Smoke and Mirrors: Automation, Globalization, and the Challenges Facing the American Labor Market

When President Obama gave his farewell address to the nation at the beginning of this week, he took a moment to note the challenges facing the American worker, saying “the next wave of economic dislocations won’t come from overseas. It will come from the relentless pace of automation that makes a lot of good, middle-class jobs obsolete.” Though he did not explicitly say so, this was a repudiation of the policies proposed by the man set to replace him. Donald Trump campaigned heavily on the promise to bring back millions of manufacturing jobs lost over the previous two decades. The culprit, as defined by Trump, is globalization, primarily in the form of international trade agreements and immigration. These dueling viewpoints highlight the questions at the heart of the issue. What is more to blame for American job losses, particularly (but not exclusively) in the realm of manufacturing—automation or globalization? And perhaps even more importantly, what can be done about it?

Donald Trump sees the collapse of the American manufacturing industry, especially in the heartland of the country, as a result of ‘bad trade deals’ that have shipped jobs overseas, and an influx of undocumented immigrants, both the result of the willingness of corporations and the United States government to value low wages over the well-being of working class Americans. He is not alone in this viewpoint. Political rivals such as Bernie Sanders and Elizabeth Warren have made similar arguments.

Globalization has certainly done its share to disrupt the American job market. Although much of Trump’s focus during his campaign was directed at Mexico (as a ‘bad trade partner’ and the source of most illegal immigration), the fact is that China has been responsible for more disruption. During the 2000s, around 2 million American manufacturing jobs were outsourced to China, where low worker wages and less stringent labor laws produced cheaper consumer goods for the American market. The manufacturing and apparel industries of America were hit particularly hard by this.

Trump, who since his election victory has shifted much of his focus over to a public feud with China revolving around tariffs and accusations of currency manipulation which many fear may lead to a trade war, has promised to reverse these trends by renegotiating international trade deals, stopping illegal immigration by building a wall along the Mexican-American border, deporting millions of undocumented immigrants, and placing harsh tariff and tax penalties on companies that produce their goods in a foreign country while importing them into the U.S.

How successful Trump’s efforts to fundamentally shift America’s economic policy of trade liberalization to a more protectionist one remains to be seen. Although most economists agree that globalization has had its fair share of negative effects upon the American job market, such remedies cannot do much to bring back those jobs, nor will they do much to stop more from being lost. The reason for this is simple: the effects of globalization on the American job sector cannot compare to those caused by automation. Automation, far more than trade or immigration, is responsible for those jobs becoming obsolete.

There are numerous studies that bear out this conclusion, the same which most labor experts have come to by now. Roughly 13% of manufacturing job losses can be attributed to trade, the rest are a direct result of the enhanced productivity capabilities of technological automation.

The trade-off, up until recently, was that automation created just as many jobs in the tech sector as it made obsolete in manufacturing. The current fear among labor economists and scientists is that, as advances in AI technology continue to self-propel at an increasing rate, that will soon cease to be the case. The White House recently published a report outlining this very concern, the same which President Obama addressed in his speech.

Despite this worrisome forecast, the White House report nonetheless advocated for more investment in AI and automation technology. The fact is that nothing short of a catastrophic, extinction-level event (such as an asteroid or global thermo-nuclear war) will halt the progress of this self-accelerating technology. Not only can’t it be stopped, Americans do not want it to be stopped. The public wants the benefits that an automated world provides: the optimization, the speed, the higher levels of service, and the cost-effectiveness; just as they wanted to pay lower prices on consumer goods, the same which were only made possible thanks to cheap foreign labor. They want all of this while also wanting to keep their jobs. But, as has become evident, that trade-off is inevitable.

Indeed, the Cabinet nominations made by Donald Trump seem to recognize this trend, even as his policy continues to point the finger at globalization. Take Andrew Puzder, formerly the CEO of Carl’s Jr. and Hardee’s, who has been nominated for Secretary of the Department of Labor. Puzderon is on record as being strongly in favor of automation, saying “If you’re making labor more expensive, and automation less expensive—this is not rocket science.”

After manufacturing and apparel, service industry jobs appear to be next on the chopping block, but they are hardly the only ones. 51% of all work done by Americans is considered highly susceptible to automation, with only 21% (those positions which a high level of expertise, human management knowledge, and creative skills) being considered safe…for now.

So, if the reality is that automation is responsible for the loss of American jobs to a far greater degree than globalization, and the reality is also that automation technology is not going to slow down, what can be done to offset the negative effects as society moves into this next phase? One thing—easier said than done—is to recognize the facts as they are. This is not to say that all efforts to reform trade and immigration should be ignored; but continuing to claim that globalization is the main cause behind U.S. job disruption is not helping matter. And, as will become evident shortly, such a strategy is not sustainable.

There are a number of proposed solutions that address the anxieties caused by automation, including some that are outright utopian in the radicalism. A guaranteed Universal Basic Income (UBI), for example, may seem farfetched, but it has been gaining traction recently, finding advocacy from the likes of Stephen Hawking and Elon Musk. Finland has even commenced with a pilot program to study its potential.

More grounded solutions, such as those advocated by the White House in their report and Obama in his speech, and shared by a large number of labor economists, call for progressive standards to be set in place in order to ease the transition for those who have been economically displaced by machines. These include “retaining programs, stronger unions, more public-sector jobs, a higher minimum wage, a bigger earned-income tax credit…more college degrees…better education from early childhood through adult job transitions and for updating the social safety net.”

As thorough as those solutions may seem (though hardly universally agreed upon), they assume that the transition into an automated job market will be a consistently steady one. What they fail to take into account is the rapidly increasing pace in which this technology is advancing. In order to truly appreciate this, it is perhaps not a matter of simple strategy that is required, but rather, an entirely new way of looking at things.

The idea behind ‘thinking exponentially’ boils down to thinking along the same lines as the Law of Accelerating Returns. Basically, if we can assume that a certain technology will be available in five years, we should expect it in three. Using this same method, society might do well to expect paradigm shifts which seem likely to occur in ten years to occur in half that time. If we can start to do this, start to think exponentially, while also recognizing that although the effects of globalization are real, they are no longer the main concern when it comes to keeping American jobs, then we may find ourselves better—if not fully—prepared for the effects and outcomes of future automation.