How Trump's Fight Against Layoffs Could Still Lead to Fewer Jobs

Yes, the hiring cycle in American factories is broken. But the president-elect’s solution could hasten the dawn of automation.

U.S. President-elect Donald Trump speaks to members of the news media as he tours a Carrier factory in Indianapolis, Indiana, on December 1, 2016.
Mike Segar/Reuters

The manufacturing sector is vital to America’s self-image as a hardy, industrious nation, even though it employs less than 10 percent of the U.S. workforce. Perhaps that’s why it was so painful to watch the bottom fall out. When factory employment plummeted in the last decade, dropping by a third between 2000 and 2010, a cornerstone of the American economy was demoted to a mere cinderblock.

Then came Donald Trump and his 35-percent tariff. The logic of president-elect’s plan, intoxicating in its simplicity, can be summed up on a good-sized cocktail napkin: I will punish anyone who moves American jobs overseas; therefore, America will lose no jobs.

Most economists agree China’s entry into the World Trade Organization in 2001 and the subsequent rush to offshore manufacturing hurt American factories; they quibble only over the extent of the damage. And doesn’t Trump’s strategy just make sense? His threat of retributive tariffs (and a pile of state tax rebates) appeared to convince furnace manufacturer Carrier to preserve more than 1,000 jobs in Indiana; the president-elect has since taken credit for keeping a Ford factory in Louisville (though that’s debatable) and for bringing 5,000 Sprint jobs back to America (also probably not true).

But here’s the rub: Outsourcing just isn’t the problem it used to be. Manufacturing layoffs are now the lowest they’ve been in more than a decade. Most factory workers are not in immediate danger of losing their jobs in the next year, and the industry labor force has settled at a steady (if disappointing) level of about 12 million positions.

Instead, workers have a new worry: When they do get laid off, it’s harder for them to find another job in manufacturing, even compared to a decade ago. In 1980, around 15 percent of factory workers transitioned into a different industry after being unemployed, according to Census data. By 2016, that figure hit around 30 percent.

“They’re not recycling workers,” said William Spriggs, chief economist for the AFL-CIO and a former assistant secretary in the Department of Labor. “In a healthier market, where things were highly competitive, you would expect to have seen a lot more new hiring. That’s not what’s going on. I just think there’s a great dysfunction in manufacturing.”

Employee churn—when workers leave one job for another, either by choice or because of a layoff—is usually a sign of an industry’s health, a signal that people can move to better companies with better wages. It’s supposedly how the market’s invisible hand re-allocates employees to more efficient firms. But the labor cycle of the American manufacturing sector has somehow sprung a leak, losing talent with every turn of the wheel.

That almost included Cindy Disbrow. In her 30 years working in Michigan, she’s welded automobile panels, prepared baby formula, and now leads a team that manufactures parts for Camaros. Whenever she left an old job, a new one was waiting.

Things changed a few years ago, she said. Factories stopped hiring, or they only took temporary workers. “A lot of companies will only use you and get rid of you,” she said. “Everybody suffered.”

Eventually, she found her current job, and got a welding certification with the help of a regional career placement center. But others haven’t been as fortunate. After the Great Recession, more than 1 million manufacturing workers never found employment in a factory again.

What turned the virtuous cycle of churn into a downward spiral? It depends on which economist you ask. Spriggs blames the decline of unions and a new pickiness on the part of factory managers, who he says are less likely to look at their workers as trainable investments without the prodding of organized labor. Laid-off workers are viewed with suspicion; no one can vouch for them, he said.

“We don’t have very good labor market information systems, and that works at the disadvantage of displaced manufacturing workers,” Spriggs said. “When you have a union and the company is hiring, you’re going to get a more diverse pool of people in manufacturing who can call upon their contacts and say, ‘I know somebody who can do this job.’ ”

Spriggs, of course, works for the biggest labor federation in the country. An alternate explanation, put forth by Ball State economics professor Michael Hicks, might be even more troubling to Trump. In his view, increases in automation and productivity have kept manufacturing employment low. And if Trump slaps companies who outsource production with a sizeable tariff, Hicks believes owners will simply double down on robots, flatlining labor growth.

Take Carrier, Trump’s biggest jobs triumph to date. The furnace manufacturer says it will spend $16 million to further automate its Indiana facility; those improvements could eventually render obsolete the jobs saved in the deal Trump negotiated.

“Businesses are saying, gosh, if I’m going from paying someone $24 an hour down to $3 an hour in China or Mexico, maybe I go to $6 an hour with automation and still save money,” Hicks said. “They’re not going to just keep production here and bite the bullet and lose money to make their workers better off. No business does that.”

In the near term, if Trump’s proposed manufacturing tariff works as planned, most of those workers keep their jobs, he'll earn immediate goodwill among his supporters, and the incoming capital investments in whirring robots will give a boost to GDP, particularly if Trump also strikes down regulations and lowers taxes.

The long-term effects, however, won’t be as pleasant. More automation means fewer future slots for human employees. And while workers might have kept their jobs this time around through the intervention of the president-elect, when the inevitable layoffs come, there won’t be new manufacturing work for everyone.

American manufacturing won’t disappear tomorrow, and neither will the American factory worker. There’s still a demand for higher-end work, which often requires some degree of post-secondary education. But if Trump wants to keep jobs from leaving the country, he’s arrived about 10 years too late. And his aggressive policies, designed to protect workers, may very well accelerate their obsolescence.