A combination of globalization and automation is eroding labor force participation in the U.S., leading to an economy that is growing less, a labor force that is working less and a nation that is weakening internally as communities, families and individuals fail to adapt to the new economic reality.
Since 2000, when permanent normal trade relations with China was formalized, Since 2000, the civilian labor force participation rate among 16-64 year olds has collapsed from more than a 77 percent rate at the turn of the century to just 72.6 percent in 2015, according to the Bureau of Labor Statistics. That has been right alongside declining U.S. market share globally of manufactured goods exports worldwide as a percent of worldwide exported manufactures, which peaked in 1999 at 13.48 percent, and has been declining ever since, according to data compiled by the World Bank. In 2014, it was down to 7.45 percent.
The lost labor capacity represents 10 million people who either left the labor force or never entered on a net basis. Since that time, manufacturing alone has shed 5 million jobs, according to data compiled by the Bureau of Labor of Statistics.
Overall, the economy has not grown above 4 percent since 2000 and not above 3 percent since 2005, with the last ten years representing the worst decade of economic growth since the Great Depression. Oh, and incomes have been flattening, too, according to the Census Bureau.
But what did anyone else really expect?
By eliminating tariffs — additions imposed on prices of goods and services from overseas — on nations that have lower labor costs, lower regulatory costs and cheaper currencies, the U.S. has incentivized shifting investment and production overseas to those countries.
An Economic Policies Institute study by Robert E. Scott and Elizabeth Glass published March 3 found that in 2015, trade deficits coupled with currency manipulation by Trans-Pacific Partnership trade pact nations — the major trade agreement now under consideration in Congress — cost 2 million jobs, half of which were in manufacturing.
And since the Trans-Pacific Partnership does not deal with monetary policy, the authors project the problem will only get worse in the years to come if the agreement is enacted, costing millions more jobs.
Add to that the lower labor costs in countries like Malaysia that still utilize slave labor — coupled with the Obama administration redefining slave conditions to suit Malaysia’s inclusion in the agreement — and this massive trade deal, the largest in history, could do even more to incentivize slave conditions overseas.
As issuers of the world’s reserve currency — the U.S. dollar and dollar-denominated assets — the cheaper something is to produce overseas, the greater trade volumes can be generated through sales in the U.S. and elsewhere, and the more capital a producing nation can accumulate.
As such, the nations with the lowest possible labor costs extract the most benefit from a reduction of U.S. tariffs on imported goods. In that environment, slavers come out on top.
It’s a race to the bottom that flattens incomes and outsources jobs.
So how will the U.S. remain competitive? Some companies are already turning to the increased use of automation domestically.
Consider a March 28 story from the Wall Street Journal, “Massive robots keep docks shipshape,” in which U.S. ports are increasingly using automation to unload cargo while predictably running into stiff resistance by longshoremen unions, who fear replacement by machines.
Surely, productivity would increase dramatically through automation but at the cost of the jobs currently performed by persons. If global trade was supposed to have created jobs through increased volume, it would appear that on the contrary, it is helping to make some of those jobs obsolete in the global race to the bottom, in this case by slashing distribution costs.
But it is not just at global shipping ports where automation is eliminating the need to work. As noted by Bryan Dean Wright in the Los Angeles Times, “a report from the 2016 World Economic Forum calculated that the technological changes underway likely will destroy 7.1 million jobs around the world by 2020, with only 2.1 million replaced.”
Meaning, the decline of the U.S. labor force seen since the 2000s will only continue in the coming years, knocking millions more Americans out of work — with no new jobs to replace the lost ones on a net basis.
Rather than creating new opportunities for Americans to do something more productive and with higher pay, instead these trends point increasingly to a society that simply works less. What will these millions of people do? Probably become dependents of either their families or the government. The alternative might be to emigrate overseas to live at the factory where one works, making a pittance.
Even longer term, however, these trends may increasingly undercut the abilities of peoples worldwide to work for a living, since the natural progression will be to ultimately automate everything. From cars and delivery trucks and trains that drive themselves, to automated drones that will leave the package right on your doorstep. One day, the first hands that touch a product might be the customer.
What will such a world look like? A utopia, where robots perform most of our jobs, or a dystopia, where the lack of work and incomes leads to less growth, more dependency and increasing societal dysfunction?
Time will tell, but if the metrics are growth, jobs and incomes in the U.S., so far globalization and automation appear to be hurting a lot more Americans than it benefits, as U.S. wealth and prosperity are exported and redistributed abroad.