Rick Haglund: Research shows trade, not automation, is killing manufacturing jobs

More than 5 million manufacturing jobs — almost 300,000 of them in Michigan — have been lost since the most recent employment peak in 1998.

Many economists have attributed the huge loss of good-paying manufacturing jobs mostly to booming productivity, enabled by the increasing use of robots and other automated processes in factories.

But Susan Houseman, vice president and director of research at the Kalamazoo-based W.E. Upjohn Institute for Employment Research, says that explanation is wrong. 

The real culprit, she says, is global trade that destroyed millions of U.S. manufacturing jobs to the benefit of China, Mexico and other low-wage countries.

Houseman has asserted this view without much fanfare for years. But a 37-page paper she wrote on manufacturing jobs losses in 2018 has been getting a lot of attention recently because of the role trade is playing in the 2020 presidential campaign. 

President Donald Trump, as well as Democratic rivals U.S. Sens. Bernie Sanders (I-Vt.) and Elizabeth Warren (D-Mass.), all are blaming global trade for the destruction of U.S. manufacturing jobs. 

Warren uses Houseman’s research as ammunition in criticizing large multinational corporations for sending good-paying American jobs to foreign countries.

Another Democratic candidate, tech entrepreneur Andrew Yang, claims that automation, not trade, killed most of the lost manufacturing jobs in the 2000s. He relies on a Ball State University study that Houseman debunks in her research.

Trump’s contention that the United States let China and Mexico steal good-paying American manufacturing jobs “resonated in many American communities and may have played a role” in Trump winning the White House in 2016, she said.

(Another view is that Trump’s victory had little to do with economic anxiety and was mainly about racism, sexism and xenophobia.)

Nevertheless, understanding the implications in Houseman’s work is crucial for policymakers in Michigan, one of the top manufacturing states in the country. 

Almost 14% of the state’s jobs are in manufacturing, third-highest in the nation behind Indiana and Wisconsin. Manufacturing represents 19.1% of Michigan’s gross state product, a statistic surpassed only in Indiana, Oregon and Louisiana.

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Plus, the state’s economic development strategy, right or wrong, is focused on growing manufacturing, particularly in the production of electric and self-driving vehicles that might someday replace today’s gasoline-fueled cars and trucks.

While acknowledging it’s difficult to parse out the various elements that affect manufacturing employment, Houseman said her research and that of some others point to trade and globalization “as the major factor behind the large and swift decline of manufacturing employment in the 2000s.

“Although manufacturing processes continue to be automated, there is no evidence that the pace of automation in the sector accelerated in the 2000s,” she said. “If anything, research comes to the opposite conclusion.”

While manufacturing productivity has increased over the past 30 years, Houseman says it’s almost entirely due to outsized gains in the computer industry.

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Without the computer business, labor productivity in manufacturing “generally has been no higher or only somewhat higher” than in the overall economy, her research found.

U.S. manufacturing employment peaked at 19.4 million jobs in 1979 and has mostly declined ever since. But after relative stability in the 1990s, manufacturing jobs took an unprecedented dive in the 2000s. 

Houseman attributes that collapse largely to China, which was granted permanent normal trade relation status with the United States and entered the World Trade Organization in 2001.

She cites other research showing 25% of the overall decline in U.S. manufacturing jobs between 1990 and 2007 were the result of increased imports from China.

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And since the North American Free Trade Agreement (NAFTA) took effect in 1994, U.S. automakers and other manufacturers have moved thousands of jobs to new Mexico factories to take advantage of low labor costs.

Reversing the trend won’t be easy. Trump, the self-described “Tariff Man,” has used tariffs as a punitive cudgel to try to force China and other countries to reduce exports to the United States.

That strategy has largely failed to boost U.S. manufacturing employment.

While about 1.4 million U.S. manufacturing jobs have been added since the end of the Great Recession in 2009, jobs in the sector have fallen in recent months as Trump has ratcheted up a trade war with China. 

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Houseman’s research paper doesn’t offer many suggestions for rebuilding manufacturing employment. Industry globalization isn’t likely to be reversed and new technologies are likely to eliminate more jobs, she acknowledges.

Electric cars, for example, pose a major threat to autoworkers’ jobs because they have fewer parts and require about 30% less labor to build than gasoline-powered cars.

Houseman has said that U.S. policymakers need to pressure trading partners not to artificially devalue their currencies, making exported American goods more expensive and imported foreign goods cheaper here.

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Income and retaining assistance for dislocated workers and more economic development assistance for communities hit by plant closings should be “an integral part of the policy mix,” she has said.

“Manufacturing still matters, and its decline has serious economic consequences,” Houseman said in her research paper. “The widespread denial of domestic manufacturing’s weakness and globalization’s role in its employment collapse has inhibited much-needed, informed debate over trade policies.”