Trade Deals, Automation, and Job Loss

By Henry McCabe

There has been a lot of talk lately among Democratic candidates about what has been the root cause of job loss in the manufacturing sector as the country has deindustrialized. The current Democratic field has articulated a wide variety of opinions on the issue, but there is currently great debate over how to address it given that the cause of job loss is in dispute. 

In a time where political polarization is paramount, there are few things that many in both parties can agree on. In fact, Donald Trump and Democratic hopefuls Elizabeth Warren and Bernie Sanders, figures who are diametrically opposed on the political spectrum, seem to agree that trade deals have had negative effects on the United States. Trump has said that trade deals such as NAFTA leave “millions of our workers with poverty and heartache,” while Sanders has said that they have caused “massive job losses in the United States and the shutting down of tens of thousands of factories.” Even Hillary Clinton, more of a centrist than any of the previously mentioned figures, came out against the Trans Pacific Partnership (TPP), saying that she would oppose the TPP, or “any trade deal that kills jobs or holds down wages.” 

Blaming trade deals for the economic woes of America’s Rust Belt has almost become expected by many on both sides of the aisle, but the argument that negotiating more “fair” trade deals will stop further job loss is unrealistic, especially given the reality that of the 161 million jobs in the American economy, 129 million are in the service sector, jobs that are unlikely to be displaced by trade deals. The manufacturing sector does remain a large sector of the American economy, but the reality is that America’s economy is now one dominated by the service sector. What is perhaps more interesting than this transition is that manufacturing output in the United States has not fallen off a cliff as some might suggest, rather manufacturing output (as indicated by the graph below) has steadily increased in an inverse relationship with the number of jobs in the manufacturing sector. 

While increased foreign competition has certainly led to a decline in the United States’ share of global manufacturing output, the magnitude of the output itself has only grown, despite job loss. This seemingly indicates that there must be another underlying cause for American job loss rather than jobs simply leaving the country due to multinational corporations packing up shop in the United States. 

It cannot be denied that some of the job loss seen in the manufacturing sector has been due to free trade policies, but it is far too simplistic to blame job loss solely on this factor. Employment in the manufacturing sector has fallen prey to an age old predator of jobs: productivity. Just as technological advancements have vastly increased the amount of food our farms produce, while shrinking the number of farmers required to grow that food, so to have technological advancement and increased productivity reduced the amount of factory workers required for the same, or increased production. One need only compare the manufacturing output of the United States to Germany to realize that increases in productivity accompany job loss no matter where one looks. German manufacturing employment has dropped in a similar manner to the United States despite running trade surpluses, and possessing a weak Euro that makes exports cheaper. In a purely capitalist system, where the government does not attempt to support dying industries, inefficient factories are allowed to close as more competitive ones remain. Protectionist trade policy has historically failed to produce tangible benefits. One prominent example of this was the Smoot-Hawley Tariff Act in the 1930s, enacted due to concerns about rising imports. The result of this was a disaster for both the American and world economy as the protectionist measures implemented in the United States kicked off a trade war that exacerbated the recession, and turned it into a depression.

Similarly ineffective would be framing the renegotiation of trade deals as a way to return jobs to the United States. While the sentiment that many candidates have, namely Elizabeth Warren and Bernie Sanders, that renegotiating trade deals through the lens of labor and environmental protection, is well placed, it is naive to believe that this will result in manufacturing jobs coming back to the United States. Supply chains have already been established in other countries, and increased labor costs due to increased labor and environmental protections would be unlikely to cause companies to move those supply chains, and thus manufacturing jobs, to the United States.

What poses a far greater threat to American job loss is automation. Automation and artificial intelligence (AI), hold great potential to exponentially increase American productivity, but if not handled correctly, could result in disaster for millions of Americans who work in the industries that will be affected. Unfortunately, automation has not been a major subject of debate in the Democratic field. Andrew Yang has brought automation to the forefront, with his campaign centered around the introduction of a Universal Basic Income that he has dubbed the “Freedom Dividend” that aims to provide a basic income of $1,000 a month for all Americans over the age of 18, with the intention of providing a foundation that will allow Americans to benefit off of increased automation rather than suffer the consequences of job loss. Automation will only be negative if the government chooses to do nothing to address it. Elizabeth Warren on the other hand has continued to point to trade deals as the source of job loss, rather than automation, calling automation “a good story.” She had often cited a German study to back up her point, which she claims shows that automation has not caused job loss by pointing to the conclusion that robots “do not cause overall job loss,” but this conveniently ignores the previous line that states that “Unlike in the United States, we find no evidence that robots have been major job killers so far.” And as we have previously seen, while automation may not be causing job loss in Germany currently, increased productivity certainly has. 

Ignoring the potential threat that automation poses means ignoring a far greater source of job loss than simply ones in the manufacturing sector. Even jobs that may have previously been immune to outsourcing, or any perceived negative effects of trade deals, are now vulnerable, such as cashiers and truck drivers. According to the Brookings Institute, up to 25% of American jobs are at high risk of automation, with an additional 36% of jobs at medium risk. Automation will hit low wage workers hardest, as the easiest jobs to automate are repetitive ones. Indeed, regions that have already experienced job loss due to increased industrial productivity such as the Midwest, will continue to lose jobs due to automation. Another recession would only accelerate this process as companies tend to automate jobs in an attempt to lower labor costs. 

In order to truly be addressing the issue of job loss in the United States, Democratic candidates must first have an understanding of the threat that automation poses if not handled correctly. Candidates such as Andrew Yang, Tulsi Gabbard, and Julián Castro have recognized this threat, while one of the field's more prominent frontrunners, Elizabeth Warren, has chosen instead to continue to focus on trade deals as a source of job loss. Any solution that ignores automation is a half solution to an issue that requires comprehensive action. 

Henry McCabe is a freshman from Saratoga Springs, New York, currently majoring in International Affairs.

Note: The GW College Democrats News & Blog Committee’s mission is to highlight, empower, and facilitate the political expression of its members. As such, the views expressed in this article are based on the opinions of its author, and do not necessarily represent the views of the whole of GW College Democrats, its executive board, or its senior deputy board.