On March 7, 2019, Mark J. Perry writes on AEI:
From an AP news report:
In the 1980s, American steelmakers needed 10.1 man-hours to produce a ton of steel; now they need 1.5 man-hours (see chart above), says Joe Innace of S&P Global Platts. Most American steel is now made at super-efficient mini mills, which use electric arc furnaces to turn scrap metal into steel. (Traditional integrated steel mills make steel from scratch, feeding iron ore and coking coal into blast furnaces.)
Some mini-mills need just 0.5 man-hours to produce a ton of steel, Innace says. Increased productivity means today’s steel mills don’t need as many workers. Steel industry employment peaked at 650,000 in 1953. By the start of this year, U.S. steelmakers employed just 143,000.
Someone should tell Trump about Voestalpine AG’s steel plant in Austria, which reveals the reality of steel production and jobs. A Bloomberg News story from June 20, 2017 offered a fascinating look at how a modern plant can now produce high-quality steel with few workers. The plant in Donawitz, a two-hour drive from Vienna, needs all of 14 employees to make 500,000 tons of steel wire a year. The same mill in the 1960s would have needed as many as 1,000 workers to produce a similar amount albeit of lesser quality.
“We have to forget steel as a core employer,” Voestalpine CEO Wolfgang Eder told Bloomberg. “In the long run we will lose most of the classic blue-collar workers, people doing the hot and dirty jobs in coking plants or around the blast furnaces. This will all be automated.” Voestalpine long ago concluded it couldn’t compete with the low-cost blast furnaces of the Chinese and others. So it has invested in technology to reduce costs while competing to make high-quality niche products. The so-called U.S. mini-mills have done something similar to stay competitive. Tariffs will let those mills raise prices and profits, but they won’t add much more than a token number of new jobs.
The policy point is that Mr. Trump’s tariffs are trying to revive a world of steel production that no longer exists. He is taxing steel-consuming industries that employ 6.5 million and have the potential to grow more jobs to help a declining industry that employs only 140,000.
Gary Reber Comments:
My partner, corporate tax attorney, investment banker, binary economist and author Louis Kelso once wrote: “It doesn’t make any difference what’s going on in the scientific world or the business world or the industrial world, we still believe full employment will solve our income distribution problems. This is what major political figures have always maintained.” One can substitute for “full employment” with boosts in the minimum wage and a “guaranteed” universal basic income and other “safety net” entitlements as solutions to our income distribution problems, without ever addressing how to democratize wealth and prevent the further accumulation of concentrated capital wealth among those people who already OWN America.
Kelso also was quoted as saying, “Conventional wisdom says there is only one way to earn a living, and that’s to work. Conventional wisdom effectively treats capital as though it were a kind of holy water that, sprinkled on or about labor, makes it more productive. Thus, if you have a thousand people working in a factory and you increase the design and power of the machinery so that one hundred men can now do what a thousand did before, conventional wisdom says, ‘Voila! The productivity of the labor has gone up 900 percent!’ I say ‘hogwash.’ All you’ve done is wipe out 90 percent of the jobs, and even the remaining ten percent are probably sitting around pushing buttons. What the economy needs is a way of legitimately getting capital ownership into the hands of the people who now don’t have it.”
This is the case with steel and virtually every other productive segment of the economy with “machines” and “automation” displacing human labor, while the ownership of such capital assets continuously concentrates among a tiny wealthy capital ownership class.
