A very large number of people are employed in the automotive sector in the US. The Center for Automotive Research, an industry group with an apt acronym, says there are 1.7 million jobs in the sector, "engaged in designing, engineering, manufacturing, and supplying parts and components to assemble, sell and service new motor vehicles". Statista says there are about 900,000 people employed in auto manufacturing. The BLS, from which these numbers probably originate, is the most authoritative source, and its numbers are here. Whatever the correct number, lots of jobs are at stake.
The coming transition from the internal combustion engine to the electric engine will disrupt employment in this industry. With government mandates to phase out traditional cars, these changes could be quite rapid. True, people are likely to still demand roughly the same number of cars, at least in the medium run. And these cars will need to be produced, sold and serviced. But the type of worker engaged in producing, selling and servicing electric cars are likely to be quite different from those that currently engage in these tasks for internal combustion cars. A wide range of parts, like carburetors and tailpipes, will no longer be needed. Instead, we will need more workers making batteries, and more software engineers. Moreover, gas stations, and the fleet of trucks that supply them with gasoline, will see demand decline. They will be replaced with electric charging stations, but will these involve the same number and mix of jobs? Servicing electric cars is also much simpler than servicing traditional cars - gone will be the days of the oil change and the smog check.
This is a bit like the debate over free trade. Of course it will be much better to transition to electric cars, for a wide range of reasons, starting with the effect on climate change. Free trade too yielded benefits to the average person, in the form of lower prices of imported goods and greater supply chain efficiencies. But, in the same way that we underestimated the effects of free trade on those who lost their jobs in declining sectors, we run the risk of forgetting those who will bear the costs of this transformation. We should not. Otherwise, the same causes will produce the same effects: discontent among the cost-bearers, manifested at the ballot box.
This is my somewhat long-winded introduction to a very important article in the Wall Street Journal today. The article describes, with many vivid examples, the changes that are coming to the auto industry. Recommended.
It doesn't seem like there are too many options for traditional gas-powered workers besides adapting through training, etc. - which is required from most of humanity as a result of complexities/technological advances resulting from climate change - some demographics more than others. Not only are electric vehicles replacing combustion engines, but there are significant changes in many aspects of industry in the U.S. and abroad. As a country and as the automotive sector, prioritizing these sustainable job challenges at the forefront, is key in driving towards solutions for these workers and ballot box retaliation can be avoided.
Posted by: Jessica Thomas | 07/26/2021 at 05:51 PM
Going off Jessica's comments on adapting through training, what is the role of companies providing re-training/new skills for employees to be able to switch fields, especially for a large shift like in the auto industry?
It will be expensive for companies to re-train and not all companies will want to make the investment and time, but seems like the there are benefits that could outweigh the cost such as having a stable workforce with skills they need, a potential more loyal workforce and reduce the hiring cost of getting a new employee.
Posted by: Allen Chen | 07/26/2021 at 08:08 PM
Jessica and Allen - these are great points. I think companies do invest in training their own employees for the reasons you mention. But the incentives to do so are not super strong. They can't be sure the employees will stay, turnover rates are often high, and their retraining efforts can then benefit competitors. They are also not best placed to provide educational services, in most cases (on the job learning by doing, as a byproduct of normal work activities, is the main source of human capital growth within firms), and doing so has a high opportunity cost (the worker is not on the job while being retrained, but is presumably being paid). In the end my view (perhaps self-serving, since it is my industry) is that there is no substitute for a well-functioning educational system that can quickly adapt to technological transformations. Unfortunately, we're not really there, which, as Module 6 argues, is why technological improvements usually lead to some increases in inequality.
Posted by: Romain Wacziarg | 07/26/2021 at 09:19 PM
Perhaps an overly optimistic viewpoint, but could the incentive to help retrain the potentially displaced workforce rest with unions such as the UAW? Is there any historical precedent for a body like a union helping its clientele adapt to massive structural market changes like the one presented?
Posted by: Kevin | 07/31/2021 at 02:42 PM