Posted on 12/18/2003 6:39:06 AM PST by LowCountryJoe
...Expansion of Trade
The U.S. economy is far more open today than it was a generation or two ago. Since 1950, international trade as measured by imports or exports has more than doubled as a percentage of GDP. This trend has had a large impact on manufacturing. Domestically produced goods as a percentage of total purchases of goods have fallen from 93 percent in 1970 to 70 percent in 2000.
This aggregate figure, however, masks differences in the patterns of trade across different types of goods. American manufacturers have transferred lower-skilled jobs abroad to economies with abundant and cheap unskilled labor. At the same time, the American manufacturing workforce has taken on higher-skilled jobs. From 1950 to 2000, employment declined the most in sectors with many low-skilled jobs, such as leather goods, tobacco products, textiles, and apparel. Employment grew the most in sectors that employ high-skilled workers, such as electronic equipment, transportation equipment, instruments, and plastics.
Like productivity growth, trade is not something that we should lament. Some of the arguments made about this topic overlook the most important points. Opponents of free trade point to jobs lost at firms that compete with imports, while defenders of free trade point to the jobs created at firms that export. In reality, both job creation and job destruction are part of the process by which countries gain from trade. Free trade encourages each country to specialize in what it does best. It thereby raises national incomes both at home and abroad.
For these reasons, the Administration remains a strong proponent of free trade. In the short run, there can be losers as well as winners from international trade. But it is better to retrain workers who are displaced by imports than to keep workers producing goods that can be bought more cheaply abroad.
The movement toward freer world trade, like rapid productivity growth in manufacturing, has benefited the economy as a whole. These two trends are mostly inexorable and generally desirable, even though they can cause dislocation for some workers and hardship for some communities.
But they do raise the question: what can or should be done to help manufacturing?...
(Excerpt) Read more at whitehouse.gov ...
But what about the comments which I have bolded here? Is it just me or do these come across as paternalistic?
This is a misdirection, to draw your eye off the ball.
Given Mankiw's recognition
But it is better to retrain workers who are displaced by imports than to keep workers producing goods that can be bought more cheaply abroad.the question remains in what skills do they retrain? Where is the future?
From the article:
An often-voiced concern about the shift from manufacturing to services jobs is that this shift will lower wages . for example, auto workers forced to become hamburger flippers. There is no doubt that many displaced manufacturing workers find themselves in lower paying jobs. The human capital they have accumulated over many years is often not readily transferable to expanding industries.Those high paying service jobs in IT, accounting, engineering, analysis, and the lower paying support and call-center service jobs are being outsourced offshore as well.Yet, as we recognize the hardship faced by displaced workers, we should not make the mistake of concluding that service jobs are bad jobs. The services industries with the highest job growth since 1950 paid as well as, or better than, the average private-sector job in 2000. Meanwhile, most of the manufacturing industries with the highest job losses paid less than average. There is every reason to believe that, even as more Americans work in service industries, the overall level of real wages will continue to rise.
What skills/jobs are not being outsourced offshore? In what skills is there no labor arbitrage?
So the original premise that 'displaced workers will be retrained for other jobs that won't be outsourced offshore' remains unaddressed.
And the answer remains, as always, in the entrepenuerial spirit of capitalism. My grandfather worked his farm the majority of his life. Could he possibly envision the jobs his son and grandson would take utilizing technologies that didn't even exist? Countless entrepenuers will try to determine what work people want done, and consumers will let them know if they are right or wrong.
It is Marxist, sugar-coated propaganda.
But, in general, the protective system of our day is conservative, while the free trade system is destructive. It breaks up old nationalities and pushes the antagonism of the proletariat and the bourgeoisie to the extreme point. In a word, the free trade system hastens the social revolution. It is in this revolutionary sense alone, gentlemen, that I vote in favor of free trade.
~Karl Marx, "On the Question of Free Trade" - January 9, 1848
I wrote: This is a misdirection, to draw your eye off the ball.
I mistook your comment for Mankiw's statement. I should have responded to you without implying motivation, more politely "Don't take your eye off the ball" - apologies.
And for that laid-off manufacturing worker who wants to retrain and support himself, what skills specifically should he train for to get himself a job?
While I am whole heartedly behind using taxes to fund education (justification because of the neighborhood effect), the current method of public education is not going to provide that knowledge or those necessary skills for our future workers to compete, globally, in the long run. Many parents are also guilty for these shortcomings by not instilling self-discpline and values in their children. I think one solution is in a voucher system - which I like to call "the separation between school and state." Though I know it is misnamed because government still steps in and redistributes money, I think that in this day and age of popular culture, sadly, you kind of need "sloganism" to get your points across.
Those high paying service jobs in IT, accounting, engineering, analysis, and the lower paying support and call-center service jobs are being outsourced offshore as well.
