Tag: Loss of Manufacturing Jobs

Trump Promised Jobs. That’s Why He Won

Take a good look at this map. It shows which counties switched parties in the 2016 US Presidential election compared to 2012. Red counties switched from Democrat to Republican, blue counties switched from Republican to Democrat and the vast majority in grey did not switch parties:

counties-that-changed-partys

Source: Brilliant Maps

Of course, it doesn’t show vote margin or size of the total vote in each county. The main thing this map shows is the large number of counties in the North East and Midwest that flipped to Trump, after having been Democratic counties in the prior election. The effect was large enough to deliver the normally Democratic leaning states of Iowa, Michigan, Pennsylvania, and Wisconsin into the Republican camp.

Tim Duy has an article about how economists and most politicians get so wrapped up that they miss the human element in economic dislocations. Duy makes the point that they ignore two of the negative impacts of job losses. First, they say how lost jobs free up human capital for use elsewhere in the economy. Of course, as jobs are added to the economy, skill levels and training determine whether laid-off workers are part of that equation.

“High-skilled” workers is what we need, but they are not always the kind of workers that were laid off.

Second, Duy reminds us that most workers have little ability to move to where better jobs might be found. Politicians tell us that the economy is shifting to urban and suburban areas; to higher skilled jobs; that workers must go and get retrained. That misses the point.

Most new jobs for those who were laid off will only be found if workers are able to relocate, to move from rural or devastated urban locations to geographic areas where jobs are expanding. Duy notes it is particularly difficult for rural areas:

The speed of regional labor market adjustment to shocks is agonizingly slow in any area that lacks a critical mass of population…Relative to life spans, in many cases the shocks might as well be permanent.

We don’t have answers for most of these communities. Rural and urban economic re-development is hard. The people living in these regions have experienced job losses (or no jobs growth) for decades; positive jobs growth has occurred elsewhere.

And the laid-off workforce isn’t mobile. In effect, we have limited access to housing in our major cities by pushing housing costs beyond the reach of most middle class workers. This, from Kevin Erdmann:

If you lost your manufacturing job in Buffalo, and you’re thinking of moving to New York City because there are more jobs there, you might decide not to move because it is too expensive. It is the affordability that is keeping you out. But, even here, the affordability problem is just the messenger. It is the rationing mechanism for a housing stock that is relatively fixed for political reasons.

If you decide to move to the NYC area, you see that the housing supply is largely fixed. New buildings are hard to get through zoning. Construction costs in big cities are very high. Income taxes are rising rapidly.

Erdmann makes the point that housing in big cities doesn’t move up with increased demand:

So, it doesn’t matter if Brooklyn apartments rent for $500, or $1,000, or $2,000, or $4,000. There isn’t one for you. Fixing this by fixing affordability isn’t going to change the supply curve. It’s simply substituting non-monetary rationing mechanisms for the monetary one.

Trump’s message that US firms need to consider domestic jobs as much as their bottom line, also resonated with middle and upper-middle class households. OTOH, it’s not like Trump took on the Coal Industry on behalf of workers. He blamed federal environmental policy, but that isn’t what caused the loss of coal industry jobs.

Trump doesn’t really have any answers, but he pretends to care while pretending to have answers. Pretending to care and pretending to have answers gave him the switched counties on the electoral map above. People want work. They want secure jobs.

Trump might be running a “jobs” scam, but if it fails, what is the Democrats’ alternative?

We have four years until the next election, two if you are looking at Congress. What policies will work? Will we just trade Trump’s scam for another one peddled by the establishment?

Business as usual hasn’t delivered. The idea that economic growth creates jobs is a pipe dream for many: For the past 40 years, economic growth did not improve wages.

Trump’s promise swung the election. If he fails, what will be the Democrats’ response?

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Who Moved My Cheese?

Some may remember the book by this name by Spencer Johnson, published in 1998. The underlying message of the book is “Don’t waste time fighting against change: accept that bad stuff will happen to you for no good reason and just keep moving”.

This outdated and simplistic message remains the message of the Democratic Party to the White Working Class (WWC). Donald Trump’s message is different. He offers them nothing but a dream, to limit immigrants working in the US and to cut off the US market from China. And since the WWC knows that more of the same isn’t going to work, they’re voting for Trump.

It is useful to remember that since our “Most Favored Nation” trade deal with China in 1979, we have lost 35% of all manufacturing jobs in this country.

The WWC thinks that the Democrats have not been able to do anything to help them keep their jobs. The reasons for failure can be at least equally shared by the Parties, but since Dems have said for years that they are the party of the working class, they are getting the greater share of the blame for 35 years of no results.

