US ex­port econ­omy fails to im­port jobs

The Pak Banker - - OPINION - Gil­lian Tett

THIS month, brace your­self to hear plenty of rhetoric com­ing out of Wash­ing­ton about "ex­ports" and "jobs". As a new Repub­li­can-dom­i­nated Congress starts work, en­ergy com­pa­nies are lob­by­ing to drop a decades-old ban on ex­ports of crude oil, ar­gu­ing that such sales will cre­ate thou­sands of Amer­i­can jobs. As pitches go, it is a pow­er­ful one. But there is another ques­tion about ex­ports and jobs that Congress should be de­bat­ing more ur­gently: the fact that US busi­nesses are be­com­ing so ef­fi­cient that they re­quire fewer work­ers than ever be­fore to de­liver growth, even - or es­pe­cially - for ex­ports.

Take a look at some fas­ci­nat­ing data com­piled by the Com­merce Depart­ment, and qui­etly re­leased last year. This shows that in the past few years, the num­ber of Amer­i­can jobs sup­ported by ex­ports has risen as over­seas sales have grown. In 2009, ex­ports cre­ated 9.7m jobs; by 2013 the tally was 11.3m.

This is cheer­ing. And since over­seas sales rose fur­ther in 2014, amid a wider eco­nomic re­cov­ery, there is ev­ery rea­son to think that when the com­merce depart­ment pub­lishes the 2014 tally the num­ber of ex­port-linked jobs will have grown again. But there is a bil­lion dol­lar catch. Look at how many jobs are be­ing gen­er­ated per dol­lar of sales and the graph steadily slopes down. Back in 2009, each bil­lion dol­lar's worth of ex­ports was cre­at­ing 6,763 jobs. In 2013, it was 5,590 jobs. That is a fall of 17 per cent - in just four years.

There are two ways to in­ter­pret this trend. If mem­bers of Congress want to feel cheery at the start of a new year, they could cel­e­brate the fact that Amer­i­can com­pa­nies are be­com­ing more in­no­va­tive and com­pet­i­tive on the world stage. This partly re­flects lower en­ergy costs. But another fac­tor is that as re­cov­ery has taken hold in the US, lev­els of au­to­ma­tion and digi­ti­sa­tion are ris­ing sharply too.

That is prompt­ing more US com­pa­nies to de­velop pro­duc­tion inside Amer­ica, since it holds down labour costs. While Chi­nese work­ers might be cheaper than their Amer­i­can coun­ter­parts, robots are more cost ef­fec­tive than both - and of­ten more com­pe­tent. Take Al­coa, the world's third-largest alu­minium company. Hav­ing pre­vi­ously ex­panded pro­duc­tion in places such as Mex­ico and Asia, it is now fo­cus­ing heav­ily on the US. This win­ter, for ex­am­ple, it is re­mod­elling a plant in Savannah, Ge­or­gia, that uses pi­o­neer­ing pro­cesses to forge metal to with­stand ul­tra­high tem­per­a­tures. A decade ago, such work might have been placed out­side Amer­ica. But Klaus Kle­in­feld, Al­coa chief ex­ec­u­tive, says that it now makes sense to keep it in Savannah, to be closer to cus­tomers and re­search units. "The pres­sure to au­to­mate is huge," he says. "We are not do­ing it for cost, but for in­no­va­tion rea­sons?.?.?.?a pre­ci­sion is re­quired that no hu­man hand or eye can de­liver."

Com­pa­nies such as Whirlpool, Gen­eral Elec­tric and Ford are tak­ing sim­i­lar steps. Even cloth­ing com­pa­nies are do­ing the same. Levi Strauss, for ex­am­ple, still makes its jeans out­side Amer­ica. But it re­cently brought its in­no­va­tion cen­tre - and those jobs - from Turkey to San Francisco. Bos­ton Con­sult­ing Group reck­ons that over half of all large US man­u­fac­tur­ing com­pa­nies are ei­ther ac­tively re-shoring ac­tiv­ity, or con­sid­er­ing this, as Amer­ica be­comes a more com­pet­i­tive des­ti­na­tion.

There is a more pes­simistic twist to all this: what will the sur­plus work­ers do? An op­ti­mistic an­swer is that the econ­omy will even­tu­ally adapt to gen­er­ate new jobs, as it did 150 years ago when farm work­ers were forced off the land. A down­beat sce­nario is that this trend will ex­ac­er­bate the bi­fur­ca­tion that has de­vel­oped in the jobs mar­ket in the past decade, as mid-tier man­u­fac­tur­ing jobs have dis­ap­peared. In a world of hy­per-ef­fi­cient com­pa­nies there is swelling de­mand for a highly trained elite; in­deed, Thurs­day's job­less claims data sug­gest that com­pa­nies are ac­tu­ally find­ing it hard to hire enough skilled work­ers. Al­coa needs plenty of com­puter pro­gram­mers. But what it does not need (as much) are tra­di­tional metal-bash­ers. Ex­ports can boom - but with fewer blue-col­lar work­ers.

Mr Kle­in­feld has re­cently started work­ing with com­mu­nity col­leges on re­train­ing pro­grammes, in a bid to help work­ers to adapt. Other com­pa­nies are do­ing the same. But what is lamentably miss­ing is any co­her­ent pol­icy from Wash­ing­ton to support such en­deav­our. In­deed, Congress seems to be pay­ing woe­fully lit­tle at­ten­tion to the is­sue, com­pared with the fo­cus it is de­vot­ing to other top­ics, such as those en­ergy ex­ports. That needs to change - well be­fore the cur­rent re­cov­ery loses steam.

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