Globalisation and US Labor Markets

By Mine Senses, Associate Professor of International Economics, Johns Hopkins University. Originally published at VoxEU.

Editor’s note: This column first appeared as a chapter in the Vox eBook, Economics and policy in the Age of Trump, available to download here.​

Most Americans agree that some trade is good. It would be a shame, after all, if Alaskans could not eat mangoes just because they happen to have settled in a location where it is impossible to grow them. Public debate on the virtues of trade gets more contentious when the discussion turns to goods that are no longer – or that are increasingly less likely to be – produced in the US, such as textiles, toys, furniture and cars.

Most economists emphasise that trade is a win-win for all countries that participate. Trade, the argument goes, improves welfare, benefiting consumers by lowering prices and by increasing the variety of available goods. Overall productivity improves as each country moves away from producing goods that they are, relatively, not competitive in and towards goods in which they are. Thanks to trade, consumers can buy fuel- efficient Toyotas, sporty BMWs, or large Ford SUVs – and pay a fraction of the cost that they would for ‘Made in America’ toys, furniture and textiles by buying cheaper versions imported from Mexico, China, or Vietnam. Trade frees the economy’s workers, capital, and land to specialise in what they are really good at – in the case of the US, advanced manufacturing goods like robots and planes, or services like banking, insurance, and software.

Economists have long-acknowledged, however, that the benefits of trade are unevenly distributed across different segments of the population, and that the destruction and expansion of industries that accompanies trade bears its own risks and costs. Until recently, however, the economic consensus was that these transition costs were likely small, and the gains were large enough to compensate for the losses that some do suffer.

Then came China, with its large population, solid infrastructure, and extraordinary economic growth. China transformed rapidly, moving from 1% of the world GDP in 1980 to 20% in 2010. China’s accession to the WTO in 2001 locked in access to the US market at low tariff rates, especially in unskilled-labour-intensive industries. Importantly, this status also reduced the threat of future protection levied on imports from China, making firms more comfortable with moving some or all of their production to China.

The rapid entry of a large export-oriented country onto the world scene had more severe consequences for American workers and communities than previous globalisation episodes. The outcome has shifted economists’ focus away from the overall gains from trade, towards quantifying the speed of the adjustment process and distributional consequences. The findings so far suggest a slow transition process involving large and concentrated losses for some workers and their communities.

During the 1990s and 2000s, the American industries competing with China experienced more factory shutdowns and lower employment growth in factories that survived, relative to less-exposed industries (Bernard et al. 2006). Workers employed in these industries saw lower earnings (Autor et al. 2014) and higher uncertainty associated with these earnings (Krishna and Senses 2014), relative to workers employed in industries facing less direct competition. While high-skilled workers in these sectors – such as lawyers, HR specialists, and administrative staff – were able to transition to other industries without much loss of earnings, less educated and lower-wage workers bore the brunt of the impact. Some of these workers received federal social assistance in the form of Unemployment Insurance, Medicaid, Medicare, Supplemental Nutrition Assistance Program, Temporary Assistance for Needy Families or Trade Adjustment Assistance. Nevertheless, these benefits fell far short of making up for the severe losses they experienced.

Where a community lost manufacturing jobs, the impact was not limited to the wages and job security of low-skilled factory workers but also extended to non-manufacturing employment in these areas (Autor et al. 2013). When customers have less money to spend, either because they have lost their job or because their level of economic insecurity has increased, local stores, restaurants, barber shops and other businesses also suffer.

The fortunes of a manufacturing factory are further connected to other industries through its supply chain. If a factory that produces furniture shuts down, the adverse consequences spill over to suppliers of wood, plastic laminate, plywood, metal, iron and machinery, and on to companies that store, transport and sell the furniture.

Local governments can play an important role by investing in public services, such as high-quality education and infrastructure, to ensure the competitiveness of workers and firms in their community. The problem is that funding for these public services is highly localised in the US, with a heavy reliance on property and sales tax revenues. Therefore, a decline in the level of local economic activity depresses tax revenues and restricts the ability of local governments to fund public services, precisely at a time when this support is most needed. The outcome is the deterioration of public services that further exacerbates the negative income shock – less spending on public housing, welfare and public transport, higher (property) crime rates, and lower quality schools (Feler and Senses 2017).

