Technology Hurt Working Class More than Trade

There was a time in this country when a white kid with a high school diploma could walk into a factory and get a job that would pay him middle-class wages until he retired. It was enough for him to buy a house, let his wife stay at home to raise two or three kids (who would all go to college on dad’s dime), and he could spend his golden years with a boat or a camper. That’s the myth, anyway. Those days, if they were ever really that rosy, are gone. From Donald Trump to Bernie Sanders and almost everyone in between, the consensus is free trade killed those good, blue-collar jobs. The facts suggest that technological change had more to do with it.

Looking back over the last 20 years, which includes things like NAFTA and China’s entry into the World Trade Organization, American manufacturing output has increased. When adjusted for inflation, that output is up almost 40%. That’s not huge growth, less than 2% a year, but it isn’t a decline. In absolute terms, US factories are adding $2.4 trillion in value.

Economists define productivity as how much each worker makes. When output increases and jobs are fewer, that is the definition of greater productivity. Workers are more efficient, and every business is after that. Daniel Griswold, writing in yesterday’s Los Angeles Times, cited “a recent study by the Center for Business and Economic Research at Ball State University, [which showed] productivity growth caused 85% of the job losses in manufacturing from 2000 to 2010, a period that saw 5.6 million factory jobs disappear. In that same period, trade accounted for a mere 13% of job losses.”

Mr. Griswold maintains, “We produce more manufacturing value with fewer employees than in years past because today’s workers are so much more productive. They are better educated, equipped with more sophisticated capital machinery and turn out more valuable products than their parents’ generation. And as a result they are better paid, with total manufacturing payrolls rising during the last decade even as the number of workers declined.”

In other words, the jobs got fewer but they also got better. That isn’t to say that trade hasn’t hurt; 13% of 5.6 million is a lot of damaged careers. However, technological advances account for six times more jobs lost.

That has ramifications when it comes to policy prescription. The solution, if there is to be one, is not to damn all trade agreements, to renegotiate them, to withdraw from them. It isn’t the free trade that is the prime issue. The trouble is technology changed the factory, and the odds are it will continue to do so. If there had been no jobs lost to trade deals during the period Ball State studied, there would still be 5 million fewer manufacturing jobs because of technological changes.

The Luddite solution, simply stop deploying new technology, is ridiculous. So, policy must manage its deployment. Ideally, workers will get training to take the new jobs created. At the same time, there are simply going to be fewer manufacturing jobs, and so the displaced workforce needs other work. This will require retraining, investment and income support — basically all of the things that would have made NAFTA and the rest relatively painless had laissez-faire economics not been the flavor of the last generation.

Indeed, the role of government in helping people make the transition between jobs is undervalued and under-utilized in America. The anger currently felt in the Rustbelt and other parts of the nation that feel left behind is quite legitimate. A change was made for the greater good, but those who benefited from the change failed in their responsibility to assist those who did not. One may call it socialism or social democracy or whatever. If the word United in USA is to mean anything, the effect of technology on the workplace is still an issue the nation has to address.