There are two issues that dominate the discussion: Illegal immigration and transition assistance when jobs are lost. Regarding Immigration:

  • The WWC knows that Dems need the political support of the Hispanic community, and that requires Dems to show sympathy with illegal immigration.
  • The WWC believes that illegal immigration has put downward pressure on job opportunities and wages in the trades, in restaurant and hotel work, and in service sectors where immigrants may be overly represented.
  • That’s why Trump’s stance on immigration is so popular with the WWC. They probably know in their hearts that kicking all the Mexican workers out, or building a wall is ridiculous. But the Democrat’s position on immigration is diffuse, and is viewed as “soft” on illegals by the WWC.

Despite anything the Dems say about retraining or “transition assistance”, the WWC knows that someone on job transition assistance can’t earn enough to support a family. Other problems:

  • Identifying the fields/industries that workers can train in that will produce stable, living wage employment is an inexact science. So, demand for retrained workers is often less than the supply for any given job type.
  • Businesses have been very successful at shifting the burden (and cost) of training displaced workers from themselves to society. This is helped along by a corporate critique that public and not-for-profit private schools are failing to maintain standards, and they can’t churn out sufficient grads with qualifications that meet the corporations’ highly specific requirements.
  • Hence the continuing financial opportunities for for-profit technical schools and for-profit universities, (can you say Trump University?)

And Ford Motor Co. just gave Trump a big wet kiss:

Ford Motor Co. says it’s moving all of its US small car production to Mexico…The company is building a new $1.6 billion assembly plant in San Luis Potosi, Mexico. It will make small cars there starting in 2018.

What can the Pant Suit say about this that would go beyond what the Pant Load will certainly say? And if she did, would WWC people believe her?

On the macro level, our current capitalism has turned to technology to produce much of what is needed with far less human labor input than ever before. That leaves job growth (and job opportunity) in only the low-skilled, low-paid “service” jobs; or in highly advanced, specialized jobs requiring very advanced training/skills/talent.

This means that the dogma of Endless Economic Growth, which we have accepted since the Industrial Revolution, is dead. Along with killing that, we need to kill off the current organizing principle of our economic system, where humans exist solely to fulfill the needs of businesses.

Work helps us find our place in society. It is something that we see as having an inherent value, something that fills a basic human need, similar to food and shelter. But our current economic system no longer recognizes that, and our economy provides little opportunity for fulfilling that basic need for a large portion of American citizens, including many in the WWC.

The idea of government deploying under-utilized labor to build and repair our infrastructure, or to re-tool our country to reduce carbon emissions would be a step that might return the WWC to jobs and a place in society. It would cost a ton.

But the idea that the government would create demand is too socialist for most politicians to accept, despite the fact that the rest of the tools just haven’t worked in 35+ years.

Tell me again why Bernie Sanders was a terrible choice.

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More Political Lessons From Brexit

There is a neoliberal aspect to Brexit that has many Brits in the 1% quietly (and tentatively) quite happy. Fraser Nelson, editor of the Spectator and a columnist for the Daily Telegraph, writing in the WSJ, said the Brexiteers:

…think the vote for Brexit was about liberty and free trade, and about trying to manage globalization better than the EU has been doing from Brussels.

Neoliberalism at its finest. You could substitute “No Obama” for “Brexit”, and “Washington” for “Brussels”, and think it was the GOP talking.

Mr. Nelson says that a major problem was that the EU’s centralized, command-type structure makes local issues difficult to manage. He says that regulations issued at the European level, rules promulgated by officials whose names Brits didn’t know, people they never elected and cannot remove from office, became law in the UK. More from Mr. Fraser: (emphasis and brackets by the Wrongologist)

Mr. Cameron has been trying to explain this to Angela Merkel…He once regaled the German chancellor with a pre-dinner PowerPoint presentation to explain his whole referendum idea. Public support for keeping Britain within the EU was collapsing, he warned, but a renegotiation of its terms would save Britain’s membership…Mr. Cameron was sent away with a renegotiation barely worthy of the name. It was a fatal mistake [by the EU] not nearly enough to help Mr. Cameron shift the terms of a debate he was already losing.

The EU took a gamble: That the Brits would not vote to leave. A better deal—perhaps aimed at allowing the UK more control over immigration, a top public concern in Britain—might have stopped Brexit. But the absence of a deal sent a clear message: The EU isn’t interested in reform.