Adverse labour market outcomes faced by individual workers, who are in most cases already at the bottom end of the education and wage distributions, and the decline of economic opportunity in their communities, often brings profound personal consequences. A decline in manufacturing decreases the wages of men relative to women, which in turn reduces their attractiveness as marriage partners – the outcome is a plunge in marriage and fertility rates in the hardest hit communities (Autor et al. 2017). There is also evidence of worse health outcomes and higher mortality rates (Pierce and Schott 2016), and an increase in the number of children born out of wedlock and to teens.

Two very important caveats are missing from this particularly bleak narrative.

  • First, none of these findings suggests that freer trade does more harm than good. None of the studies mentioned above accounts for benefits of trade, not only to consumers in the form of lower prices and more variety, but to firms in services and in advanced manufacturing that benefit from access to the world market by exporting their products and by importing cheap inputs, machinery and raw materials. A decline in prices of tradable goods and a decline in housing prices in exposed localities, at least partially, will curtail the impact on purchasing power.
  • Second, while trade has been a contributor to these negative trends, especially during the 2000s, by no means has it been the primary contributor. Automation of jobs by computers and robots, although less prone to producing zingy one-liners for politicians than trade with China and Mexico, had a much bigger impact on the adverse economic outcomes that factory workers without a college education have experienced. It’s plausible that even jobs whose elimination could directly be linked to China’s WTO accession would have eventually been replaced by machines instead of by Chinese workers. Fast food CEO and former Labor Secretary nominee Andy Puzder recently described why in an interview with Business Insider: ‘[Machines are] always polite, they always upsell, they never take a vacation, they never show up late, there’s never a slip-and-fall, or an age, sex, or race discrimination case’ (Business Insider 2016). It is unlikely that policies to reverse the trend in which manual labour jobs are replaced by cheaper, faster, and more efficient robots, would gain much traction in Washington.

Alas, with such a bleak economic backdrop, nuanced discussion of trade’s pros and cons does not resonate, especially in election years. There is some evidence that communities hit hardest by globalisation have shifted away from centrist candidates towards ideologically extreme candidates in the most recent US election. The shift took place in both ends of the political spectrum: more moderate Republicans were replaced by more conservative candidates and more moderate Democrats by more liberal candidates (Autor et al. 2016). Now, the question is: what policies will these officials – who were elected on a promise of turning the tide of globalisation away – implement? And what is the prospect of success for these policies?

Initial signs are worrying. President Trump consistently promised, on the campaign trail, to restrict trade. This will hurt American consumers, in particular those with low incomes as they spend a greater percentage of their income relative to their richer counterparts on the kind of goods that have declined the most in price, thanks to trade (Fajgelbaum and Khandelwal 2016). They will end up paying more for ‘Made in America’ versions of products previously imported from other countries. This policy will almost certainly trigger retaliation by trading partners, which will result in lower demand for American exports and possibly lead to a global slow-down. Additionally, given the interconnectedness of US and Chinese economies, policies that restrict trade with China will disrupt the supply chains of many American firms which rely heavily on cheap intermediate inputs and raw materials from China.

So far, the only policy implemented on this front is tearing up the Trans-Pacific Partnership (TPP) – a 12-nation trade deal negotiated by President Obama – to which China was not a signatory country. This was an act vigorously supported by the Chinese, as it has the potential to replace Americans with their Chinese counterparts in setting up the rules of the trade relations in Asia.

Importantly, even if Trump’s protectionist policies are implemented and manufacturing companies are successfully incentivised to move back to the US, their new factories are more likely to look like the BMW plant in Spartanburg, SC than a 1970s Ford plant in Detroit, MI – that is, located in a Southern right-to-work state without much regulation, with a factory floor populated not by blue-collar workers but by robots and a few relatively high-skill and high-wage workers who are machine operators, technicians and engineers. This is unlikely to help the plight of workers living in trade-impacted communities elsewhere.

Instead of trying to reverse the trends in globalisation and technological development at the expense of the communities, firms, workers, and consumers who benefit from these trends, a more productive approach would involve reducing the harm to those who lost their livelihoods during this process.

