Should US manufacturing policy embrace job restoration or retraining? 

In the lead-up to the 2024 election, Joe Biden and Donald Trump are targeting industrial states such as Michigan, Pennsylvania and Wisconsin, which played a key role in determining the outcome of the past two elections.

Despite their many differences, both candidates have emphasized the need to restore lost manufacturing jobs.President Biden has kept most of President Trump’s tariff increases, recently announced. China plans to more than triple tariffs on steel and aluminum from 7.5 percent to 25 percent.Donald Trump previously suggested he was considering Tariffs exceeding 60 percent Also about imports from China if he becomes president.

Partly as a result of their efforts, there are now approx. 600,000 manufacturing jobs added since 2017. This increase is equivalent to one-tenth of China’s losses since 2001, when it joined the World Trade Organization.

These efforts may be seen as an attempt to reverse the decline in labor’s share of national income over the past four decades.Data collected by Bureau of Labor StatisticsFor example, the share has fallen from about 64 percent in the mid-1980s to about 58 percent in recent years, with most of that decline occurring over the past 25 years. however, National Economic Research Bureau survey There is no consensus among economists on the extent of the decline or the main drivers.

In this context, important questions remain unresolved. In other words, is focusing on increasing manufacturing jobs good economic policy?

Former U.S. Trade Representative and World Bank President Robert Zoellick discussed the matter in an op-ed for the Wall Street Journal. Criticize Both Biden and Trump want to “return this country to its fantastic mid-20th century past.” Zoellick argues that America’s economic success is largely due to its ability to move from low-tech, low-productivity sectors to higher-value sectors.

And while there are fewer manufacturing employees than there used to be, manufacturing is much more productive today, according to a recent study by a U.S. government agency. Kato Institute It points out that U.S. manufacturing accounts for a larger share of global output than Japan, Germany, South Africa, and India combined.

Zoellick also questions whether efforts to increase manufacturing jobs will lead to higher wages. Reason: Manufacturing workers earn less than workers in other sectors, especially technology-related sectors, where productivity is much higher.

This is the counterargument of “Fair Trade” supporters. Proponents of free trade are primarily concerned with economic efficiency rather than social justice..Nobel Prize winner Angus Deaton of Princeton University write As a recent commentary from the International Monetary Fund puts it: “When efficiency involves upward redistribution of wealth, our recommendations are often little more than a license to plunder.”

Mr. Deaton is more skeptical than ever about the benefits of free trade for American workers, given what happened to blue-collar workers. Economic theory argues that workers who lose their jobs or are adversely affected by foreign competition are compensated by workers who benefit from lower prices for their goods. But Deaton observes that this redistribution never actually happens.

So how can the United States achieve a better balance between promoting economic efficiency and reducing income inequality?

One way is to recognize the role that technological change can play when managed well.

Until now, most of the benefits of technological change have gone to highly educated companies and workers. For example, another of his NBER studies found that with the introduction of computers from 1970 to 1995, Demand for college graduates is higher compared to workers without a degree.. As a result, computer use contributed to widening the wage gap between high-skilled and low-skilled workers over this period.

Looking to the future, there is some reason to believe so. Artificial intelligence could help reduce income inequality. The main reason for this is that applying AI to routine processes can improve the efficiency of low-skilled employees fairly quickly.

Towards this end, Professors Daron Acemoglu, David Orter, and Simon Johnson recently Initiatives Shaping the Future of Work at MIT. Its mission is to analyze the factors that erode the quality of employment and labor market opportunities for non-college workers and put the economy on a more just path.

MIT program leaders generally say that because of powerful forces such as globalization, technological change, and union dissolution, little can be done to keep workers without college degrees happy. He states that this is his point of view. They argue that this assumption is false.

The title of their first policy memo was “Is professional worker AI possible?” They argue that the best way forward is to develop worker-enhancing AI tools that enable less-educated or low-skilled workers to perform more value-added tasks. .

The bottom line is that politicians have good reason to be concerned about the plight of American workers without a four-year college degree. Collectively, they represent: almost two-thirds of the US workforce.

But history also proves that countries that impose high tariffs to protect workers inevitably lag behind countries that pursue export-oriented policies. Witness the performance of Asian economies compared to Latin American countries. In the post-World War II era.

So my position is that raising tariffs is bad economic policy. That said, I do concede that political considerations are likely to trump a healthy economy, at least until the results of this year’s elections are known.

Dr. Nicholas Sargen is an economic consultant with Fort Washington Investment Advisors and affiliated with the University of Virginia Darden School of Business. He has written three books including “.Investing in the Trump Era: How Economic Policy Impacts Financial Markets”