Globalization And Loss Of Manufacturing Jobs In The US | EssayIvy.com

Globalization and loss of manufacturing jobs in the US

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Globalization and Loss of Manufacturing Jobs in the US
The US manufacturing industry has reported loss of jobs for the last two decades. In the
last seventeen years, the manufacturing sector in the US has lost five million jobs. The loss of
jobs has been blamed on two main facts; automation and globalization. Whereas automation has
seen robots and computers replace human workforce in the manufacturing sector, it is not right
and accurate to blame the loss of jobs entirely on automation. Globalization has seen trade
between the US and other countries, notably China, increase tremendously. However, the trade
between the US and China has led to trade deficit on the US side as the US has seen more
manufactured goods imported from China while less exports are shipped to China. The
Information Technology Innovation Foundation (ITIF) blames the loss of manufacturing jobs in
the US on the declining US competitiveness and trade pressure (Nager 1). During the concluded
US presidential election in 2016, the then republican candidates Donald Trump and Bernie
Sanders blamed globalization for the loss of US manufacturing jobs.
Automation is one of the major causes of loss of manufacturing jobs in the last two
decades. Individuals and organizations in support of free trade have used automation as their
weapon to address the diminishing labor requirements in the US industries. Most industries have
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adopted high-end American technology which involves replacing human resources with robots
and other machines which have higher productivity and low maintenance. The recent
advancement in technology has given these industries no alternative but to adopt the technology
to retain their competitive edge. Between 1965 and 2000, the manufacturing sector in the US saw
manufacturing jobs decrease from 19.5 to 16.5 million jobs (Nager 1). While this represents a
drop of three million jobs over thirty-five years, the period between the years 2000 and 2010 saw
the economy lose five million jobs within five years. This fall in manufacturing jobs is higher
than that experienced during the Great Depression. Automation, therefore, has played a major
role in the loss of jobs in the US manufacturing sector.
Globalization has been blamed for a sizeable share of job loss in the US. Economists and
defenders of US economy have pointed out at the dangers of globalization on the US industries.
Most notable famous individuals include President Donald Trump and Bernie Sanders who
openly blamed globalization and its effects on US factories. While globalization has been praised
for opening businesses, countries with high costs of production have suffered from high influx of
cheap imports. The turn of the century marked a period of growth of imports and exports in the
US economy. Most other countries were expanding their economies especially the developing
nations which saw increased consumption and production. While the United States saw increased
exports, it also registered more imports, which created a trade deficit with its trade partners. The
country was importing more manufactured goods from China and Mexico. The continued and
sustained importation reduced the real gross domestic output of the industries. According to
Adams Nager (7), 12 out of 19 industries had their output reduced. Importation from China has
had the largest negative impact on the American industries. According to David Autor, the
increased substitution of American manufactured products with Chinese products has led to the
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loss of 2.4 million jobs with the American territories with the most Chinese products registered
the highest hit (Nager, 7).
The uncompetitive nature of American manufactured products is another cause for
reduction in employment in the US. Although the cost of power in the US is relatively low, the
cost of labor is prohibitively high when compared to countries such as China and Mexico. The
high labor cost combined with other factors make the American produced products more
expensive, hence uncompetitive. China, on the other hand, boasts cheap labor which lowers the
production costs substantially, hence making its products cheaper. The uncompetitive nature of
American products gives Chinese made products an edge in the marketplace.
The use of mercantilist tools has also negatively influenced the American industrial
sector. China is known to use every means possible to gain a competitive edge over its
competitors. In 2001, China joined the World Trade Organization (WTO) and the Permanent
Normal Trade Relations (PNTR) status which opened new markets for Chinese products
(Houseman 12). To remain competitive, China employs tools such as currency manipulation,
subsidies for industries expected to face losses, the requirement to conform to localized features,
imposing quotas on imports and obligatory transfer of intellectual property. These practices
reduce the access of Chinese market by American firms while high custom taxes on American
products makes it difficult for American companies to trade in China. These practices reduce the
need for American products overseas hence derailing the growth and expansion of American
companies and ultimately, reducing employment opportunities in American industries.
Offshoring production is another major cause of loss of jobs in American industries.
Many American companies avoid the high production costs in the US by outsourcing their
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products from countries with conducive manufacturing sector. American companies wishing to
retain their competitive edge in terms of technology and price circumvent the high labor costs by
having their products manufactured overseas and brought back to the States for sale. This
practice kills the industries and leads to job losses as American factories remain idle.
According to Hicks and Devaraj, growth of the US economy is also to blame for the
dwindling jobs in the manufacturing sector. Hicks and Devaraj explain that the economy
develops in stages, each stage with different characteristics. The economy begins by setting up
agricultural-based plants, which are then replaced by manufacturing industries. With advanced
growth, manufacturing industries are replaced by service industries. Hicks and Devaraj argue
that the US economy has shed manufacturing jobs in favor of service industry (Hicks and
Devaraj 5).
President Donald Trump promised to revitalize the US manufacturing sector by making
the sector more competitive by lowering the production costs. By tackling globalization, the
American companies will be more competitive at the international stage, hence increase the
demand for their products. This is the surest way to solve the problem of demising jobs in the
manufacturing industry. While automation is necessary for efficiency, maintaining competitive
advantage at the global market, cutting down on offshoring production and having government
intervention through subsidies, grants, tax exemptions and support is the surest way to
revitalizing the manufacturing sector and enabling industries to grow and create employment.
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Works Cited
Hicks, Michael J. and Srikant Devaraj. "Myth and the Reality of Manufacturing in America."
Center for Business and Economic Research (2015): 1-7. Document.
Houseman, Susan N. "Understanding the Decline of U.S. Manufacturing Employment." Upjohn
Institute for Employment Research (2018): 1-25. Document.
Nager, Adams. "Trade vs. Productivity: What Caused U.S. Manufacturing’s Decline and How to
Revive It." Information Technology and Innovation Foundation (2017): 1-27. Document.

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