  • First, a well-functioning and adequately funded set of social safety net programmes would buffer against some of the losses faced by these workers and ease their transition to new employment outside their industries.

Expanding eligibility criteria and increasing the generosity of temporary assistance programmes such as Unemployment Benefits, Supplemental Nutrition Assistance Program and Temporary Assistance for Needy Families would help cushion the initial blow of a job loss.

  • Second, while a short-term cushion is important in an environment in which trade shocks are more frequent, unanticipated, and harder to insure against, policies that get people back to work as soon as possible are preferable.

This is not only because of the efficiency losses due to unemployment, but because a job is more than just a paycheck for many workers – it helps create a sense of purpose, provides an often-needed structure, gives the sense of a solid place in one’s community, and is a part of one’s identity.

The cost of losing a job is more than just losing the financial benefits of having a job. Recent research links decline in labour force participation of men, especially of white men without a college degree, to high rates of ‘deaths of despair’ due to suicide and drug and alcohol abuse (Case and Deaton 2017). Retraining subsidies, federal job guarantees, wage insurance programmes, and subsidised loans for displaced workers going back to college are all policies that could help younger workers transition to new sectors that require a very different set of skills than their old job, and help older workers transition into retirement.

  • Third, eliminating local government policies that serve as a barrier to migration and incentivising workers to move to more prosperous communities would be beneficial.

One such barrier is artificial restrictions on housing supply, like zoning laws and building restrictions that increase housing prices. These policies tend to place a heavier burden on low-income households who spend a larger share of their budget on housing.

Another barrier to mobility is occupational licensing laws. Currently, about one third of workers in the US need a state-issued license to work. The time and money cost of acquiring a license in a new state varies widely and serves as a barrier to relocating, especially for low-income households with at least one earner working in an occupation with a licensing requirement, such as a hair-dresser, make-up artist or a child-care provider.

Moving towards standardisation of the eligibility requirements for government assistance programmes, making it less onerous to transfer benefits and health insurance across states lines, and providing relocation vouchers for needy households would also incentivise workers to move away from low-opportunity communities by reducing the risk and pecuniary costs associated with moving.

The current administration has so far shown little appetite for expanding government social safety nets and easing the transition cost for displaced workers. One of the first legislative actions of the Trump administration was an attempt to repeal the Affordable Care Act – a system designed to insure low-income families and provide an important buffer against loss of employer-provided health insurance following a job loss.

Similarly, Trump’s first budget plan involves deep cuts across government agencies and eliminates many federal programmes that assist the poor (Low-Income Home Energy Assistance, Community Development Block Grant Program, Section 4 Capacity Building for Community Development and Affordable Housing Program, to name a few) and programmes that support education and training (21st Century Community Learning Centers Program, Federal Supplemental Educational Opportunity Grant Program, Striving Readers Comprehensive Literacy Program and the Senior Community Service Employment Program). Also, there is a government-wide hiring freeze in place that is likely to make the implementation of policies already in place more difficult.

One area where there is some possibility of reform is the reduction of existing regulations. If some of these reforms serve to reduce barriers to mobility across localities, they have the potential to speed up the adjustment process. However, it is unlikely that this will be enough to end the ‘American carnage’ that President Trump described in his inaugural speech.

References can be found in the original post.

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About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism (“Because markets”). I don’t much care about the “ism” that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don’t much care, as long as the benefits are delivered. To me, the key issue — and this is why Medicare for All is always first with me — is the tens of thousands of excess “deaths from despair,” as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics — even the worthy fight to help the refugees Bush, Obama, and Clinton’s wars created — bright shiny objects by comparison. Hence my frustration with the news flow — currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press — a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let’s call such voices “the left.” Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn’t allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I’ve been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.

31 comments

  1. SA

    Well, globalization hasn’t lowered the price of housing. Family grocery bills haven’t declined. Cheaper clothing may be available, but it doesn’t last. Health care? Education? Cars? Dishwashers and dryers? The problem with the smiley-face theory of trade benefits is that big-budget items haven’t gotten cheaper, because lower manufacturing costs have been captured as profits.

