How America Should Deal With Globalization

The Federalist - Monday July 25, 2016

by Ramona Tausz

The United States must respond to globalization by retraining semi-skilled workers to step up to the needs of today’s economy, economists said last week at a lunch sponsored by the Center for the National Interest.

Milton Ezrati, recently senior economist and market strategist at Lord, Abbett & Co., and Bruce Stokes, director of global economic attitudes at the Pew Research Center, spoke on Americans’ attitudes towards free trade—an issue pertinent to the current election cycle, as both Donald Trump and Hillary Clinton have expressed skepticism about reducing trade barriers to global markets.

Stokes cited Pew statisticsdemonstrating young people and minorities tend to believe global free trade agreements are good for the country, while older people and most whites disagree.

“Think about who it is in our country who may have suffered from globalization: it is old, white men,” Stokes said. Fifty-two percent of white men think trade accords are a bad thing, according to this Pew study. “It is people I went to high school with who went into manufacturing rather than college because you could get a good job at a steel mill and make a good living.” Young people, on the other hand, have grown up with globalization, while minorities never had those jobs to begin with.

Blocking Free Trade Is Not The Answer

Ezrati agreed the pain of globalization has landed on the “low end of the wage scale,” with the semiskilled workers—such as manufacturers who have lost their jobs to the Chinese—suffering most.

Nevertheless, ending trade agreements or building tariff walls, he said, is a “cure worse than the disease.” While the harm to small groups of people is easy to see, the benefits of free trade are diffused and far less visible. Ezrati said free trade has enhanced the buying power of every American man, woman, and child by several thousand dollars by lowering prices, citing statistics from the Peterson Institute.

Still, he added, when whole textile communities in North Carolina lose their industries, there’s a problem—and the United States hasn’t made enough of a response.

“We’ve been very laissez-faire about this issue,” he said. “We’ve shrugged our shoulders and said people can work at Walmart.”

The Solution: Updated Vocational Training

“People are just not going to accept the wages that the Chinese will,” he said, adding that a Chinese worker will now work for roughly 1/50 of what an American worker will. “There is no way we can compete in low-value, labor-intensive activities, and we just have to relinquish these activities.”

The answer, he said, is to retrain semiskilled American workers, focusing on what he calls “high value-added, digitally-demanding, and mechanically-demanded activities.”

He used the example of steel. The United States no longer makes structural steel, leaving that to manufacturers in Asia. Nevertheless, it continues to produce high-technology, custom-made metals.

“The answer here is education and training,” Milton said. “To take these semiskilled workers who have lost their jobs or who might have become semiskilled workers, and train them to be useful to the future industry that the U.S. can compete in.”

While Ezrati said he doesn’t fully disagree with President Obama’s calls for more Americans to enter math and science professions and for more American engineers, he thinks that goal is secondary to simply helping semiskilled workers “step up to the needs of the twenty-first century.”

Looking To The Future

In some places, counties and businesses are already taking steps to put this kind of plan into action.

“In North Carolina, where several counties have lost their industries, some community colleges have said, ‘We are now vocational places,’” Ezrati said. “And a lot of companies have done a lot of vocational training themselves to help people transition either to other jobs within the company or on the side.”

Stokes agreed that vocational training, instead of college, may be a smarter option for many young people today. While a job in manufacturing hardly sounds attractive to millennials, a college degree no longer necessarily offers a bigger paycheck—while a manufacturing job may be the kind of career necessary to compete in the increasingly global market.

“It was unthinkable to me that I would not go to college,” he said. “But we’ve created this sense that that should be the goal, when it may not be economically the right pathway.”

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