- Title: Automation, not Mexico and China, threaten American jobs - economists
- Date: 18th April 2017
- Summary: MUNCIE, INDIANA, UNITED STATES (RECENT) (REUTERS) ABANDONED BORG WARNER PLANT SEEN THROUGH CHAIN LINK FENCE VARIOUS OF EXTERIOR OF BORG WARNER PLANT WITH GRASS GROWING THROUGH GROUND SIGN READING (English) 'FOR LEASE' ATTACHED TO CHAIN LINK FENCE VARIOUS OF 'STOP' AND 'NO TRESPASSING' SIGNS AT GATE ENTRANCE
- Embargoed: 2nd May 2017 17:08
- Keywords: automation robots Donald Trump China Mexico Nicole Smith Michael Hicks skills shortage Carrier United Technologies Cummins Zimmer Biomet DePuy Amber Barnard Darren Wildman
- Location: MUNCIE, INDIANA, USA; INDIANAPOLIS, INDIANA; COLUMBUS, INDIANA, WARSAW, INDIANA, HUNTINGTON, INDIANA, WASHINGTON, D.C.
- City: MUNCIE, INDIANA, USA; INDIANAPOLIS, INDIANA; COLUMBUS, INDIANA, WARSAW, INDIANA, HUNTINGTON, INDIANA, WASHINGTON, D.C.
- Country: USA
- Topics: Company News Markets,Economic Events
- Reuters ID: LVA0016CXCZLZ
- Aspect Ratio: 16:9
- Story Text:A rusted chain link fence guards an abandoned Borg Warner auto parts plant. The factory in Muncie in east central Indiana once employed thousands. Now, it symbolizes the fading fortunes of white working class men.
Fifty-four percent of the voters in the surrounding county cast their lots with then Republican presidential candidate Donald Trump who charged China and Mexico with robbing America of jobs.
Some jobs have indeed been lost to trade with the U.S.' big trading partners - just as hundreds of jobs at a United Technologies plant in Indiana will soon shift to Mexico - but not by as much as it Trump makes it out to be.
Economists told Reuters the threat is not necessarily China or Mexico, but automation and the technology and replacement of machinery that picks up those particular jobs.
In Muncie, Ball State University economics professor Michael Hicks studied the impact of automation on the U.S. workforce from 2000-2010. He found that trade accounts for about 12 percent of jobs lost; 88 percent was due to automation.
"Our study was fairly clear, I think, as others are, that trade accounts for some manufacturing job losses but the majority of those losses in manufacturing jobs are due to automation and productivity in general," Hicks said.
He points to Carrier as an example. After Trump lashed out at the air conditioner maker and its parent United Technologies for planning to move 2100 jobs to Mexico, the two sides struck a deal. As planned, the company would still shift 700 jobs at this plant in Huntington, Indiana, south of the border. But it would keep 1100 jobs at its Carrier plant in Indianapolis in exchange for local incentives and invest $16 million in the plant so it can automate the operations. CEO Greg Hayes says ultimately, there will be fewer jobs.
A study by consulting firm PwC released in March estimates nearly four in every 10 jobs in the U.S. could be automated by the early 2030s.
But automation is a good thing in the long run, say economists, just as it has proven throughout history. Lower-wage, low-skilled workers get hurt in the short term, but it boosts productivity and output, producing new higher-skilled jobs that pay higher wages.
Forrester Research estimates automation will produce nearly 14 million new jobs in the next decade. That's about 9 percent of the workforce.
In Indiana, the economy relies on manufacturing more than any other state. Home to the Indianapolis 500 auto race, it's gearing up for advanced manufacturing, led by the automotive, medical device and transportation sectors.
Cummins, the nearly century-old engine maker, has added 9,000 jobs over the past five years as it boosted automation.
At its plant in Seymour just south of Indianapolis, robots allow two workers to flip a two-ton engine in five minutes - a job that used to take two workers 25 minutes to do using ropes and cranes.
By shrinking time and the space required, boosting worker safety and productivity throughout the plant with machines, Cummins can expand productivity by using the same number of workers and eventually expand output and employment.
"For us the automation has really been about new technology, bringing new technology into the plant, which has generated more jobs because of the new engines that we build. In a lot of cases automation for us has been a case of first and foremost, it helps employee safety, generates an improved-quality product, and then obviously, those things obviously generate more jobs. If you've got a better product than anybody else, and if your employees are safe, that's the order of the game," Cummins Americas Operations Leader Darren Wildman told Reuters.
But the problem is, Indiana, like many states, faces a skills shortage. With unemployment below the national average at 4.1 percent, the economy is at full employment.
Employers say they need workers with a better understanding of math, science, engineering, electronics, and computing and problem solving skills to run today's robots and numerically controlled machines.
"The reasons I'm concerned is that Indiana still lags national comparisons of percentage of high school dropouts, there's still a lower than average percentage of people with post secondary education and training, so in some ways, we have to make sure Indiana continues to step up the pace with how quickly it is graduating its students," said Nicole Smith, Georgetown University's Center on Economy and the Workforce chief economist.
Warsaw, in northern Indiana, dominates the world market for orthopedic devices, providing more than 50 percent of the globe's total joint replacements.
Led by giants like DePuy Synthes and Zimmer Biomet, the local sector employs 2100 people. But it's short 300 machinists. So manufacturers joined forces with academia and community leaders to form a nonprofit aimed at developing and attracting new talent.
Back in Seymour, it is taking a week or two longer at Cummins to fill jobs requiring advanced skills than 10 years ago.
To nurture and ensure a pipeline, Cummins is supporting schools from kindergarten to college to strengthen math and science skills. It has teamed up with Ivy Tech Community College and other vocational schools to retrain workers like Amber Barnard.
The former assembly line and machining worker is now a team leader. She is taking preventative maintenance courses at the college.
"They have us in courses that will help us excel and learn new skills," Barnard said.
"Machining, programming. You know, like when there's an issue when the machine has a problem, why did it happen, how do we prevent it, what steps can we put into the program to keep the issue from happening again?"
Economists say automation also helps keep jobs in the U.S., despite fears robots will replace workers.
"It keeps production here. And that production does all kinds of other things. It demands power. It demands transportation. So while we've lost seven-and-a-half million manufacturing jobs since peak employment in the late 1970s, we've gained closer to 10 million logistics jobs. So, it's not clear that just because we're losing manufacturing jobs that trade isn't so far, trade and automation not a job creator," Ball State's Hicks said.
Hicks told Reuters his bigger concerns surrounding Trump's comments on China and Mexico are that they could spark a trade war in which all sides stand to lose.
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