President-elect Donald Trump has been ferociously tweeting and making open announcements with regard to #AmericaFirst — #BuyAmerican and #HireAmerican being the new hashtag. He has secured a deal with Carrier, ensuring that the company keeps in the US the 800 jobs it was planning to move to Mexico.
Trump also promises to bring back to America jobs that he believes are “stolen” by cheap labour abroad.
That said, is the US ready to absorb the jobs if at all Trump succeeds in bringing them back?Missing the skills
There exists the real possibility of the move actually proving to be an economic failure if there is a mismatch in demand and supply owing to skill gaps.
Examine this scenario: Trump manages to close a footwear assembling factory in China for Americans to assemble the same in the US. Now there are two possibilities:
One, the newly established American factory is automated, which means that the unit may not #HireAmericans to the extent it did in the case of its non-automated plant in China. It may hire one American for every 10 people it hired in China.
Two, in case the plant is not automated to assemble, and is established to function in an identical fashion as in China, there is a possibility that the 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 the unavailability of low-skilled labour which the footwear assembling requires or because of skills lost either to a long spell of unemployment or because of other skills gained in the process of displacement to other industries when the footwear assembling unit relocated itself to China from the US.
Given that the workers are now skilled to assemble mobile phones, the footwear assembling unit relocating from China to the US may find it difficult to absorb the former displaced workers into mobile assembling units in the US. It is to be assumed that the gap 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 bringing back jobs to America.Mismatch issues
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.
The existing displaced workers from the agricultural sector find it difficult to get absorbed in the #MakeInIndia campaign, while the supporters of #MakeInIndia too find it difficult to absorb such displaced workers.
Unfortunately, cheap labour cannot substitute the required skills for a particular 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 ₹70 a day, 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 mitigate economic failure is to support the translocation of jobs to America with necessary skill development programmes that help to close the skills gap in the demand and supply of labour. Domestic reforms that facilitate the absorptive capacity of Americans should be high on agenda of the Trump administration.Shape of reforms
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 example of this is Maruti Suzuki in India: technicians and supervisors were trained before production started in Gujarat. In fact, prospective employees of 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 relocation to the US to be smooth; pre-building the necessary infrastructure in the US would facilitate compliance of production facilities to domestic requirements.
An understanding of domestic and international regulations, to which the US is a party, would ensure that the transition is completed in a smooth, timely manner.Mind the feet
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 feet of partner countries.
For instance, by not respecting China’s ‘One China’ policy, the 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 smooth and timely.
So abiding to the ‘One China’ policy is inevitable for one’s good, both in the short and long run. The US must complement its international policies with its domestic policies.
Even though there is great need for 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, Trump must weigh the cost of popular policies over the benefits of economic policies. Also, it is assumed that the so-called “stolen” jobs are low-skilled in nature.
The writer is a Mumbai-based economist