“Throughout the election campaign both candidates talked about creating more jobs, the most discussed topic in the election campaign, by reviving the manufacturing industry.”
ITT Romney will fight for every American job." This recent advertisement referring to Chrysler's plans to shift jobs to China kicked off one of the many slanging matches between US presidential candidates Barack Obama and Mitt Romney. Throughout the election campaign both candidates talked about creating more jobs, the most discussed topic in the election campaign, by reviving the manufacturing industry.
Now that the US election is over and Obama is firmly back in the Oval Office, many would dismiss the Obama-Romney debates over jobs and China as usual campaign rhetoric.
But still - as Dieter Ernst, a senior research fellow at the East West Center, Hawaii, said recently - we need to know the challenges the US faces in job creation. In a recent presentation, "Industrial Innovation and Employment", at a seminar of new generation policymakers, Ernst attributed the persistent unemployment in the US to a significant erosion of international competitiveness and innovation barriers such as lack of investment.
From 2001 to 2011, state and lo- cal financing per student in the US declined by 24 percent despite a 72 percent increase in tuition fees. This made student loans exceed $1 trillion, more than Americans owe to credit card companies. This, along with inadequate support for industry-related research, has seriously constrained US industry's ability to create more jobs, Ernst said. It has also resulted in a skill mismatch, with 3.2 million job vacancies going unfilled because employers couldn't find suitable candidates.
Besides, US trade deficit in advanced technology products increased from $16.6 billion in 2002 to $99.6 billion in 2011, Ernst said, with the information and communications technology sector accounting for the largest share, causing jobs to flee abroad. As Scott Thurm, senior editor of The Wall Street Journal, said in a widely quoted article in April: "Thirty-five big US-based multinational companies added jobs much faster than other US employers in the past two years, but nearly threefourths of those jobs were overseas."
So can the US get the jobs back? "Reshoring of manufacturing is possible, but it most likely leads to a 'race to the bottom' in wages and regulations," Ernst said. Citing the relocation of General Electric's production facility from China to Louisville, Kentucky, in 2009, he said it was made possible by a government subsidy of $17 million, "lean manufacturing" to reduce labor content and most importantly an agreement with labor unions to reduce new recruits' wages to $13 per hour. That's less than $13.97, which makes a worker with three dependants eligible for food.
Ernst prefers the advanced manufacturing partnership strategy, which says the US' competitive edge lies in its superior capability to use transformative technologies to provide packaged solutions