    The author’s claim that automation has had a bigger impact on labor than off-shoring since 2000 is one I would like to see proved.

    1. Dan

      The canard that automation would have cost manufacturing jobs in the US anyway lacks any real merit IMHO also. Job loss to automation itself would have been a far SLOWER process than to the job loss than what has occurred by off-shoring manufacturing to the teaming hordes of previously-unemployed Chinese workers. You just don’t go into your robot store, pick out a “Widget Maker 1000” and off you go. All the advocates of this meme like to use the auto industry as an example. Anybody recall when automation was first introduced into making cars? Like 20-30 years ago maybe?? And it is still ongoing.
      And now, the expertise to even automate production of the bazillion of different “Widgets” out there, has been, or in the final stages of being lost. So yeah, eventually even Chinese robots will be more efficient than American robots. At least we will have all those American oligarchs to look up and aspire to.

      1. marku52

        When HP moved printer assembly offshore, the opposite happened. The American manufacturing plant was highly automated, all circuit boards had to be carefully designed with spacings appropriate to robot grippers, etc.

        When mfg moved offshore, it was the reverse. Everything was done by hand, there were no spacing requirements for tiny Asian hands, and as far as costing was concerned, we were told to assume labor was FREE.

        No sh*t, FREE.

        1. Left in Wisconsin

          Yes, that’s why all the companies moved their production to Mexico and China – for the robots!

    2. diptherio

      The first half of the article is actually good…but the counterarguments and suggestions the author makes show how out-of-touch he is. People have lost their jobs due to trade policies that have greatly enriched the 1%; solution: offer a few more gov’t hand-outs!

      But I’m being unfair, because he recognizes that it’s not just about the money…so he suggests more of the “re-training” snake-oil that has failed time and again to offset the loss of good jobs. Genius! I’m sure it will work this time.

      Even when the mainstream econo-pundits admit the problems with the BS they’ve been propounding for decades, they just replace it with some more of the same. Some of us were aware of the negative side-effects of “free-trade” policies even as undergrads. And it’s not because I was some kind of genius, but because it was right there in the textbook under the heading “factor price equalization.” It was obvious to me that if you depend on wages and live in the US, having the factor price of your labor equalized with Chinese and Mexican workers is not a good thing. The response I got to pointing this out was just as obtuse as anything written above: but there are NET gains, so everything is cool! (You see, as long as the winners could conceivably reimburse the losers, there’s nothing to worry about…even if the losers don’t actually get reimbursed).

      At least now we know that the problem with the mainstream economists isn’t that they don’t understand the problem. The first part of this piece proves that they do. They just can’t seem to stop defending the status quo, even when they themselves can explain why it’s indefensible.

      1. Left in Wisconsin

        The problem is that, by definition, trade has to be a net positive. Because in the model actors wouldn’t do it if it wasn’t. But in real life, of course, the ones making the decision to trade (i.e. relocate production to lower wage locations) aren’t countries, they are company executives. So the argument that trade has to be a net positive for the country goes out the window, because it isn’t the country deciding to trade. Except economists are too disingenuous to admit that. So, lots of hand-waving and “feeling our pain.”

        1. diptherio

          Right, it’s a classic case of that old economic trick: assume that which you claim to prove.

          And the conflation of abstract entities with actual flesh-and-blood decision-makers is one of my long-time pet-peeves. A country doesn’t have a nervous system and so doesn’t experience anything. Individuals do. Saying something is “good for the country” is as meaningless as saying something is “good for business.” Who in the country is it good for? Who in the business?

          Because what’s happening is that without saying it directly, they’re claiming that the interests of a country’s richest people are concomitant with the interests of a majority of the population. Not just “what’s good for GM is good for America,” but “what’s good for GM’s CEO is good for Americans…and if you don’t agree, it must be due to a lack of economic knowledge on your part, not glaring philosophical errors on ours.”

  2. Livius Drusus

    Trade is good if it encourages competition based on “race to the top” policies like greater productivity and cooperative labor relations but not if it encourages “race to the bottom” policies like weak or nonexistent labor rights, low wages and a lack of environmental regulations. NAFTA should have been the North Atlantic Free Trade Agreement not the North American Free Trade Agreement.

