General Motors GM is still shipping jobs overseas, President Trump’s Make America Great Again wishes be damned. The automaker was the number one company to ask for retraining assistance from the government due to jobs lost to offshoring, or imports, in 2019.
“What stands out to me from a study of the 2019 Trade Adjustment Assistance data is that a very large number of companies are offshoring production and jobs to other countries, even as their businesses were doing well,” says Jeff Ferry, chief economist for the Coalition for a Prosperous America (CPA), a DC think tank and advocacy group for domestic supply chains. “They are doing it for a variety of reasons. I hope that the current discussion of reshoring production back to the U.S. persuades these companies, because as of 2019 we still see the trend in offshoring.”
GM is often not technically moving out of the U.S. and moving the same job to Mexico, but it is launching new models in Mexico and shifting its production mix south of Texas and to other low-cost centers. From an economist’s point of view, when a company changes its production mix to favor foreign locations, the net effect is to reduce U.S. production and jobs.
Last year, GM asked for Trade Adjustment Assistance (TAA) for 4,794 workers, all of them due to plant and other closures in Ohio, Maryland and Michigan.
The closure of its Lordstown, Ohio plant led to the loss of 1,300 jobs in March 2019.
Lordstown was the first of five factories GM intends to close, with a total projected job loss of 14,000. Most of the work done at those facilities will go to Mexico where labor costs are lower and the new Nafta keeps free trade across borders a viable manufacturing strategy for GM.
In recent comments to investors, company CEO Mary Barra said she is putting a high priority on the China market, too. China buys around 30 million GM cars a year, more than double the 14 million she said might be a reasonable long-term U.S. sales figure. GM already exports at least one model from China to the U.S., and industry insiders suspect there will be more, especially in the EV segment.
The government’s TAA program is designed for helping companies pay for retraining of employees who lost jobs due to imports or plant closure due to foreign relocation. They pay out around $700 million a year, with the balance sometimes going to income support for workers during their training period.
TAA issues an annual report and part of that annual report includes data on companies who sought assistance from the program for its soon-to-be displaced workers. CPA looked into that data, which is public, and published a report on it over the weekend.
In 2019, over 1,000 companies applied for TAA assistance. The good news is that this number is down from previous years. Their data goes back 10 years, with 2019 seeing two times less applicants than in 2009, the peak of the Great Recession, when 288,274 TAA requests were made. The lowest over the 10 year period was in 2014, when just 71,551 requests for assistance were issued.
Other large cap companies that sought support include Verizon, Ford, Caterpillar and Kimberly Clark.
On the tech side, Symantec followed GM and closed over 3,000 jobs in California. Last November, they sold off their business-to-business division and renamed itself Norton LifeLock NLOK . It now focuses on selling cyber-security products to consumers. This is a low-margin business and technology companies often seek to outsource activities to low-wage centers as their profit margins decline, CPA’s Ferry wrote.
Harley Davidson HOG lost 1,194 jobs and is shifting some of its manufacturing to Thailand. The iconic motorcycle brand is losing out to Japanese brands and has been laying off due to competitive forces.
Some political leaders and many on Wall Street don’t view imports as job killers, necessarily. They see them more as a mix in the types of jobs — instead of manufacturing, it’s assembly; instead of tightening screws, it’s draw blueprints on a computer screen. For Davos Man, trade improves economic efficiency.
The governments view of the Main Street and “flyover country” workers — which includes those working in upstate New York and Central Massachusetts as much, if not more, than it does Indiana and Nebraska when considering population size — is that in getting rid of lower skilled jobs to lower income nations, newly laid off workers could be retrained, and move to higher paying jobs. The TAA was created with this in mind.
But there is increasing recognition that this is not the case, according to an American University study on the subject released in 2008. Some of this is due to the fact that the areas where jobs were lost tend to be company towns. When a skill set is no longer required, there is nothing to be had for those workers anywhere near their homes and so they end up settling for lower pay.
The CPA Job Quality Index for 2019 suggested that the quality of jobs has systematically deteriorated as workers are forced from tradeable sectors like manufacturing to nontradeable sectors, like services.
The average manufacturing worker in the year 2000 who moved to a non-manufacturing job by 2018 suffered an income loss of 19%. That kind of income loss only serves to exacerbate income inequality that many on Wall Street now bemoan, like Ray Dalio and Warren Buffet. And it can also lead to social unrest, plus strain state’s resources as state’s become more reliant on high income earners and capital gains from a wealthy investor class in order to keep the lights on.