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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