20
Sep
16

THE HUMAN CAPITAL OF MANUFACTURING

0916mem_coverEven if politics isn’t your cup of tea, this year’s presidential election has been hard to ignore. Its twists and turns wickedly resemble more the new J.K. Rowling fantasy novel than a noble competition to lead the most powerful country in the world.

One of the salvos being slung from one camp to the other involves opinions on the value of the North American Free Trade Agreement (NAFTA). At its core, the debate centers on whether NAFTA is bad for American manufacturers and workers because it enables cheap-labor countries like Mexico to take manufacturing jobs away from the United States.

Putting politics aside—and that’s no small feat given the existing climate—opinions on the causes of middle-income job losses in the United States include both economic forces and, some will argue, technology advances.

A recent column in The Wall Street Journal points to two interesting perspectives worth considering. One is an essay in Foreign Affairs by Dartmouth economist Douglas A. Irwin, who says that between 2007 and 2009, the United States lost nearly nine million jobs, pushing the unemployment rate up to 10 percent and, seven years later, the economy is still recovering. Even as trade commands broad public support, a significant minority of the electorate—about a third—opposes it. These critics come from both sides of the political divide, but they tend to be lower-income, blue-collar workers who are the most vulnerable to economic change. For these workers, “neither political party has taken their concerns seriously, and both parties have struck trade deals that the workers think have cost jobs,” says Irwin.

He argues that trade is but one reason some blue collar workers have lost their jobs. Another is technological advances that impact millions and occurs without enough formal retraining of displaced workers.

Still, “Technological change is far from the only factor affecting U.S. labor markets in the last 15 years,” argues MIT economist David H. Autor in a paper published last year in the Journal of Economic Perspectives. He notes the deceleration of wage growth, changes in occupational patterns, and dislocations in the U.S. labor market brought on by rapid globalization as the main reasons, but admits that in various ways these are linked with the spread of automation and technology. “Advances in information and communications technologies have changed job demands in U.S. workplaces directly and also indirectly … altering competitive conditions for U.S. manufacturers and workers.”

But “jobs are made up of many tasks,” Autor says, and while automation and computerization can substitute for some of them, understanding the interaction between technology and employment requires thinking about more than just substitution. In the end, technology has replaced some traditionally middle-education jobs, but this is the group that is also easiest to retrain.

Engineers have radically simplified manufacturing environments allowing for more autonomous and streamlined operations. But as Autor puts it, “human capital investment must be at the heart of any long-term strategy for producing skills that are ‘complemented by’ rather than ‘substituting for’ by technological change.”


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The Editor

John G. Falcioni is Editor-in-Chief of Mechanical Engineering magazine, the flagship publication of the American Society of Mechanical Engineers.

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