The primary goal of designing current study is to discover and analyze significant reasons, which caused a decline in manufacturing jobs in the United States steel industry. The paper will focus on the historical facts leading up to these reasons as well as consequences of the decrease in the number of jobs. The state of the modern steel industry in the USA will also be described further in the study.
1. Historical Background
When the steel industry faced the crisis in 1977-1978, it wasn’t something new and unknown, because the industry had already had problems and hard times starting at the end of the 1950s due to the increase of imports. The state of the steel industry at that time was characterized by prolonged growth, which was even worsened by the rising of imports, lowering profits and constant misunderstandings with the USA government on the matter of pricing policies. By the end of the 1960s, the problem with import became so acute that the leaders in the steel industry had no other choice but to refer to the government, which they tried to persuade to “negotiate import restrictions with Japanese and European exporters of steel” . Having acknowledged the necessity to protect domestic producers of steel, the government prepared a so-called “protectionist legislation” aiming at eliminating the amount of imported steel into the country. However, taken measures seemed not to be working. Despite the fact that the year of 1974 was rather successful for the steel industry, it was followed by the significant recession in 1975, which “plunged the industry back into a depressed state – a condition from which it has not recovered” . What caused the recession? The author of the book “The U.S. Steel Industry in Recurrent Crisis: Policy Options in a Competitive World” Robert W. Crandall names several reasons, including the “increase of the environmental costs” and the “labor costs” . As a result of the increase of imports and the failure of the government to control it, a lot of steel mills had either to close down or to decrease the number of workers. The ones that chose to close turned into places like Youngstown, which became “a place of naked ruins, junk heaps of indiscernible provenance or pint-sized industrial follow-ons, including a few steel processing plants and one “mini-mill,” which doesn’t make steel but simply melts scrap metal into reusable form” . According to statistical evidence, about 10,000 people were employed there “before first one; then another big steel company shut down until US Steel struck the final blow in 1979” . In 2002, the mini-mill which still exists and operates in that area employed only “about 430” workers . Examples of the shutting down of mills and employees dismissal are multiple. At the beginning of the 1980s, the community was shocked when “U.S. Steel added to the record-breaking chill by announcing it would permanently lay off 15,400 workers and close part or all of twenty-nine mills, the largest shutdown in American history” .
2. Significant Reasons Causing the Decline of Manufacturing Jobs in the United States Steel Industry
Having spoken about critical historical facts concerning the decline of manufacturing jobs in the U.S. steel industry, it is necessary to examine major reasons that influenced the decline. The first reason is the decision of U.S. government to seize some of the steel mills in the USA at the beginning of the 1950s. This happened on the 8th of April, 1952, when “President Harry S. Truman announced that, to avert a strike, the federal government was seizing the steel mills of all the major companies involved in a labor dispute with the United Steelworkers of America” . It is not necessarily the most important reason, because other reasons seem to have even more influence on the steel industry of the USA, however, the actions of the President provoked much discontent and irritation, because before that nobody has “taken over the major portion of an industry as basic to the American economy as steel” . It marked the beginning of crisis not only for the steel industry, but also it resulted in a political and constitutional crisis for the whole country, or in a so-called “war power between Congress and the President” .
