14th December 2016.
President-elect Donald Trump has been ferociously tweeting and making open announcements with regard to #AmericaFirst — #BuyAmerican and #HireAmerican being the new hashtag. In his first, Trump has secured a deal with Carrier by ensuring that Carrier keeps the 800 jobs in the United States which it was planning to move to Mexico initially. While ensuring that the existing jobs don’t move out of the United States, he also promises to bring jobs back to America which he believes are “stolen” by cheap labourers sitting outside the US borders. In this regards, Mexico, China, amongst other culprits like India, have not heard the end of Trump bashing.
However, is the US ready to absorb the jobs if at all Trump succeeds in bringing those back to America? Bringing jobs to the US might actually prove an economic failure if there is a mismatch in the demand and supply because of skill gaps. For instance, Trump manages to close a footwear assembling factory in China for Americans to assemble the same in the US. Now there are two possibilities: 1. the newly established American factory is automated to assemble which means that the unit may not #HireAmericans to the extent it did in the case of its non-automated plant in China. For instance, it may hire 1 American for every 10 hire it did in China. 2. In case the plant is not automated to assemble, and is established to function in an identical fashion as it did in China, there is a possibility that the now demand from the assembling unit (low-skilled labour intensive) may not meet the existing supply of labour. Disruption in the existing supply of labour could be either because of unavailability of the low-skilled labour which the footwear assembling requires (may be the available labour are not low-skill or do not possess the skills which the footwear assembling requires) or because of the lost skills either to long spell of unemployment or because of other skills gained in the process displacement to other industries when the footwear assembling unit relocated itself to China from the US back in the day (for example, at time t-1, mobile assembly unit in the US had absorbed the job displacement when the footwear industry reloacted to China from the US. Given that at time t, the workers are now skilled to assemble mobile phones, the footwear assembling unit on relocating from China to the US, may find it difficult to absorb the former displaced workers to mobile assembling units in the US. It is to be assumed that the gap between t-1 and t is such that Americans may find it difficult to transit across industries).
The aim of the new administration should be to avoid this obvious economic failure of simply brining back jobs to America. Other countries also face similar problems. For instance, India’s #MakeInIndia campaign also faces a similar mismatch in the demand and supply of labour caused by the skill gaps of labour where not only the existing displaced workers from agricultural sector find it difficult to get absorbed in the #MakeInIndia campaign but also the hailers of #MakeInIndia find it difficult to absorb such displaced workers. Unfortunately, cheap labour cannot or doesn’t play a substitute to the required skills of a labour to perform the job. For instance, without essential training, it would be foolish to expect 100 farmers excellent at sowing seeds in the field, even though now available at INR70/day (approximately USD1) to assemble mobiles at Foxconn factories. As can be seen, ample availability of cheap labour cannot substitute for the skills that are required to perform a job.
One of the ways to reduce the abovementioned economic failure is to support bringing of jobs to America with necessary skill development programmes that help to close the skill gap in the demand and supply of labour. Domestic reforms that facilitates the absorptive capacity of Americans should be high on agenda of the Trump administration. Domestic reforms can take the form of supportive policies focussing on vocational training, on-the-job training or starting training before bringing the job back so that the absorption is immediate when relocation to the US happens. One such example is that of Maruti Suzuki in India where the scheme trained technician and supervisors before the production started in Gujarat, India. In fact, to-be-employees of the Maruti Suzuki were also sent to Japan to learn about Japanese culture before commencing employment with Maruti. Likewise, training programmes should/could be in place before bringing back jobs to America. Besides,the Trump administration has to ensure that there is free movement of Americans to partner countries so that they can learn about the existing state of production of goods in the partner countries. Such learning would help the transition of relocation to the US smooth as pre-building the necessary infrastructure in the US would not only facilitate compliance of production facilities to domestic requirements from what already exists in partner countries, compliance of domestic regulations with international regulations that the U.S. is party too, but would also ensure that the transition is completed in a timely manner. Besides, cooperation with partner countries is an absolute essential. Having said this, to facilitate smooth transition back home, the Trump administration is better off not stepping on the wrong foot of partner countries. For instance, by not respecting China’s “one China” policy, Trump administration is only making it harder to bring back jobs to America by subjecting the US to Chinese retaliation where movement of Americans to China could be restricted/limited consequently making the transition less smoother and timely. So abiding to “one China” policy is inevitable for one’s good, both in the short and long run.
Hope the US compliments its international policies with domestic policies, and understands the consequences it faces by stepping on the wrong foot of partner countries.
Endnote: Although I talk at length on the need of domestic reforms to facilitate the absorption of jobs brought back to America, bringing back jobs to America to begin with may not be a wise move. As a businessman himself (or is he a businessman?), hope Trump weighs the cost of popular polices over the benefits of economic policies. Besides, the post assumes that so-called “stolen” jobs are low-skilled in nature.
A version of this article is published by the Hindu Business Line on 2nd January 2017 under the title ‘Not Easy Bringing Jobs Back to the US’ accessible at http://www.thehindubusinessline.com/todays-paper/tp-opinion/not-easy-bringing-jobs-back-to-the-us/article9453991.ece