It's because you can get more marginal product from our people without incurring the much higher costs. Those people are hungry (literally & figuratively) and they can show rapid productivity gains despite using yesterdays capital equipment. As developing countries shed themselves from repressive government - through revolutions or acknowledgment that liberalization causes a strengthening of the country - the competition will only become greater. Many of us can see the writing on the wall; there is a major "catch-up-effect" in play at this time. As liberalization - in the classical sense - occurs in the developing world, developed countries seem to be moving in the opposite direction. The "catch-up-effect" already causes painful but natural consequences to our economy, however, if we adopt long-term policies to lessen the short-term pain, we'll going to make these consequences compounded.
It should read: "It's because you can't get more..."
How old is he? Where does he live? What can he do? What does he like to do? What does he hate to do? The notion that someone, somewhere else, far removed the individual in question's own subjective heirarchy of values can make this determination is a poor one. The fundamental premise of the question you pose is flawed. It's up to the individual to determine what labor they will offer in exchange, not some central planner.
I see Big Red China has a big PR push going these days. This may or may not be part of it.
But you know what? China can produce Federal Government cheaper than we can -- I mean just look at the cost of living in and near the Beltway.
So .... the Bush Administration's position is now that we turn over Government to China?
That is a valid way of reading this statement's reasoning.
That is likewise not the problem. Laid off wporkers are capable of choosing for themselves.
The issue is what skills/jobs won't be outsourced offshore? From that list, I agree, the individual can and should chose for themselves.
So I ask yet again, as I did originally:
What skills/jobs are not being outsourced offshore? In what skills is there no labor arbitrage?From what list of long-term onshore jobs should they be choosing to retrain?So the original premise that 'displaced workers will be retrained for other jobs that won't be outsourced offshore' remains unaddressed.
I thought I'd answered that. The question isn't answered by me telling you what job will be long-term onshore, because I know no more than you do. The answer to that question is found in the dynamic of the market itself.
If you asked my grandfather in 1963 what his grandson would be doing if all the farm jobs currently in existence were priced out of the local market. Could he tell you 40 years ago that his grandson would manage computer networks? Could he have told you 30 years ago? Even 20? The market allows us to find the answer, it doesn't necessarily allow us to forsee the answer. Just because you can't see it, doesn't mean it's not there. This is why I feel the premise of the question itself is flawed. Economic understanding is guidance, not omniscience.
I'm sure you know you didn't. I'm sure you know the difference between citing a specific list (as asked thrice) and evading the problem (as does Mankiw) by advocating the individual choose from amongst choices you yourself can't even define.
The point being the choices don't exist and you know that, as does Mankiw.
Just because you can't see it, doesn't mean it's not there. This is why I feel the premise of the question itself is flawed. Economic understanding is guidance, not omniscience.
Is that your answer to the dads and moms and fellow freepers who are struggling to find work and feed their families?
They should be guided by economic understanding?
Perhaps we're suffering from miscommunication. I'm not 'evading', I'm trying to explain to you that your question has no valid answer, it's akin to asking me how many angels will fit on the head of a pin. No one short of god knows what work consumers will demand tomorrow and the day after. The best we can do is allow individuals to freely exchange in order to find out what it actually is that consumers want when tomorrow comes.
The point being the choices don't exist and you know that, as does Mankiw.
Sure they do. But there isn't a universal answer (or even list of answers) because the considerations for any particular line of employment aren't universal, they are individual and subjective. 15 years ago my brother took a job at 19 years old in a window factory. He cut the sheets of glass to size for the window. I wouldn't be suprised to learn that job is done by a robot today. At any rate, he didn't care much for it, so he found another job, this time installing auto glass. Driving a van around the county and changing out windsheilds in 90' Florida heat isn't much fun, but it paid the bills, and he became more adept with experience. He took another job, from another glass company, there he also learned to install storefront windows, mirrors, showers, just about anything with glass. After years of working for an hourly wage for someone else he took the plunge and opened his own glass shop. He had to hire a receptionist to handle sales, he didn't outsource it to India. He's had to hire installers, he can't outsource that to China. He bought his own used window pressing unit, so he can make his own custom windows. Do you think he envisioned doing any of this 15 years ago when he was coming home with shards of glass in his hands day after day of cutting flat glass? Do you think someone else told him what jobs to look for and take, what skills to learn, and then where and when to open his own business? Your question is absurd, because there is no end to what work people want done, the only hinderance to that work being done is not allowing the parties involved to negotiate their own mutually beneficial exchanges to accomplish it.
