OPINION: Unskilled and Unable – Why Donald Trump’s Great Jobs Promise is a Lie

OPINION: Unskilled and Unable – Why Donald Trump’s Great Jobs Promise is a Lie

The USA has serious problems with recruiting, training and retaining suitable factory workers. Michael Pascoe explains.

MICHAEL PASCOE | Business DayOpinion - commentary -analysis

For all the turmoil marking the first weeks of President Trump, the big boot is yet to drop. That’s when the angry heartland realises the factory jobs aren’t coming back, no matter what Trump promised.

It will take time for that realisation to dawn on Trump’s followers. Minor events, such as the 700 Carrier jobs, will be well-publicised PR stunts and the overall employment picture will tend to overshadow what’s specifically happening in manufacturing.     

Employment momentum was building nicely over the past two years – nothing to do with Trump – as witnessed by the Federal Reserve starting to return monetary policy to something like normal.

But for those suffering nostalgia for the ideal of secure, high-wage manufacturing in the rust belt – it’s not going to happen. On one hand, manufacturing automation is not about to be reversed, while on the other, the USA has lost the capability to feed, run and maintain many modern factories.

The most commonly-given reason for Trump’s “bringing the jobs back” chant being a lie is that most of the jobs weren’t “stolen” by China and Mexico in the first place and they therefore can’t be “brought back”.

There have been various studies attempting to allocate responsibility between automation and cheap foreign labour. The highest score I’ve seen for automation’s role is a massive 85 per cent, as summarised by the Financial Times:

“The USA did indeed lose about 5.6 million manufacturing jobs between 2000 and 2010. But according to a study by the Centre for Business and Economic Research at Ball State University, 85 per cent of these jobs losses are actually attributable to technological change – largely automation – rather than international trade.

The think-tank found that although there has been a steep decline in factory jobs, the manufacturing sector has become more productive and industrial output has been growing. ‘Simply put, we are producing more with fewer people,’ notes Mireya Solís, a senior fellow at Brookings.”

Trump and his more dangerous associates, such as the Sinophobe head of his National Trade Council, Peter Navarro, would have voters believe jobs can nonetheless be taken from China by tariffs and bullying individual companies. And, pre-Trump, there have been papers written about the benefits of “reshoring”, about being closer to markets and capitalising on cheap gas, currency relativities and a supposed “Made In America” mood swing.

But there’s another factor mitigating against reshoring: America’s manufacturing capability has been hollowed out.

The USA has lost the skills, the support services, the supply chain and talent for much of the manufacturing it hungers after. It’s simply too hard, too costly, too inefficient to try to rebuild it.

It’s what Harvard Business School Professor Willy Shih likens to the “tragedy of the commons”, the loss of common grazing land that supported all the village. The USA has witnessed the loss of much of its industrial commons.

For the past decade, Shih and colleagues have been researching what’s happened to American factories. What the Professor found is that in whole areas of manufacturing, the jobs can’t be brought back or new technology manufactured in the USA because America simply doesn’t have the skills anymore.

As long ago as 1997, he found at Kodak that, despite a highly-automated production line, the company could not make digital cameras in the USA because there just weren’t the people with the knowledge to make the parts. In 2009, he co-authored a paper showing the Amazon Kindle could not be made in the USA, even though the core technology was developed there.

“While the macroeconomic data on comparative labour and factor costs may be compelling, the actual process of reshoring – bringing assembly work back from abroad – is hard work,” Shih wrote in a 2014 MIT Sloan management review paper.

“This is especially true when the resources upon which a company draws (the supplier base, the workforce, and even the company’s own internal product design capabilities) have atrophied.”

A 2012 Harvard Magazine interview walks through the dispersal of American manufacturing talent. Shih does lay blame on cheap overseas labour luring manufacturing offshore, but now the result goes beyond wage rates.

“Once you allow those (manufacturing and engineering) skills to dissipate, throw away those capabilities, a lot of those decisions are very expensive or impossible to reverse,” he wrote. “My counsel is to be more thoughtful about that.