    I seriously doubt that automation had a bigger negative impact than trade policy. If automation was the culprit then why was the high productivity period from 1947-1973 so good for ordinary workers, with strong wage growth and low unemployment? Were businesses moving factories to China and Mexico because that is where the robots were?

    The bottom line is that American companies took the low road when it came to dealing with competitiveness issues when Japan and Western Europe were done rebuilding. Instead of working with labor to improve competitiveness via cooperation and better production methods American companies chose to smash labor and move production first to the anti-labor states of the Sun Belt and then to developing countries where they could exploit cheap, powerless labor. This is the race to the bottom/low-road strategy and it has been terrible for American workers.

    1. Mike

      L.D. – You’ve hit the nail on the proverbial head in the following:

      The bottom line is that American companies took the low road when it came to dealing with competitiveness issues when Japan and Western Europe were done rebuilding. Instead of working with labor to improve competitiveness via cooperation and better production methods American companies chose to smash labor and move production first to the anti-labor states of the Sun Belt and then to developing countries where they could exploit cheap, powerless labor.

      The economic reality of post-war economics was – destroyed nations, industries, and infrastructure are GOOD for economic growth, as long as your nation survives all that and has the capacity to exploit all that destruction. The US did not treat the economic miracle of the EU/Japanese “rebirth” as a limited gift, but as a way to make them subservient to our long-term goals. To do that, they would have to truncate their growth to accommodate our needs before theirs – a hopeless insanity.

  3. philbq

    Right on: SA, Dan, and Livius. Your comments are the truth. The article is just another standard smooth defense of the destruction of the U.S. manufacturing base by greedy corporations. (It came from Vox, where they promoted Hillary Clinton and other corporate centrist Democrats.) These corporations did not invest in old U.S. factories. They preferred to close them instead and build shiny new ones in low-wage countries. The loss of millions of manufacturing jobs in the U.S. has had profound economic and political effects. Those corporations who moved manufacturing out of the country should pay a tax penalty.

    1. Jeremy Grimm

      Sorry — I have to disagree with you. This is a standard defense but it’s not a smooth defense of the destruction of the U.S. manufacturing base. I think this is a very lame defense, old and decrepit barely able to hobble out. The arguments made in this post are stale well past deserving any answer.

  4. John Wright

    The editorial also threw in a “de-regulation” bone for the home building industry

    “One such barrier is artificial restrictions on housing supply, like zoning laws and building restrictions that increase housing prices. These policies tend to place a heavier burden on low-income households who spend a larger share of their budget on housing.”

    The cities that have been hit hardest with loss of employment are not going to see this as much of a benefit as real estate is probably declining.

    High housing markets are usually good job markets, and deregulating via changing zoning laws and building restrictions is unlikely to help poor job market areas.

    How about removing artificial restrictions on drug importation from Canada or modifying Medicare Part D to negotiate prices with pharmaceutical companies?

    These should also fall under “These policies tend to place a heavier burden on low-income households who spend a larger share of their budget on (insert many expenses: medical, educational, auto repair, food).”

    Low income people frequently spend ALL of their income, so relief in ANY area would be welcome.

    This is a neolib standard editorial, display some understanding of the current system’s problems, propose some policies with little chance of occurring (such as a increased safety net) and then throw in a request for some industry friendly “deregulation” that COULD be passed, ostensibly to help the now disadvantaged people who lost their jobs.

    Also praise the corporate friendly TPP, “This was an act vigorously supported by the Chinese, as it has the potential to replace Americans’ (corporate interests) with their Chinese counterparts in setting up the rules of the trade relations in Asia”

    I inserted the “corporate interests” as that was who was really setting the rules of trade with Asia in the TPP, it was not the typical American or American labor.

    Do people really write these op-eds?

    Maybe there is some neolib-bot that spits them out.

  5. RickM

    Here is the tell:
    ” While high-skilled workers in these sectors – such as lawyers, HR specialists, and administrative staff – ” HR specialists, that’s a good one. I remember when HR was the Personnel Department. Back then you could hire someone with the required aptitude and preparation to do the job. Now? Those specialists are all-knowing and all-seeing. But what they know and what they see are invisible, for the most part, except how to low-ball salaries so that no one in his or her right mind would take the job, unless desperate (which is a feature, not a bug, I reckon).

