By the year 2020
A key theme in this year’s presidential race is competitiveness of American industry, though candidates like Donald Trump and Bernie Sanders tend to use more colorful language when describing their belief that the United States has lost its economic edge.
Both candidates despise recent trade deals, which they feel have proven that the U.S. can’t compete with countries like China and Vietnam, which have far cheaper labor and less onerous environmental regulations.
But if you ask actual manufacturing executives, they’re far more bullish on America’s future than many of its political leaders. On Thursday, professional services firm Deloitte teamed up with the Council on Competitiveness to release its 2016 Global Manufacturing Competitiveness Index, showing that the United States is the second most competitive manufacturing economy after China. What’s more, global manufacturing executives predict that by 2020, the United States will be the most competitive manufacturing economy in the world.
So why has the United States been shooting up the ranks? Long gone are the days when cheap labor was the most important input for manufacturers. Total manufacturing employment in China peaked during the 1990s and has been falling ever since. And as manufacturing continues to reduce the number of workers needed, the important ingredients to success in the sector are whether advanced technologies and materials are available, and whether or not intellectual property protections are strong. The United States beats out China on both of these scores.
This is not to say that anxiety over the decline of manufacturing employment is misguided. While it’s good that manufacturing firms think that the United States is a great place to do business, their success in America will not have the same impact, in terms of providing a huge number of well-paying jobs, as they did a half-century ago.
Pay for most workers has been stagnant for a generation, and opportunities for the majority of Americans without a college degree are shrinking. It’s natural to look at the phenomenon of declining manufacturing employment as a political failure that can be rectified. But the fact that China has lost more manufacturing jobs than the U.S. over the past 20 years is a strong indication that playing hardball with the Chinese isn’t going to do anything to increase employment in the United States.
Rather than a political failure, the decline of manufacturing employment is a natural economic process that many industries, like agriculture, have gone through in past eras. As sectors become better at what they do, they often require fewer people to get the work done.
So while it’s understandable the state of manufacturing is of concern to presidential candidates, those who say they can bring back lost jobs in the sector either don’t know what they are talking about, or are being disingenuous. Instead, American politicians should be lauding the fact that manufacturing executives want to do business here, even if that fact won’t save the struggling American worker.