The second reason consists of two interrelated reasons, which have impacted the US steel industry the most and have resulted in the significant cut downs of jobs all over the country. These two reasons include the growth of imports and U.S. government’s failure to control it. The steel industry had faced a lot of problems before; however, the real crisis began in 1977. In the middle of 1970s, the industry started its recovery, which was abruptly “aborted by a sudden surge in imports and the price-cutting associated with this surge” . As a result of the increasing amount of imports several major companies closed, the income of the industry lowered to the “zero” mark. It became clear that without government’s assistance industry would not be able to survive. The U.S. government understood the importance to design a set of policies “to ease the pressure on the steel industry and its employees, induce the companies to withdraw or suspend their dumping complaints, quiet the congressional proponents of trade protection, and minimize the contribution to domestic inflation, which was rising to 7 percent and beyond” . However, the plan that was proposed by Anthony Solomon to accomplish all of the goals described above did not address the real needs of the industry, which continued to dismiss its workers by closing down more and more mills. Measures that should have been taken by the government at that period had to be stricter, maybe even in the form of protectionism to help the industry face severe competition from cheaper imports. Instead, the plan that was designed aimed at helping the steel industry “in its struggle with foreign competitors by assuring “fair” competition and reasonable domestic tax and environmental policies” . Also, it remains unclear why the U.S. government waited for so long to design these policies, which indeed came out only after nearly 20 years from the beginning of the steel industry crisis. The help should have been provided earlier. This is how the actions of the government are described in the article by Michael Waller “U.S. in Steel Trap”: “The domestic steel industry and other industries vital to U.S. national defense is being killed off by policymakers in Washington who are caught up in a “free-trade fervor” . And the most awkward consequence of such actions can be seen when the U.S. Army needs the products of the steel industry, and it has to go to the world market to find it. This is how it happened when the U.S. Army found the need for new soldiers’ berets. Instead of buying them from domestic producers, “it had to go to Communist China to have them made. No U.S. company could produce them to the required quality and specifications” . Some of the scientists tried to explain such a weird behavior of the U.S. government. These explanations can be found in the article “Offshoring in the Service Sector: Economic Impact and Policy Issues” by Alan Garner, who states that “Economic research finds that protectionism is a costly way to preserve U.S. jobs” . Instead, the author is convinced that the better way out is to “adopt policies that ease the reallocation of labor and capital to industries with stronger competitive positions” .
The sequential reason of lack of government regulations to aid the steel industry, which also contributed to the decline of manufacturing jobs in the U.S. steel industry, is the lack of competitive strength of U.S. mills as compared to Chinese and Japanese mills, for example, which at that time produced more qualitative products and at cheaper prices. Of course, having no or negative profits makes the owners of the steel mills lay off the workers because there is no sense in continuing the operation.
The following reason which impacted the number of employees in the U.S. steel industry is deindustrialization. The process of deindustrialization has touched all of the world nations. It is characterized by the reduction of the employment in the manufacturing sector and the decrease of the number of people employed in the service sector of the national economy. Some of the scientists state that the decrease of manufacturing jobs in the steel industry is due to the decrease of the industrial capacity of the steel industry, which is partially true; however, it is necessary not to forget about the lack of competitive ability as compared to imports. Factors which contributed to the process of deindustrialization in the USA include: “a lack of investment in basic production, plant closings and layoffs, and the large negative merchandise trade balance as evidence that the United States is losing its manufacturing base” . People that have been laid off started to shift to the service sector, but those who couldn’t shift had to remain unemployed. The process of deindustrialization does not only mean shifting of the jobs to the service sector. However, it means the decline of the manufacturing industries as a whole, which is followed by the reduction of employment and the decrease of net profits.
In conclusion to this point, reasons that contributed to the decline of manufacturing jobs in the United States steel industry include the increase of foreign imports and lack of competitive advantage to resist it; government failure to eliminate the pressure on the U.S. steel industry from the side of foreign producers; deindustrialization and shift of the jobs from industrial sector to service sector of economy; lack of investment in the steel industry; decrease of profits; and bankruptcy of the steel mills.
3. Modern State of the Steel Industry in the USA
There is no doubt that the U.S. steel industry will continue to exist and will survive all of the hardships. However, the structure of it is constantly changing, adopting new technologies, changing ownership and adapting to a new competitive environment. It is necessary to acknowledge that “both changing technology and international competition have contributed to a tougher and more competitive environment for American steelmaking” , but the centers of the steel industry are still situated in the eastern parts of the country. For example, Pennsylvania, Ohio and Indiana employ nearly “44 percent of all steelworkers”. In 2004 employment in the steel industry calculated about “156,000 wage and salary jobs” .
The majority of workers are employed by large firms, which can be seen from the following chart.
Having spoken about the reasons which impacted the number of workers in the U.S. steel industry and contributed to its decline, it is necessary to conclude. As it has been stated above, the process of deindustrialization has been a characteristic feature peculiar to all countries all over the world. And the USA is not an exception at this point. However, not only deindustrialization contributed to the decline of manufacturing jobs in the U.S. steel industry. The U.S. government could have taken more effective measures to protect the steel industry from foreign competition; however, it failed to do it. Besides, the development of modern technologies allowed the industry to reduce the number of jobs by adopting new technologies requiring the minimum of human interference. Also, lack of competitiveness and investment in the sector have made it less profitable leaving the owners of the steel companies no other choice as to reduce the number of steelworkers.
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