One of the stated objectives of the current administration’s tariff policy is bringing manufacturing jobs back to America which raises an interesting question as to whether that outcome is feasible and desirable. First, our economy has been the envy of the world for many years despite the decline in manufacturing employment from 32% of the workforce in 1950 to 8% today. Second, the shift of manufacturing to countries with low labor costs greatly enhanced the profits of U.S. companies which has been responsible, at least in part, for the roaring stock market that we have enjoyed for many years. Finally, Americans have benefitted from goods that are cheaper than they would have been had they been produced here. For example, the average monthly wage in Vietnam is roughly $700 as compared to $5,000 in the U.S.
Putting aside hard data for a moment, Americans are thoroughly confused and inconsistent in their views of world trade and the merits of tariffs.
For example, surveys find that 60-70% of Americans agree in principle with free trade yet 79% believe that globalization has harmed U.S. manufacturing. One survey found that 62% were in favor of a tariff on blue jeans if it would strengthen that industry in the U.S. However, that number fell to 34% if the tariff would result in a $10 price increase on jeans and 19% should the price rise by $20. Most important, Americans favor bringing manufacturing back to the U.S but most are not interested in a factory job. As shown in the left panel above, 80% of respondents state it would be better if more Americans worked in manufacturing. Yet, the right panel indicates that 72% disagree with the statement “I would be better off if I worked in a factory instead of my current field of work.” Another survey found that only 20% of respondents preferred to work in a factory as compared to their current job. Surveys can be unreliable because people often behave in a way that is inconsistent with the views they express. However, in this case, the lack of appetite for factory jobs is supported by the fact that 20% of factories cite an insufficient supply of labor as restricting output.
Most of us agree that critical manufacturing such as computer chips and defense related goods should be developed or revitalized in the U.S. However, a study by Deloitte found that almost 50% of the new jobs required to achieve this objective will not be filled due to a significant skills gap.
The bottom line is that bringing back manufacturing to the U.S. is superficially appealing, but the unfortunate reality is that this goal may not be achievable given a shortage of willing, highly trained workers.