    And here is the obligate corollary:
    “the impact was not limited to the wages and job security of low-skilled factory workers…”

    I am now a “high-skilled” worker with the necessary “credentials,” but I have also worked in a heavy chemical manufacturing facility, where a “low-skilled” worker wouldn’t last a month without hurting himself (only men back in those days, but not now, where such jobs exist) or someone else. Any jackass who doesn’t know that it takes consummate skill to handle heavy, dangerous materials or know which wrench to use in a confined space surrounded by high-pressure lines transmitting hydrochloric acid or hydrogen gas should not have a forum to spread such nonsense.

  6. Bill H

    “…high-quality education and infrastructure, to ensure the competitiveness of workers and firms in their community.” This a truism invented by politicians, and to some degree by educators, that has never been demonstrated to any significant degree by a consequent improvement in lifestyle of the working class. Mostly it has merely produced wealthy educators and more highly educated unemployed.

  7. tegnost

    This article is totally schizophrenic and reflects the diseased thinking of what passes for informed commentary. In a nutshell it recalls to me a conversation I had with an avowed federalist many years ago as free rabbit ears style tv was being replaces by digital. I said I don’t like the digital and I’m not going to pay to watch a bunch of commercials, he looked at me like I had an unrealistic view, not believing that I or anyone else would actually stop watching tv, and stated that a new tv is only $150.00 and I could easily pay that in order to continue to watch tv, completely missing the point that I was not going to spend money in the way he was sure I would. This post makes the same mistake. People with no money buy nothing. This authors assumption of the benefits of trade are blind to this simple restriction. Also, the policy prescription of less policy (deregulate everything, standardize everything), sort of a policy to not have policy, is the essence of our nations collective outcome pushed upon us by the neolibcons and the few sops this writer is willing to put forth are inadequate to the problems caused by said policy of un-policy. News flash…I do not have a tv, and don’t watch tv pretty much ever (and when I do it’s in awestricken disbelief) and I even listen to the Seahawks games on the radio b/c raible and moon are better than the tv. In a somewhat unrelated post script regarding this and the competition article, it dawned on me while reading thuto’s comment that the trade deals are cooperation agreements between nations and their elites to put every wage earner on the planet into competition with one another. Socialism for the rich, darwinism for the poor.

    1. cnchal

      It actually much worse than you think. Generating new wealth locally is what has been lost by elite collusion. All those tombstones, that were once used by stupid men that make stuff, to make stuff, stuff the educated desk jockeys use to live in on or with.

      It seems that high end North American or western manufacturing has become channeled into making the most retarded objects known to man, military crapola. Or pickup trucks. Only slightly less retarded.

      What of the future? Manufacturing is a wealth creating activity (making military crap excepted), and relatively speaking, doing less here and more there means less wealth here and more wealth there.

      Politicians don’t care. Their conception of wealth creation is handing someone a bill for $2000 for 4 hour of labor at a desk.

  8. Phacops

    Thank you all for the incisive comments debunking that opinion piece.

    Not being trained in economics, it is hard for me to tease out the arguments. That piece reminds me of a tactic used by deliberately ignorant Creationsists or the anti-science crowd unethically confusing any factual account. It is known as the Gish Gallop, proof by verbosity, which drowns the reader in a flood of individually weak arguments that one does not know where to start in refuting.

    When I see or hear such, I catch a whiff of bullshit, and while I try to be educated about economics, I can’t quite tell where the stench is coming from. Do all economic arguments rely on such verbose discussion?

    1. diptherio

      Fortunately not. I suggest reading Stephanie Kelton and Bill Black (if you don’t already).

  9. Synoia

    Fast food CEO and former Labor Secretary nominee Andy Puzder recently described why in an interview with Business Insider: ‘[Machines are] always polite, they always upsell, they never take a vacation, they never show up late, there’s never a slip-and-fall, or an age, sex, or race discrimination case’

    True.

    Machines also will not buy your product.

    Employees = Customers.

