Opinion by: Saagar Enjeti
A bitter debate has erupted online, and for once, it’s actually substantive and relevant to all our lives.
As I touched on yesterday, all credit for this discussion goes to presidential candidate Andrew Yang for bringing the issue of job loss to the forefront of the debate stage and getting the entire field to debate universal basic income versus a federal jobs guarantee. The battle lines of the stage were most present between Senator Elizabeth Warren and Yang in this section.
For most people, this is a pretty wonky area, because their eyes start to glaze over, but determining exactly who is right about this question is actually really important. Per Senator Warren and Bernie Sanders version of events, American manufacturing jobs were predominantly lost because of bad trade policy pursued by the United States, while according Yang, trade policy was a small factor but automation was predominantly responsible for the hollowing out of the American middle class.
So let’s get to the bottom of it. Yang’s case is that since the year 2000, the predominant loss of American manufacturing jobs has been because of automation. This heralds what he calls the fourth Industrial Revolution: the arrival of an age where the dominant number of jobs for Americans will be automated out of existence within the next decade or so. In order to cope with the dramatic shift in our economy, a universal basic income of 1,000 a month is necessary to bolster and empower workers.
This is an elegant solution, if you believe that this is the correct diagnosis of the problem. This may shock many viewers of this program, but I actually think Elizabeth Warren might be right: that bad trade policy is far more responsible for the loss of these 4 million manufacturing jobs than automation.
You see if Yang’s thesis was right, then we would have seen a spike in productivity after the decline in manufacturing jobs in the year 2000. That, however, has not at all materialized in the data. Instead, Elizabeth Warren and others like myself point to the us beginning permanent normal trading relations with the People’s Republic of China. My friend Samuel Hammond of the Niskanean Center pointed to this particular chart. Just look at how jobs fall off a cliff after the signing of NAFTA and PNTR with China.
I should give full credit to Yang, his response to low productivity following the job loss in his automation thesis is that everyone is trying to find a job in order to make ends meet and, they don’t leave the labor force. Sam Hammond however notes that “the U.S. had higher manufacturing productivity growth in the 1972-2000 period and steady manufacturing employment levels. If the early 2000s job losses were automation you’d need see a big spike in productivity.”
I appreciate Yang’s passion for this issue, because he’s right. The hollowing out of our country and its middle class over a rapid period of just 19 years is the central question for policy makers today. This isn’t just about job loss; it’s about the opioid crisis, it’s about suicide, it’s about a general malaise and despair at the heart of millions of Americans who feel in their gut that things now are just not right.
The automation diagnosis however lets off the hook some familiar villains of this show: Neoliberals. Neoliberals promised us that integrating China into our system and making it easier for the Wst to trade with them would let us have cheaper goods overall and create more jobs here at home. The opposite happened: much of the evidence I laid out earlier demonstrates that the discrete policy choice of normal trade relations with China is overwhelmingly to blame for the loss of manufacturing jobs and that China’s entire new middle class was built at the direct expense of our middle class.
This is bad news, but it’s also good news: It means that we have a choice. It means that while automation can, will, and has remained a concern for our manufacturing base that it’s possible that through a radical shift in our trade policy, we can make a choice and bring some of it back. This what candidates like Elizabeth Warren, Bernie Sanders, and yes, Donald Trump have now talked about for years.
I’ll end by saying that while I disagree with Andrew Yang and believe that trade policy is a far more effective solution to this problem than UBI, that we wouldn’t even be talking about it if it wasn’t for him. It’s a great thing to have people online debating how American manufacturing jobs were lost; for a while, nobody even cared, and some were willing to deny the truth. So let’s keep the debate going! There’s really no downside to trying to do everything we can to reverse the disaster that has been wrought upon us.
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