Question

Read, analyze, and discuss in terms of the type of unemployment suggested by the article.

Steel Tariffs without Jobs

By The Editorial Board

The reaction against Donald Trump’s new steel and aluminum tariffs has been fast and negative, from foreign leaders to business groups to financial markets. As the President absorbs the damage to the economy and his political standing, we hope he also reconsiders the illusion that his tariffs will create new American jobs.

“So steel and aluminum will see a lot of good things happen. We’re going to have new jobs popping up,” Mr. Trump told steel and aluminum executives last Thursday at the White House as he announced his 25% and 10% tax on imports.

Someone should tell him 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 reporter Thomas Biesheuvel. “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.

Like King Canute, Mr. Trump is trying to roll back the economic tides. The difference is that Canute knew it was folly.

Appeared in the March 5, 2018, print edition.

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Answer 1

The type of Unemployment discussed by the article is Structural unemployment. Structural unemployment is caused by an underlying shift in the economy and can be caused technological advancements and trade agreements.

In this case, Advancements in technology have increased automation in steel industry(U.S. mini mills) to stay competitive in U.S. Putting a Tariff on Imports from China will increase employment in this sector very little as compared to the jobs lost in other industries that consume steel that have a lesser degree of automation and higher employment(6.5 million)

In this case the structural employment is caused by a combination of both the causes because of the technological advancements and because of the tariffs put on the imports.