“I just wrote a case on a large multinational that has its engineering centre in India, with thousands of engineers and an average age of 27, and its home engineering operation in the USA, where the average age is 47. The guys in India said the USA operations hadn’t hired anybody in the past half-dozen years, so they don’t have fresh skills. Do you retrain, or start with the younger generation and try to keep their skills fresh? That’s a huge problem. I saw people at Kodak in film manufacturing who had amazing skills, but as technological substitution happens, those people can’t take their skills anywhere.

“The global market for tradeable goods decimated the lower-skilled jobs. I think it’s starting to attack highly skilled jobs, too. I don’t have good answers, but I think that’s the next huge issue.”

With the advent of President Trump and the threat of tariffs, Professor Shih’s work is attracting renewed attention.

And the problem extends further than high-tech – the USA has serious problems now with recruiting, training and retaining suitable factory workers. American management and work ethic in many cases isn’t competitive with what corporations have become used to in Asia.

There’s a small example of that in Merchant House International – an Australian-listed, Hong Kong-headquartered, Bermuda-incorporated Chinese manufacturer of footwear and Christmas decorations. I wrote in 2013 about MHI reading the Chinese and American strategic winds and taking advantage of state incentives to open an automated American factory. That factory is yet to make a profit.

There are lessons from Shih’s work for Australia as well. Like the USA, a large part of manufacturing looks set to rely on state aid in the guise of electorally-sensitive Defence Department work. The political love affair with making “things you can drop on your foot” doesn’t look like its playing well left to its own devices.

Local protectionists and President Trump can make a song and dance about a few token jobs, but slapping tariffs on imports, making consumers pay more for goods, undermining comparative advantages and endangering world trade won’t achieve the impossible.

– Sydney Morning Herald

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  • Leslie Chin  On February 23, 2017 at 1:38 am

    Donald Trump has sold American voters a bill of goods i.e. “alternative facts”. Rust belt jobs are not coming back; robots, Chinese and Mexicans are doing these. America’s future lies in innovation and technology at which they are still the best.

  • demerwater  On February 23, 2017 at 3:58 am

    After I looked at this presentation, I began to wonder.
    Are we missing the boat in its entirety?

  • walter  On February 23, 2017 at 10:21 am

    Making children is expensive in North America. In Third world countries seems to be a Olympic event. Was it the plan of the globalist to give these overpopulated countries a piece of the pie? As far as I can see only “Big Money” profiting from One World Order. If TRUMP wants to reverse the trend, Americans have one Huge TRUMP (intended) Card, they buy lots of the crap produced outside. Terrible slap in the face of younger Americans, told to accept a position of service industry. Nationalism needs a chance to reboot the system, younger generation in advance countries should not have to bear the brunt of bad decisions made by greedy politicians.

  • Leslie Chin  On February 23, 2017 at 11:00 am

    Silicon Valley has already signaled that they will be in trouble if they cannot recruit high tech workers from abroad. With Trump’s inward looking anti-immigrant policy in place who will want to come to the US? especially if they can find challenging jobs at home.

  • walter  On February 23, 2017 at 11:32 am

    Then the Us should focus their educational system to make sure younger generation can participate in the progress of their country, done before, my opinion that crooks like gates used very bright foreigners because he got them half price. I remember seeing on TV large mansion in San Jose twenty young Indians working in the valley, all sleeping on the floor. BTW you actually wrote “Who will want to come to the US” Everyone?

  • Albert  On February 23, 2017 at 1:11 pm

    Dr. Shashi ….”Think out of the box”

    Think it was an Indian educator who said he went to one of the best universities in India. Graduated with high honors, memorized all the facts from his textbooks and teachers, but it was through an American graduate level school he learned how to “think”. This is one large advantage found in American institutions of higher learning. That’s why we are good at innovation and creating new things. The problem is the typical American youth turns away from science and technology. Classrooms on such subjects are filled with foreign students many of whom return to their country for whatever reason. Wonder how Trump will handle this

  • Ron Saywack  On February 23, 2017 at 1:46 pm

    “That’s when the angry heartland realises the factory jobs aren’t coming back, no matter what Trump promised.”