The EU apparently needs fixing, but it won’t be the UK who does it. Cameron tried in a lukewarm way to fix Europe a little around the edges, and failed. A final point from Mr. Fraser:

The question is not whether to work with Europe but how to work with Europe. Alliances work best when they are coalitions of the willing. The EU has become a coalition of the unwilling, the place where the finest multilateral ambitions go to die.

Perhaps. It IS clear that not all regulations are created equal, some are inefficient, and some are just stupid. But, a business environment with fewer government regulations is the wet dream of most business owners, while it often harms consumers. It is also true that the Brexit supporters were able to conflate in the minds of voters all the discontent with UK austerity, benefit cuts, poor quality job creation and wage stagnation along with the EU’s hegemony, into a big ball of emotion.

And it worked.

The inside-the-bubble UK neoliberal view is that the EU was the problem, and the British voters solved that. America doesn’t have an analogue. We could leave NAFTA, but that has none of the earth-shaking possibilities. We could fail to pass the TPP. That would be a yuuge anti-neoliberal event.

There is an economic malaise in blue collar UK. Once an industrial powerhouse, it has become service driven, with finance and lawyering representing a significant portion of its economy. Sounds just like America in 2016.

Let’s link all of this up with our domestic political economy:

  • Income inequality has grown in the US since at least the 1980s.
  • Real median income is the same as in 1996.
  • Our Labor Participation Rate (the share of American civilians over the age of 16 who are working or looking for a job) is about where it was in the 1970s.
  • Despite a rosy headline unemployment rate of 4.7% (which counts only people without work seeking full-time employment), the U-6 rate (includes discouraged workers and all marginally attached workers, plus those workers who are part-time purely for economic reasons) is much higher at 9.7%. In human terms, that is 15.3 million souls who need a job.

Donald Trump and Hillary Clinton both see these things. The candidate who convinces voters that s/he will really address them will win.

Trump is correct when he says if there are millions out of work, how can we permit immigration? He wrongly focuses on Mexicans, but he’s right: We need fewer people pursuing the fewer jobs we will have until at least until 2025, when finally, all the Baby Boomers retire.

America is in a class war, but it’s the working class versus the middle class rather than workers versus billionaires, as Bernie talks about. Joe Six-pack doesn’t hate the billionaire class. Therefore, Trump is acceptable.

The Pandering Pant Load sees this, and has moved to exploit their anger.

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The Pant Suit vs. the Pant Load – Jobs, Part Infinity

We are in a time when a presidential candidate’s personality counts for more than the candidate’s policies. Candidates obfuscate on most policy issues and the media lets them get away with absolutely outrageous declarations of near-facts or outright half-truths.

One policy we must make them nail down explicitly is their jobs policy.

The key to making America great again is adding more jobs. Wrongo is a pest on this subject, but without more jobs, growth in GDP is harder to achieve. Tax revenues are more difficult to grow. People who are idle get into trouble.

The Pant Suit and the Pant Load know this, so they will talk from here to November about adding manufacturing jobs back to cities that lost them starting in the 1970’s. Those jobs are never coming back, but both of them are working hard to convince you they can do it. Consider this, from Parallel Narratives:

We’re now being told by folks who know better that all we need to do to bring those jobs back, to resurrect a future we can believe in, or make America great again, is to elect the outsider politician who is not beholden to elite interests like banks, CEOs and politicians. Unfortunately, that horse has left the barn, those jobs are gone for good…

A great example of a politician braying the “I can bring jobs back” mantra was in Sunday’s NYT business section’s column, “Preoccupations.” In it, a young couple had the option to work from home, so they moved from Austin, TX, that hot-bed of tech, to South Portland ME, not so techie. They work for two different firms from two home offices. Then, they are invited to attend a funds-raiser for a gubernatorial candidate: (emphasis by the Wrongologist)

The candidate raising campaign funds was a hard-working lawyer who seemed genuinely well meaning, but no one had told him that his economic platform of protecting manufacturing jobs and Maine’s traditional industries wasn’t going to fly with an audience of health care professionals, programmers, web designers and researchers…We muttered to each other that this guy didn’t have a place in his platform for people like us, many of whom worked for employers in other states. Our checkbooks stayed in our pockets.

If you hear this kind of BS from the Pant Suit or the Pant Load, your checkbook should also remain hidden.

