As North America goes through its biggest recession and loss of jobs in decades, U.S. President Donald Trump is offering a job creation solution.
In a Labour Day election address to the media, the Republican candidate declared that a move toward “decoupling” from China would transform the U.S. economy and bring manufacturing jobs home.
“We will make America into the manufacturing superpower of the world and we’ll end reliance on China once and for all,” Trump said in a White House speech to reporters.
Nice to see even robots follow the “bend at the knees” rule. <a href=”https://t.co/Ra9U93EMbl”>pic.twitter.com/Ra9U93EMbl</a>
“I don’t think it’s wild,” said Joel Blit, senior fellow at the Centre for International Governance and Innovation, an economist and engineer who teaches at Ontario’s University of Waterloo.
Fresh research by the Waterloo professor shows that what he calls in his paper published last month in Canadian Public Policy, “the biggest human and economic catastrophe in recent history” may have a positive outcome — if it is well managed.
Essentially, what Blit’s research shows is that in Canada, following the three recessions since the dawn of the computer age that he examined, some jobs disappeared, never to return.
“We’ve seen a very large decrease in routine jobs, whereas non-routine jobs basically weren’t hit at all,” Blit said in a phone interview. He says that’s not what used to happen before the 1980s, according to U.S. data, when both kinds of jobs were similarly affected by recessions.
The non-routine jobs — jobs that required creativity or could not easily be automated — that were lost bounced back quickly after each recession ended. That was not so for the relatively routine jobs. Blit’s research shows that once gone, they were gone for good.
Besides automation, of course, as labour activists and anti-globalizationists have complained, many good factory jobs disappeared as U.S. manufacturers sought cheaper labour in places like China.
‘Deaths of despair’
When jobs disappeared, some traditional blue-collar workers were unable to find well-paying jobs to support their families, leading to what U.S. scholars have called “deaths of despair.” But as rock-bottom unemployment rates before the coronavirus struck demonstrate, eventually the economy did put people back to work, and was beginning to push wages higher.
When routine jobs disappeared many of those left unemployed went to non-routine jobs, some of them in sectors such as retail, warehousing or entertainment services that were difficult to automate.
Blit’s ominous projection is that in the current deep recession, when the loss of routine jobs happens again, many of those sectors such as retail and food services will go through the same process of automation because robots have gotten so much better. Not only that, but he expects COVID-19 will lead to even more job losses.
“Added on top of the usual forces we see in recessions, this time around there is also a health incentive to automate,” he said.
The most obvious examples have been the growth in online shopping favouring companies like Shopify or Amazon, and food delivery services. But in manufacturing, human-to-human contact is being replaced by human-to-machine contact that blocks disease transmission, he said.
Automating medicine and universities
Blit points to other examples, such as Walmart’s cashierless store experiment, that, if it works, could save the company money and wipe out hundreds of thousands more routine jobs. Not only that, but the medical field itself, which has so far resisted automation, will be forced to discover new ways to eliminate routine tasks that involve face-to-face contact, thus increasing productivity. He foresees something similar happening in the education sector that until now has been resistant to automation.
Those that fail to automate may find themselves losing out to others that have — what he calls the “reallocation” of market share, of capital and of workers to successful automators.
For employees who don’t find work with the winners, eventually the economy will create new jobs to put those people back to work. But if history repeats, the process of re-employment will take years, which is why Blit supports some sort of minimum income support guarantee from governments for what he fears will be a worse dislocation than in the past.
However, he strongly objects to the extension of government wage subsidies for employers that he says will circumvent the incentive toward greater automation, which he says is essential to the success of the North American economy in a low-wage world.
A stroll through almost any shop in the U.S. or Canada reading “made in” labels reveals just how big a job it would be to bring that production home. As Jia Wang, deputy director of the China Institute at the University of Alberta, once explained, low-wage Chinese manufacturing has become indispensable to North Americans.
“For the U.S. it’s the massive amount of consumer goods — the clothing, the shoes, the household electronics, the computers and the phones,” she told CBC News in 2018.
The latest trade figures from the U.S. census bureau show imports from China this year, while off their highs following trade squabbles and as the coronavirus disrupted shipments, still dwarf U.S. exports to China.
With the threat of a growing trade war, China has rushed to learn how to make the high tech, high-value goods it buys from the west. But for the U.S. to make the low-value goods that North America imports from China is almost impossible, said Wang.
Rich country labour costs are just too high for lower-income Americans to be able to afford the output if the goods were made in the United States.
“If suddenly the price goes up by 50 per cent, can they still afford it? And that’s the real danger,” Wang told me.
Whether Trump has a real plan to reinvigorate U.S. manufacturing or whether it is just short-term electioneering, Joel Blit believes a push for North American manufacturers to make better use of advances in robotics really could begin to bring production home.
He calls the push for automation caused by recessions a “silver lining.” But unless a robot revolution brings a bigger share of global manufacturing back to the U.S. and Canada, there is a danger that the job losses due to greater efficiency will merely make the lives of the poorest even harder.
“It’s going to be great because we’re going to be a lot more productive, we’re going to be richer as a country,” said Blit. “But I am concerned that the benefits are only going to go to a few.”
Follow Don on Twitter @don_pittis