    “Trumpesque’ demagoguery, nativism and populism, prominent in a certain part of Europe seven/eight decades ago, now appear to be on the endangered species list?

    Just as the sun finally set on the iniquitous British Empire, the ephemeral American Empire has ostensibly seen its best days and now, at twilight, it is only ‘moments’ away from entering the realm of perpetual darkness.

    Alas, Trump and his delusional clan will soon come face-to-face with this impending reality and it will not be a pretty sight.

  • walter  On February 23, 2017 at 4:27 pm

    He was elected, give him a break,” perpetual darkness” kinda harsh, also insulting to millions of Americans hoping to be rescued from emptiness they were left in by LIBERAL Pie in the Sky thinking. Time will tell.

  • Clyde Duncan  On February 23, 2017 at 6:52 pm

    If we had to mark it on a calendar… we’d venture that today’s the day Wall Street started to realize the Trump economic agenda is much like Gertrude Stein’s description of Oakland: “There is no there THERE.”

    Before the market open, Treasury Secretary Steve Mnuchin went on CNBC and pledged the Trump administration’s commitment to getting tax reform done before Congress heads back home for its late-summer break.

    “We want to get this done by the August recess,” he said. “We’ve been working closely with the leadership in the House and the Senate, and we’re looking at a combined plan.”

    Sounds great! What are the details, sir?

    Sorry, no dice. “Look, as I’ve said before, we’re primarily focused on a middle-income tax cut and simplification for business.”

    No numbers, no discussion of what rules might be axed. Just more of the same feel-good Pablum.

    The August timeline isn’t something Mnuchin just pulled out of his posterior because it sounded good.

    He knows too well that Wall Street has constructed a fantasy in its collective mind about the Trump administration as a “Morning in America” rerun of the Reagan administration.

    Reagan was inaugurated on Jan. 20, 1981; the Kemp-Roth tax cut passed both houses of Congress by Aug. 4.

    That was a significant feat on its own. But the Trump administration has set the bar far higher… because the White House and Congress have agreed that Obamacare reform is supposed to get done before the tax bill.

    If Mnuchin had said something, anything, specific… the major U.S. stock indexes would be screaming still higher into record territory today.

    Indeed, they’re all in the red as we write; that’s the sound of traders hitting the “sell” button as they realize the next catalyst for growth in small stocks won’t be coming from a tax cut.

    “It won’t be long until the impending collapse of the post-election Trump-O-Mania frenzy in the stock market,” says our David Stockman.

    David’s been saying since early December that the Trump agenda is doomed and Wall Street’s expectations will be dashed.

    He says so with the authority that comes from being “present at the creation” of the Reagan tax cut in 1981 — when he was White House budget director.

    We forgot all about it till today… but if you look on YouTube for “A Day With President Reagan,” you’ll find an NBC News special from Feb. 13, 1981; MSNBC reran it late the night of Reagan’s funeral in 2004. Midway through, there’s a four-minute section with David drawing detailed strokes of a budget plan for Reagan’s Cabinet, in office barely three weeks.

    It’s striking to watch now… because it reminds us we’ve seen nothing approaching those specifics coming from Team Trump.

    Heck, it wasn’t till seven days ago that the Senate confirmed the current budget director, Mick Mulvaney.

    “There is not a snowball’s chance in the hot place that the frail GOP majorities on Capitol Hill will pass a giant Reaganesque tax cut financed with red ink,” says David, now.

    “Washington is at a fiscal dead end with a $20 trillion public debt already in place and $30 trillion baked into the cake by the middle of the next decade. And that’s under existing policy, before even a single dime of the Trump tax cuts or infrastructure stimulus is added to the equation.

    “The ranks of tea party Republicans and Freedom Caucus fiscal conservatives simply will not walk the plank for a 10-year budget resolution that would result in a Greek-style public debt at 140% of projected GDP…

    “Without a FY 2018 budget resolution, there will be no ‘reconciliation instructions’ on tax reform. Without the latter, the Senate will become a 60-vote, filibuster-driven killing field for tax reform.”

