples including the steel industry in California where "minimill" technology led steel plants to cut 75% of employees over five decades, while keeping production the same. It presents many more examples."Over the long haul, clearly automation's been much more important (than trade) — it's not even close," Lawrence Katz, an economics professor at Harvard who studies labor and technological change told the Times.No candidate talked much about automation on the campaign trail, the article asserts, but it fails to note that most news articles didn't either. "Technology is not as convenient a villain as China or Mexico, there is no clear way to stop it and many of the technology companies are in the United States and benefit the country in many ways."So, the key question is what the next wave of policies will offer to deal with the problem and that answer is murky, at best. The Times notes that President-Elect Trump told a group of tech company leaders last Wednesday: "We want you to keep going with the incredible innovation. Anything we can do to help this go along, we're going to be there for you."Then, it quotes Andrew Puzder, the incoming labor secretary and chief executive of CKE Restaurants, as extolling the virtues of robot employees over the human kind as recently as last March. "They're (robot employees) always polite, they always upsell, they never take a vacation, they never show up late, there's never a slip-and-fall, or an age, sex or race discrimination case," he said.So, the Times concludes that globalization caused some of the job losses, especially trade with China during the 2000s which led to the rapid loss of up to 2.4 million net jobs. Still, over time, automation has had a far bigger effect than globalization, and would have eventually eliminated those jobs anyway, the article said.When Greg Hayes, the chief executive of United Technologies, agreed to invest $16 million in one of its Carrier factories as part of a Trump deal to keep some jobs in Indiana instead of moving them to Mexico, he said the money would go toward automation. "What that ultimately means is there will be fewer jobs," he said on CNBC.Another analysis, from Ball State University, attributed roughly 13% of manufacturing job losses to trade and the rest to enhanced productivity. Over time, automation has generally had a happy ending: As it has displaced jobs, it has created new ones. But some experts are beginning to worry that this time could be different. That's because even as the economy has improved, jobs and wages but for a large segment of workers others—particularly men without college degrees doing manual labor—wages have not recovered.Labor economists say there are ways to ease the transition for workers whose jobs have been displaced by robots. They include retraining programs, more public-sector jobs, a higher minimum wage, a bigger earned-income tax credit and for following generations, better education. But critics are pointing out that the new administration's policy headlines to date have little overlap with the White House proposals, and that retraining programs have been a hard sell in the past because of their cost.The White House on Tuesday released a report on automation and the economy that called for better education from early childhood through adult job transitions and for updating the social safety net with tools like wage insurance. "Just allowing the private market to automate without any support is a recipe for blaming immigrants and trade and other things, even when it's the long impact of technology," said Mr. Katz, who was the Labor Department's chief economist under President Clinton.The changes are not just affecting manual labor since computers are rapidly learning to do some white-collar and service-sector work, too. Existing technology could automate 45% of activities people are paid to do, according to a report by McKinsey.So, the key issue now is to be sure that policies are focused clearly at the cause of the unemployment and wage inequality problems, likely a very difficult task since so much political capital has been used blame trade and to build expectations on anti-trade efforts that may offer little relief, or may make problems worse. Thus, the coming debate over trade policies will be extremely important and should be watched closely by producers as it proceeds, Washington Insider believes.