Is China Stealing American Jobs?

Posted on November 5, 2016 by

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Donald Trump has blamed China for damaging the American manufacturing industry and taking jobs from the American worker. A large portion of his trade platform calls for the rebuke and rejection of Chinese deals in favor of the American worker. Trump says that China has taken our manufacturing jobs, our companies have left us for China, and China is unfairly manipulating its currency to increase its exports and damage the US economy.

So, is China taking our jobs?

Is any of this criticism true? Is China stealing away American jobs and damaging the prospects of the American economy? An Economic Policy Institute report from 2011 says so. In fact, Trump cited this report in one of his speeches. The report claims that as US exports and manufacturing decline, China’s economy, exports and manufacturing rise. The report attributes these phenomena to China’s currency manipulation, which keeps Chinese exports more attractive at an artificially low price and artificially inflates the US dollar, making US exports globally harder to buy. Also in favor of Trump’s argument, another economic report announced that US markets directly exposed to Chinese imports (through the enactment of trade deals) suffered from higher unemployment, reduced labor participation, and lower wages in directly competitive local manufacturing jobs. These reports make for a bleak outlook on the rise of the Chinese economy and its trade dealings with America.

But flash forward four years and the truth is a bit more nuanced. Today, China’s economy is slowing and American companies are re-shoring, not outsourcing jobs. Labor, oil and gas costs are rising in the Chinese economy, and now the economic benefits of manufacturing in China only surpass the US manufacturing benefits by five percent. Some companies are migrating out of China due to rising costs, into other Asian markets, where costs are not as high. But other companies are deciding that the benefits of manufacturing in the US (better response to supply and demand, faster shipping, and higher productivity) are enough reason to move back. Generally, the manufacturing industry is on the rise in the US and on the decline in China.

pmi-1946-2016This chart, ranging from 1946-2016, depicts the growth of the American manufacturing industry. “A PMI reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally declining.” From 2012 to the present, manufacturing has generally been increasing in the United States. (For reference, the sharp decline in the 2000s occurred right after economic recession of 2008.)

However, recent developments in the Chinese economy still don’t paint a complete picture of the manufacturing industry. The truth is, despite rising for the past four years, manufacturing jobs are on the decline in the long run.

U.S. manufacturing jobs 1939-2016, U.S. Bureau of Labor Statisticsus-manufacturing-employment-1939-2016

But interestingly, manufacturing GDP has continued to rise, even as manufacturing employment has fallen (although we can see here the recent uptick in manufacturing employment from 2010-2016 due to re-shoring).

U.S. manufacturing jobs 2006-2016, U.S. Bureau of Labor Statisticsus-manufacturing-employment-2006-2016

U.S. manufacturing GDP 2006-2016us-manufacturing-gdp-2006-2016

But wait, if all of our manufacturing is moving offshore, as Trump suggests, wouldn’t we see a decline in manufacturing GDP? What, then, accounts for the continued rise in GDP? The answer is technology. Increasing technology is allowing the manufacturing industry to employ fewer people but still produce more. Technological advances are maximizing the efficiency of the manufacturing process at the cost of workers, which suggests altering trade practices with China will not help the average American worker laid off from a manufacturing job.

Short term fixes?

If we know that manufacturing jobs are on the decline in the long run, but there is also a slight surge in manufacturing jobs right now, will altering trade practices or condemning China help disenfranchised workers, specifically those of the ilk to which Trump appeals? Well, if we ignore the long run, even with the recent increase in manufacturing jobs, we’re still not seeing improvement for the working class that lost manufacturing jobs years ago. That’s because re-shored American manufacturing jobs are not going to the working class that lost these jobs in the first place. Despite concern over the loss of manufacturing jobs, many of these jobs are going unfilled. Manufacturing technology has become increasingly more complicated, and with that comes the need for more training and experience. Simply put, workers who fill manufacturing jobs require more education than they did twenty years ago.

wsj-manufacturing-jobs-education

The blue collar workers who have lost their manufacturing jobs simply don’t have the skill set to handle the returning jobs, and promises to halt trade deals or hold China accountable for currency manipulation will not solve their problems short term or long term.

Real solutions

The good news is Trump’s campaign raised awareness around the workers suffering from industries leaving them behind. Unfortunately, Trump’s proposed policy recommendations and accusations against China do nothing but rally anger and focus around the wrong issue. However, the populist rhetoric of Trump’s campaign (and to some degree, the Bernie Sanders’ campaign), will have a lasting impact on the political climate, no matter who is elected next week.

Real solutions do not center around trade. For the New Yorker, Jeffery Rothfeder writes:

…What would arguably help underemployed U.S. workers the most is retraining, so that their skills match the requirements of the better-paying jobs in U.S. factories. In turn, this would… encourage companies to reshore more jobs. Federally funded technical-education programs, perhaps in conjunction with community colleges, are one approach to that end. Tax inducements could also be offered to U.S. companies that establish factory-floor apprenticeships allowing workers to upgrade their skills. Raising the minimum wage should be considered as well, because it gives companies the incentive to protect profit margins by improving worker productivity and capabilities.

How to fund a massive retraining program is another story. Like Hillary Clinton’s plan to help coal miners put out of work by the energy industry, any plan would need to be extensive, funded well, and utilize the lessons from the federal plan to help tobacco farmers. Ultimately, the focus needs to shift to larger trends surrounding manufacturing and accommodating and assisting those put out of work by technological advances. It does the country no good to rapidly industrialize while leaving the public behind.

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