When my father lost his $60K/yr salaried position this summer he didn't sit down and say 'woe is me, this is the end.' My mom went out found a clerical position paying a whopping $8/hr, and dad found a job working 3rd shift as a subcontractor replacing PC's in a network for $14/hr. Why did they do this? For completely subjective reasons - my father has his Air Force retirement, they've nearly paid off their house, they simply took those jobs to supplement their retirement savings. Their house is too big, and they're already planning to sell it (three bedrooms, pool, 2 car garage with a detached one car shop in the back plus the lawn is more than they want to maintain as they age) and buy a smaller place, banking the equity they've accrued. Is what they decided to do applicable to everyone? No. Should my mom, a licensed nurse, get back into that field? It would certainly pay better, but she prefers the lower pay at the clerical position simply because of the schedule and workload involved. Does that mean someone else shouldn't train to be a nurse? Shouldn't their decision to do so be based on their own feelings about getting shit and blood on their hands everyday instead of my determination about what might or might not be a position of employment that isn't outsourced to Mexico? Again, you question is absurd and irrelevant.
Is that your answer to the dads and moms and fellow freepers who are struggling to find work and feed their families? They should be guided by economic understanding?
Of course! To do otherwise is to invite ruin. You can sit in your house and mail out resumes asking for a $100,000/yr starting salary eating strawberries, but that's not a wise course. Instead, you better pick up the want ads and find out what other people (who hold the money you are willing to exchange labor for) actually want done.
You (as does Mankiw) still ignore the problem:
But it is better to retrain workers who are displaced by imports than to keep workers producing goods that can be bought more cheaply abroad.If a list of skills/jobs that will not be displaced by imports can not be compiled, then the 'dynamic market' has provided 'economic guidance' that any job can be done more cheaply offshore.
That your parents are nearing retirement and have equity in their home and are no longer raising a family is, I'm sure, a great comfort to them. But that doesn't change the reality of the newly laid-off manufacturing worker who seeks to retrain and needs to know for what kind of job should he retrain?
What economic guidance is he to follow?
Sure [choices exist]. But there isn't a universal answer (or even list of answers) because the considerations for any particular line of employment aren't universal, they are individual and subjective.
If they in fact existed, you could point to them. One can point to the things one in fact "knows" about. What you are really saying is you "hope" they exist. You don't really know, but you're confident enough to take a position without proof - beyond glass installer. Confidence is not evidence.
Yes, installing glass doesn't seem like an offshorable skill (aside from prefab, modular contruction). Should all laid manufacturing workers retrain as glass installers? I suspect there aren't 3-million glass installers needed.
To do otherwise is to invite ruin. You can sit in your house and mail out resumes asking for a $100,000/yr starting salary eating strawberries, but that's not a wise course. Instead, you better pick up the want ads and find out what other people (who hold the money you are willing to exchange labor for) actually want done.
I'm not advocating they sit around and invite ruin. I'm asking you (and others) to think about where this 'presumption' that retraining for skills/jobs no one seems to be able to identify with certainty, that won't likewise be replaced by Indian/Chinese workers at 1/20th the cost in 3-5 years, leads.
The problem is much deeper than just retraining. It also involves preventing the cost of ones skill from being undercut by global labor arbitrage.
What new skills should someone train for (as Mankiw advocates) that won't be undercut by India or China in a couple years?
If that can't be answered, then the problem won't be solved by retraining or individual choice, now will it?
No, it's more a skill that illegal Mexicans can do much more cheaply than can some layed off and retrained American boroscope operator.
The Gunslinger gave you a terrific answer without giving you the specifics, the specifics of which no one can predict with any accuracy.
Capitalism and its byproduct, the entrepreneurial spirit, is the answer to those displaced workers. I'm sure you've heard the saying: "Lead, follow, or get out of the way". The leaders are the entrepreneurs, the followers are the employees that are employed by the leaders, and the 'get-out-of-the-wayers' are those former employees that didn't put forth the necessary effort to help the leader to keep on leading. They're usually your union types.
In the "new economy", yes. Along with groundskeeper, cook/grillman, dishwasher, janitor, day laborer, etc...
Retraining into semi-skilled or unskilled jobs won't buy much breathing room.
So what is left? Where does the manufacturing worker turn? Where does the IT weenie turn? Where does the accountant, the programmer, the call center operator turn?
But more to the point, regardless of where one turns, what will prevent that skill from being done more cheaply in India or China?
Why has that changed? Think! It wasn't always so.
Career planning, aptitude tests, and job placement services used to exist in highschools and colleges. Yes there are job fairs wherein recruiters come on campus, but what for what 'careers' should students be studying so as to be attractive to said recruiters?
Whom will they be recuriting? Where will they recruiting? For what will they be recruiting?
Why will any new-hire keep his job any longer than India or China can ramp up to receive it?
The freedom to negotiate in such transactions is more important than those members of society who feel financial pinches in the short-term!
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