While the low-wage jobs problem has been around for more than 40 years, America’s politicians are still peddling the same solutions. In fact, a new analysis from the White House’s Council of Economic Advisers (CEA) released Monday shows that only 88% of men ages 25 to 54 are participating in the US workforce. The CEA reports that the US has the third-lowest labor-force participation rate for “prime-age men” among the world’s developed countries. We have done so well that, on a percentage basis, Greece, Slovenia and Turkey all have more men working than the US does. Greece! The decline is concentrated among less educated. Here is a chart:

Male Labor Force Part by Edu

More than 95% of men used to work in 1964, regardless of their educational attainment. Today, you better have at least a bachelor’s degree if you want to be sure you will get a job.  But it is worse than that. The CEA said:

In recent decades, less-educated Americans have suffered a reduction in their wages relative to other groups. From 1975 until 2014, relative wages for those with a high school degree fell from over 80% of the amount earned by workers with at least a college degree to less than 60%.

Clinton and Trump would have you believe that the problem is bad trade deals with China, the TPP, or immigration. Trump in particular, is saying that the political elites have knowingly caused this all at the expense of the American worker. There is a modicum of truth to that, but it is the American corporation and the American tax code that is closing out US jobs, and hammering the middle class. American corporations now pay about 11% of our total US taxes, down from about 30% of US taxes in 1960, as jobs (and markets) have moved abroad.

What are the Pant Suit and/or the Pant Load going to do in the face of advancing automation now facing us not just in manufacturing, but also in the service and knowledge industries?

It is time to make the candidates talk about this on the campaign trail.

The basic policy choice we have is to put people to work, or to continue to allow the profit motive to dominate. If the profit motive remains supreme, we will continue our relentless drive to reduce labor costs — by eliminating jobs, or by paying workers less for the same work.

To date, our leaders have chosen the latter path, and we have reaped the results. We have become a land of spreadsheets and flags.

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More Questions for The Pant Suit and the Pant Load

Yesterday, Wrongo broke the bad news about the May job report. Exactly one year ago, Wrongo wrote “Technology Isn’t Creating Enough Middle Class Jobs.” That article spoke about how deploying new technologies continues to cost more and more mid-skilled jobs.

With low interest rates, the cost of capital investments have fallen relative to the cost of labor, and businesses have rushed to replace workers with technology. Because of technology, since the mid-1970s capital and labor have become more substitutable, and it’s a major global trend. Some proof of this is in the article in the Quarterly Journal of Economics, where  Loukas Karabarbounis and Brent Neiman from the University of Chicago found that the share of income going to workers has been declining around the world.

As Brad Delong, economist at the University of California, Berkeley, wrote recently, throughout most of human history, every new machine that took the job once performed by a person’s hands and muscles increased the demand for complementary human skills — like those performed by eyes, ears or brains.

This is no longer true. From Wrongo’s June, 2015 column:

Facebook is touted as a prime player in the knowledge economy, but it only employs 5,800 to service 1 billion customers! Twitter has 400 million total users. It has 2,300 employees.

What is the value of Facebook and Twitter to the jobs economy? These are two of our very “best” success stories, and they only employ 8,100 workers.

These firms have had a huge impact on society, but the total jobs they have created are only a rounding error in our economy.

As the idea sinks in that human workers may be less necessary than in the past, what happens if the job market stops providing a living wage for millions of Americans?

How will people afford to pay the rent? What will happen if the bottom quartile of workers in the US simply can’t find a job at a wage that could cover the cost of basic staples?

What if smart machines took out the lawyers and bankers? Bloomberg is reporting that job loss is on the way for bankers. Banks are racing to remake themselves as digital companies to cut costs. In other words, they’re preparing for the day that machines take over more of what used to be the sole province of humans: knowledge work. From Bloomberg:

State Street had 32,356 people on the payroll last year. About one of every five will be automated out of a job by 2020, according to Rogers. What the bank is doing presages broader changes about to sweep across the industry. A report in March by Citigroup…said that more than 1.8 million US and European bank workers could lose their jobs within 10 years.

They close by saying that Wall Street will go on—but without as many suits.

Some estimates say that automation could cost half of all current jobs in the next 20 years. The OECD thinks the number is smaller. They argued last month that lots of tasks were hard to automate, like face-to-face interaction with customers. They concluded that only 9% of American workers faced a high risk of being replaced by an automaton.

9% of today’s American workforce equals 13.6 million jobs. It just took us seven years to gain 14.5 million jobs, most of which were contractors and temp jobs.

The prognosis for many medium and some higher-skilled workers appears grim.

The corporatists have seen these forecasts. It explains their unwillingness to do anything serious to create effective jobs programs here at home. They don’t need to do anything, because there is a (virtually) infinite supply of skilled and unskilled workers in the overpopulated third world.