    That’s serious enough… but in addition, “the Trump White House is already on the verge of a terminal political crisis,” David declares.

    “After the travel ban fiasco, the Flynn resignation imbroglio, the massive anti-Trump leaks coming from the bowels of a hostile national security establishment and the renewed media campaign to re-litigate the 2016 elections over the Russian meddling canard, the incipient Trump administration is already mortally wounded.

    “The ruling elites are determined to take The Donald down, and whether they succeed or not, it is extremely probable that Washington will grind to a halt — Watergate-era style — by early spring.

    There will be no giant tax cut, but there will be a news flash at some point soon crystalizing that very fact.

    “Then the meltdown will begin, and the stock market will be bidless because all the robo-machines will be selling the news of breakdown, dysfunction, fracture and crisis in the Imperial City, not Donald Trump’s ‘hopium’ tweets.”

    [Ed. note: With 40 years of experience both in Washington and on Wall Street, David knows exactly what Trump is up against — and that people are out to get him.

    It’s still not too late, but time’s running out. In his latest book, TRUMPED!! David explains how Trump needs to “make 10 great deals” to take back America from the swamp critters. Only then can American democracy be restored.

    Best regards,

    Dave Gonigam
    The 5 Minute Forecast

  • Gigi  On February 25, 2017 at 12:37 pm

    Last nigh I watched an episode of Inspector George Gentry. It was about catching bank robbers. It turned out that the bank robbers were a gang of poor white kids who felt oppressed by the system. The line that stood out for me was how they were described “working class but not working”, reflecting the lack of jobs/jobs not paying enough to survive. That is the major problem affecting societies not only in America. Many people are categorized as working class but they have no jobs because the jobs are not there. Additionally, the jobs most of them have do not pay enough for even their basic survival needs.

    Mu oldest daughter is in now a junior in college. A few months ago she got this gig job visiting high schools and talking to students about the college experience — what to expect and how to maneuver through it successfully. At first she was very excited even though the pay was peanuts, but she doesn’t need to “work”. However, what did it for her was how she was treated by management. She claimed they made her feel incompetent and made out that they were doing her this great favor by giving her this awesome job. I told her to make a list of her weekly work hours, her final take home pay and determine if the gig job was worth it. When she tallied up the pay, travel expense, and time spent traveling, her final take home was a whooping $10.56 a week. I asked her if being miserable, unhappy and treated shabbily to boot was worth $10.56 a week. She quit. She laughingly joked that even though she was $10.56 poorer, she was much happier. I would be too.

    Americans have been brainwashed into thinking that they’re exceptional and blessed but incompetent and disposable. They keep electing people they believe will make things right yet they don’t seem to know exactly what is wrong. I hear this from many of the teachers. They’re stressed, miserable and complain about how things are but they haven’t figured out why. Quick example, recently at a PD workshop, we were told to take out our phones to access a website. I did not because (1) it’s my personal phone, (2) the job does not pay my phone bill/contract. I was flabbergasted that everyone else just whipped out their phones and did what they were told. When I mentioned this to a group of teacher later, they just looked at me blankly. They could not comprehend my point. They do the same when told by the principal to do stuff over the weekend. I’ve flatly refused stating that it’s in violation of my work contract. I can do this because (1) The state of Virginia has a shortage of 2,000+ teachers. (2) I am certified to teach K-12 general special education and K-6 elementary education. I can teach social studies and TESOL based on my college credits although I’m am not certified in these areas since I haven’t taken the exams. They haven’t figured this out either. Americans needs to re-evaluate their worth and a take a stand to defend it if they want their situations to improve rather than condemn those attempting to push back.

    • LONDON WOMAN  On February 25, 2017 at 2:35 pm

      All politicians are a joke. We have so many people who come from abroad to UK to drain the NHS.

      My 92 year old ENGLISH neighbour who is white and born on this country has had to wait at home for 3 days for a hospital bed because there are none available. It’s disgusting

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