Globalization and its effects on national labor markets is one of the most pertinent issues of our day. Debates on globalization have dominated the political sphere of late, as shown by their role in both Brexit and the 2016 US presidential race. These debates have centered on globalization’s effects on immigration, trade, and financial policy.
Some believe that the policies pursued by the U.S. government in these three areas have harmed working class Americans by lowering their wages and bargaining power. However, globalization has produced widespread benefits for the U.S. economy. Most of the negative economic outcomes commonly attributed to globalization are in fact caused by automation. In order to change the negative conditions that have arisen in its economy, the United States must retrain workers that have lost their jobs to automation with the help of both its public and private sectors instead of trying to reverse globalization. This responsibility for retraining is something the public and private sectors must take on.
Upsides of Globalization
In many cases, globalization has increased the choices of goods and services available to consumers while also lowering their average price. As a result, American consumers spend less on many goods than they did about a century ago. These changes have coincided with increasing long term worker productivity. Even between 2012 and 2014 worker productivity grew, due in large part to changes in technology.
These increases in productivity have benefitted several sectors of the U.S. economy. In the domestic finance sector, for example, globalization has made the transfer of capital more efficient. Even beyond this, the burgeoning of venture capital, or investments in business that have growth potential, has proven to have wide-reaching economic implications — it accounts for the resources devoted to about 82 percent of all private sector research and development going back to 1979. This is simply due to the fact that globalization makes it easier to transfer capital across the globe.
The United States has also become an undisputed leader in global healthcare innovation in the last few decades even though it has seen healthcare costs balloon during this time period. In fact, six of the largest 10 pharmaceutical companies are based in the United States. The same trend follows for medical devices: as recently as 2014, the United States alone controlled 45 percent of the global market share. Moreover, eight of the top 10 medical device manufacturers are based domestically. In the technology industry, the United States also leads the globe, as over 30 percent of all global IT spending stems from technology products made in the United States.
Woes of Automation
While there is some evidence to suggest that globalization and outsourcing contributed to the loss of manufacturing jobs in recent decades, most evidence suggests that increased automation is the real culprit. For instance, the U.S. manufacturing labor force decreased by nearly a third while U.S. manufacturing output increased by 40 percent from 1970 to 2015. This trend is consistent with smart business practices, since manufacturing firms generally raise their efficiency by lowering their labor costs. It also makes sense that American firms would prefer automation to outsourcing given the relative strength and size of the workforce in the United States.
This loss of manufacturing jobs has had an outsized effect on many cities in the Rust belt, which traditionally relied on the steel and automobile industries to power their economies. With the commercialization of self-driving cars imminent, many truck drivers could also lose their jobs. This major reshaping of one of the largest single sectors of the U.S. labor force would be just the latest example of automation hurting working class Americans.
Retrain
To make automation work for the American masses, the United States must retrain the workers left unemployed. Despite claims to the contrary, there are indeed high paying blue collar jobs that workers can reasonably be retrained to do. These jobs include elevator pullmen, plumbers, and electricians. Giving workers these new skills will fill open jobs and therefore boost wage growth.
Both the public and private sectors will need to take action in order to retrain these workers. The specific actions that must be taken will differ from case to case. For instance, in some situations retraining workers will require public-private partnerships at the local level. This can involve government funded skills training at community colleges or technical schools to give workers the skills necessary for private sector jobs. In the private sector, companies that dominate a certain geographical market may be best suited to retrain their own workers for necessary roles through apprenticeships.
Promoting skills training rather than trying to reverse globalization will help more Americans to succeed in the modern economy. This way, the United States can reap the benefits of globalization while shielding its workers from the pain that accompanies necessary economic transitions.