So, these are today’s questions for the Pant Suit and the Pant Load, and their answers need to be specific:

  • Where will the household’s income come from when jobs alone can’t provide it?
  • How will we deal with large-scale inequality that requires large-scale redistribution?
  • Is it time to think about how to provide more income that isn’t directly tied to a job?

From Eduardo Porter:

For large categories of workers, wages are already inadequate. Many are withdrawing from the labor force altogether. In the 1960s, one in 20 men between 25 and 54 were not working. Today it’s three in 20. Although the population is generally healthier than it was in the 1960s; work is almost uniformly less demanding. Still, more workers are on disability.

The issue is not technology, or robots, or restoring our manufacturing base. It isn’t better skills, or technology or outsourcing. We have too many people chasing too few good jobs.

This is why we need the presidential candidates to speak the truth about job creation in America.

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Free Trade’s Double-Edged Sword

The Bernie Sanders win in Michigan is chalked up to his attacks on trade agreements, in particular, the Trans Pacific Partnership that resonated with a broader audience than his attacks on Wall Street. Along the way, Donald Trump has been plowing the same ground, talking about how America is losing jobs to Mexico and Asia.

So the question is, are we seeing a political backlash against trade? Can Sanders or Trump gain sufficient political traction to win with this issue? And can we blame trade for losing jobs to China and elsewhere?

Jared Bernstein in Monday’s New York Times made an excellent point: (emphasis by the Wrongologist)

The economic populism of the presidential campaign has forced the recognition that expanded trade is a double-edged sword. The defense of globalization rests on viewing Americans primarily as consumers, not workers, based on the assumption that we care more about low prices than about low wages.

When you hear politicians speak about free trade, they talk about cheaper products. They sidestep the terrible impact on American jobs, they sidestep the concern that many, many jobs have been lost through free trade agreements. The free trade deals have also exacerbated the loss of union power, which means fewer (and lower paying) jobs, fewer hours, and poorer benefits, including pensions.

The trade topic is obviously a huge driver of Trump’s and Sanders’s appeal. It is a problem for Hillary, since she was for the Trans-Pacific Partnership before she was against it.

Despite being on opposite ends of the political spectrum, the two populists are using the same message: The government, both political parties, and business are working at cross-purposes with the needs of the American people. In a democracy, populism is a warning sign that government has been disconnected from its citizens. Consider that while Americans lost at least 4 million jobs, corporate profits are up, and the 1% has gotten much wealthier.

It’s true that off-shoring is good for the global economy. Chinese people working to make iPads are richer than they were, but it’s not a win-win situation. It’s more of a win-lose, where Chinese workers win relatively big, while American workers lose medium.

Another problem is that workers directly impacted by trade have little power or influence in their firms or the country as a whole. In the US, exports only make up about 13.5% of GDP. But in Sweden, Denmark or Germany, exports are north of 40% percent of GDP. And these countries, with far fewer natural resources, have robust social safety nets in addition to high wages. And as Bernstein says:

The real wage for blue-collar manufacturing workers in the United States is essentially unchanged over the past 35 years, while productivity in the sector is up more than 200%.

Why? Because governments in these other countries stress building high-skill industries that compete based on producing high value-added products, while low-skill industries that compete based on exploiting their employees are discouraged. This is called having an industrial policy, which encourages business to meet government priorities. In America, we are against having industrial policies, because it sounds like socialism.

Bernstein points out that the free trade negotiation process has been captured by investors and corporate interests:

According to the Washington Post, 85% of the members of the outside committees advising the administration on the proposed Trans-Pacific Partnership were from private businesses and trade associations (the rest were from labor unions, NGOs, academics and other levels of government).

And that’s the world we live in. Business is driving most of the decisions that our politicians make, ensuring that whatever is enacted is primarily good for business, and secondarily, if at all, for We, the People.

And in the world we live in, free trade has significantly boosted wages and quality of life for overseas workers and has helped lift millions of Chinese and other Asian citizens out of poverty, while our middle class, a prerequisite for our stable society, has been hollowed out.

Yet, America’s plutocrats and politicians push for even MORE free trade.

The current election cycle may horrify the “political establishment,” of both parties, but it was preordained by their bought-and-paid-for politics.

Americans have a real gripe. They don’t see, or care about the benefits to Chinese and other third world workers that lower or stagnant wages at home help to provide. The Bernie win in Michigan and Trump’s success in the GOP primaries show people are super pissed off.

Our political parties better start coming up with ways to mitigate the trade and wage problem before someone like DonDon actually succeeds in becoming president.

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