    1. diptherio

      Good point. I also found it rather telling that Pudzer thinks the best way to deal with discrimination cases is NOT to stop discriminating, but to replace the uppity workers with robots.

      One more thing that robots are better at than people: putting up with sexual harassment.

    2. animalogic

      “Employees = Customers”
      Correct.
      But — business doesn’t care who is the customer. X number of Americans lose jobs ? No worries — we’ll find customers in China, or Finland, or Brazil or where ever.
      Of course, even that strategy winds down when automation in the “where ever” counties hollows out the labour/customer base….

  10. Synoia

    Trade, the argument goes, improves welfare, benefiting consumers by lowering prices and by increasing the variety of available goods.

    Lowering prices is not a benefit if jobs are lost, it creates the opposite of the “virtuous circle,” the “downward spiral.”.

    It is also not a goal of any business, lowering costs is am objective, lowering prices is only an objective temporarily to squeeze out competition, as it has in the form of US workers.

    Trade has decreased the variety of available goods. The same goods are available everywhere, having killed off local versions of the products. The only variety remaining appears to be local customs in food and dining.

    Louis Vuitton and Chanel, Hugo Boss and Michael Kors, are the same everywhere. The charm of local goods is dying. What remains are a few local crafts, few and far between.

  11. marku52

    ” Currently, about one third of workers in the US need a state-issued license to work. ”

    That strikes me as total BS.

    1. John Wright

      One wonders if this is seemingly a high proportion because it also includes drivers’ licenses for delivery people and truck drivers.

      After this is a “state-issued license”.

      If so, the statement could be correct, but not in the way a casual reader might interpret it.

      The statement should be qualified by how time-consuming/difficult/expensive it is to get a license for one of the jobs requiring one.

      1. marku52

        Yeah, let’s not license OTR truck drivers.

        And after we free up all the nail salon and hair workers, think of the employee wonderland we would create.

        Still calling BS…..

  12. Jeff Z

    Note also the rhetorical sleight of hand. NAFTA and the like are simply ‘trade agreements,’ since they often leave in copyright and patent (necessary to some extent, but that is another debate).

    Whenever you see ‘free trade’ in the MSM or articles like this, is really means ‘tariff reduction’ and quite likely, increased power for transnational corporations to undermine local rules if they threaten ‘profit’, or now even ‘expected profit.’

    Finally, this piece also takes for granted that current measures of GDP/output are accurate enough. This is coming under increasing scrutiny even in the economics profession, but it will be extremely hard to dislodge.

    Sometimes I am ashamed to be an economist, and today is one of those days.

    1. marku52

      Unfortunately, your profession (at least the macro side of it) has a lot to answer for. If I want to know what position “main stream economists” will take, it is inevitably the one that justifies the existing imbalance of power and wealth. The micro guys can be fine “What price can I expect to get for the avocado crop this year if it comes in at so many bushels….”

      Keep asking them uncomfortable questions…

  13. Chriss Street

    This idiotic post explains why Trump won. Each productive manufacturing job generates a multiplier of 4.5 additional jobs. Each service job (fast food) generates a .5 multiplier of additional jobs.

    Fake economists are not distracted by facts

  14. MG

    Yet another economist who just equates lower prices with increasing consumer utility with no regard for quality/duration of the item including possible replacement costs.

    Obviously doesn’t build or repair anything of note nor does he know much about the clothes he wears.

  15. Felix_47

    I am no expert but I would love a reader to explain to me how the unions allowed these trade agreements to take place without allowing free trade in union organizing, lawyers and workers comp doctors. Our medical legal complex should be sitting in RVs in Mexico signing up workers for back ache if we want a level playing field. The car industry, as a practical matter, is now in Mexico and the workers have minimal organizing rights and make a dollar an hour. And you can automate workers out of a plant pretty much but you can`t automate worker`s comp lawyers and doctors out of the system. I once read that the major component (financially) of a GM car was health care.

    1. MG

      Yes and the largest reason for the trade deficit with Mexico is because of the transplanted auto industry which even after Obama ‘saved’ the US auto industry accelerated further during his presidency.

      Uwe Reinhardt, a health economist at Princeton, was the one who was often quoted as saying GM spent more per car on healthcare than it did steel.

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