President-elect Donald Trump promised $7,000,000 in tax cuts to air conditioning manufacturer Carrier of Illinois, and Carrier in return promised to keep about 800 jobs in the U.S. But carrier is planning to invest $16 million in a stateside factory as part of the deal, and that investment will go mostly into automation. How many of the 800 jobs will remain after the automation is in place? Hard to say.
The U.S. manufacturing industry is at an all-time peak for production, but jobs aren’t increasing with the same vigor. That’s because U.S. companies are becoming increasingly automated. A factory that once employed 150 workers on the line might now operate with eight engineers and a lot of new machinery. Corporations are now choosing between cheap offshore labor and robots more often than they choose between cheap offshore labor and American workers.
The workers needed in today’s factories are not unskilled, so the American high school grad isn’t choosing between being a <minimum wage barista and being a $20.00 an hour factory worker, either. High school grads in the U.S. often aren’t even prepared to take the college courses they need in order to work in a modern factory.
We’ve been saying that the solution is strong partnerships among government, education, and industry. If the Carrier situation is any indication, the new government has a different idea: dueling tax breaks.
We can see how that works out by looking at the U.S. territory of Puerto Rico. They offered deeper tax breaks to corporations than states could legally offer. They got plenty of major corporations, including Apple and Microsoft and Big Pharma, to wash their profits through the island, with big costs to taxpayers but little to show for it in the way of jobs. In fact, according to the Government Accountability Office, pharmaceutical companies saved $2.67 in tax dollars for every dollar they paid a worker in Puerto Rico.
The result? Instead of sustainable jobs, Puerto Rico ended up with $73 billion in debt and a lasting fiscal crisis.
The federal government can afford a show of “saving jobs” by paying off one company, but it’s not a sustainable plan for the future. Tariffs on goods that are produced by U.S. corporations overseas might speed up reshoring, but they won’t prevent automation. For most U.S. companies, it’s just a matter of time before the up-front investment in new machinery is more affordable than hiring human workers, no matter where those workers live.
Trump might speed it up.
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