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There is a huge hole in Trump's promise to bring back US manufacturing jobs

March 18,2017 20:29

Making clothes in the US is prohibitively expensive, because workers expect to receive decent wages for their labor. So what did the military do? It invested in automation. The Defense Department's Advanced Research Projects Agency granted Georgia Tech ...and more »



American
manufacturing.

YouTube/iPhone-Fan

When Donald Trump was running for president, he said companies
should "buy American and hire American."

But in manufacturing these days, buying American often means
creating jobs for robots, not humans.

The story of SoftWear, a sewing-automation company in Atlanta,
should throw some cold water on Trump's dreams of returning
thousands of Americans to manufacturing jobs.

SoftWear started with a group of Georgia Tech professors playing
around with robots and became a company because of an earlier
"Buy American" push.

Since 2002, a rule known as the Berry Amendment has prohibited
the Defense Department from procuring "food, clothing, fabrics,
fibers, yarns, other made-up textiles, and hand or measuring
tools that are not grown, reprocessed, reused, or produced in the
United States."

The DOD quickly learned why nearly all clothes are made overseas
these days.

Making clothes in the US is prohibitively expensive, because
workers expect to receive decent wages for their labor. So what
did the military do? It invested in automation. The Defense
Department's Advanced Research Projects Agency
granted Georgia Tech with $1.26 million to develop robotic
sewing machines.

That result was SoftWear. And even its sewing robots, it turns
out, don't actually produce any clothes in the US.

SoftWear's CEO, Palaniswamy Rajan, 46, moved to the US from
Bangalore, India, and never looked back. He's unapologetic about
eliminating mechanical jobs like sewing, arguing that automation
lets workers focus on more interesting, bigger-picture tasks —
and often in better, higher-paying jobs. While the US producers
rank third after China and India in textile exports, the country
imports about 97% of its clothes, Rajan says.

Most young people nowadays would rather work in services than in
a factory, he says, so why try to recreate a world that is long
gone and wasn't all that great to begin with? "It's an
idealization of the past, as if the past were always so rosy," he
said.

"Do we really want phone operators plugging in your phone
connection, people having hard physical-labor jobs in factories,"
he said, that are physically straining and often unhealthy?

America's manufacturing retreat dates back to
disco

The story of the Atlanta-based startup is emblematic of the
challenge facing one of Trump's central campaign promises: to
"bring back" millions of manufacturing jobs to hard-hit regions
of the US.

US manufacturing employment has been declining since a 1970 peak,
a drop that accelerated after China's entry into the World Trade
Organization but, tellingly,
not after the US entered the North American Free Trade
Agreement with Mexico and Canada in 1994.

Andy Kiersz/Business Insider

Trump has argued widely in favor of ripping up trade agreements
and threatened to impose tariffs on key trading partners, arguing
that NAFTA was "the
worst trade deal in the history of the country" and calling
the Trans-Pacific Partnership, which his administration has
already jettisoned, a "rape of our country." He has also threatened
to leave or simply ignore the WTO, a move that could unravel
the global trading system.

But SoftWear's business, along with so many others across the US,
should remind Trump of a factor he has yet to acknowledge: the
role of automation in reducing the number of manufacturing jobs
available. Rajan's firm employs just 20 people, though he plans
to hire 15 more in the coming year.

That fits a nationwide pattern of manufacturing output hitting
record highs in recent years, even as manufacturing employment
continues its steady decline.

Andy Kiersz / Business Insider

"The fact that the U.S. manufacturing sector
has been succeeding by many measures in recent years makes
Trump's promises seem like false dreams," Mark Muro, a senior
fellow and the director of policy at the Metropolitan Policy
Program at the Brookings Institution, wrote in MIT's Technology
Review. "No one should be under the illusion that millions of
manufacturing jobs are coming back to America."

Indeed, despite Trump's public rhetoric about pressuring the
air-conditioner maker Carrier to keep jobs in Indiana instead of
sending them to Mexico, the company's CEO later acknowledged the
result would be, you guessed it,
greater automation.

Welcoming our robot overlords

The rise of robots lends a sense of
urgency in US business investment in new digital
technologies, according to a recent report from Morgan
Stanley. Corporate managers' interest in new digital technologies
has surged, the bank's analysts said. "Several companies have
made digital appointments in recent months, and outlined their
respective strategies at capital markets events."

Morgan Stanley

In contrast with Trump's focus on immigration as a threat to
jobs, President Barack Obama touched on
the issue of automation in his farewell address, saying: "The
next wave of economic dislocations won't come from overseas. It
will come from the relentless pace of automation that makes a lot
of good middle-class jobs obsolete."

Just how big a drag automation has been on factory employment is
still open to debate. The US economy has lost some 5 million
manufacturing jobs since 2000, a decline of nearly 30%, to 12.3
million jobs. There has been a substantial recovery since the
depths of the Great Recession, but nothing on a scale that could
reverse the preceding decades' losses.

But one study from Ball State University finds "almost 88% of
job losses in manufacturing in recent years can be
attributable to productivity growth, and the long-term changes to
manufacturing employment are mostly linked to the productivity of
American factories." In other words, robots, not outsourcing or
trade competition, are the culprit.

Others are less sanguine. A 2014 study from MIT's Daron Acemoglu,
David Autor, and coauthors found "net job losses of 2.0 to 2.4
million stemming from the rise in import competition from China
over the period 1999 to 2011."

Autor himself, however, is optimistic about the prospects for
automation to generate better, higher-paying jobs. He wrote in a separate
paper that the rapid pace of recent technological growth had
not, for the most part, wiped out a significant portion of jobs
but instead changed the labor market in myriad ways, many
positive: "Automation does indeed substitute for labor — as it is
typically intended to do. However, automation also complements
labor, raises output in ways that lead to higher demand for
labor, and interacts with adjustments in labor supply."

That may be especially the case in the services economy, which
accounts for some 80% of spending in the nearly $19 trillion US
economy.

JPMorgan said on February 27 that it was launching software that
could accomplish in seconds
the same amount of work it would take lawyers 360,000 hours
to do. This kind of surge in productivity is hard to fathom — and
lawyers aren't even part of the manufacturing industry. Not yet
anyway.

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