Jobs vs. Jobs

At RealClearMarkets Allan Golombek articulates what is to me a counterintuitive argument—that the “China shock” in which a million and a half manufacturing jobs in the United States disappeared practically overnight was actually a good thing for the United States:

A fresh study by a team of academics (Nicholas Bloom, Kyle Handley, Andre Kurmann and Phillip Luck) has found in effect that the China Shock is more like the kind employed in heart treatment – it improved the way our system works.

Let’s look at the regional variations, and the change in the nature of jobs. The semi-skilled manufacturing jobs that moved to China actually provided a boost to American employment in high-end areas such as the West Coast and New England – because that is where the new technologies have been developed. Jobs did not simply move from the U.S. heartland to China, they moved from some parts of the United States to others – from the Rust Belt to the Sun Belt. They didn’t just move to China, so much as they moved via China – to Americans better able to meet consumer needs in the 21st century. The end product? Better jobs, at better pay, for higher levels of skills and entrepreneurship – encouraging economic efficiency and growth.

I think that there are so many factors left out of that calculation that you simply cannot draw that conclusion from the data at hand. Some of those considerations are workers brought in on H-1B visas, other foreign workers, wage stagnation, and that not all jobs are created equal.

Let’s begin with that last consideration. When a factory worker loses his or her job earning $45,000 a year plus benefits but gets another job in fast food taking orders and makes $20,000 without benefits, that’s not a parallel move. That worker has actually been injured.

Here’s the next consideration. Let’s say 100,000 business services jobs are created in the course of the year and 100,000 initial H-1B visas are issued in that year. That has happened frequently since the “China shock”. That does nothing for the manufacturing workers who’ve lost their jobs but it does increase costs. More people need more housing, more roads, more sewers, more public services of all kinds.

The housing boom of the early Aughts did result in some manufacturing workers finding new jobs but many of those jobs were also taken by foreign workers, many of them coming into the country illegally. That probably resulted in some smoothing but didn’t really solve any problems. Many of those workers lost their construction jobs during the late Aughts.

The enormous increase in SSDI rolls is corroboration for what I’m pointing out. SSDI is the unemployment insurance of last resort.

Finally, hourly earnings of non-supervisory employees have been flat for decades while earnings for top management and protected professional have increased. That’s the breakdown of total national income. That is not what a healthy economy looks like.

I’m not opposed to trade or efficiency but that’s not what we’ve seen over the last 20 years. What we’ve seen is Chinese mercantilism. Under a gold standard that might have worked out nonetheless but with our current fiat currency it has mostly resulted in Chinese inflation and American stagnation.

15 comments… add one
  • Gray Shambler Link

    And in a field of what? 19? Can you find a presidential candidate who gives a damn?

  • steve Link

    I would just object a bit as I dont think this is all on China. Our investor class was quite willing to move everything to China so they could make more money. Let’s not forget that they started out taking jobs to Mexico and when they can take them somewhere else to earn even more they will do that. They even took those jobs to China knowing that they would have to give up their manufacturing secrets as part of the deal.


  • Gray Shambler Link

    True, China’s just the big dog, check your purchase labels, come’s from all over the third world.

  • Guarneri Link

    Yes. Trade and comparative advantage is fine. It derives from free and honest trade. Prescious little of that.

    “Our investor class was quite willing to move everything to China so they could make more money.”

    Who is our? First, moving to China or Mexico is quite costly and complex. It generally applies best to low level labor intensive operations. Try getting a quality air conditioner coil manufactured in Mexico. Second, in 30years our firm only moved one operation. We have scraped and scratched to keep the manufacturing footprint here. Third, the real issue has been state subsidized imports. Remember, there are a lot of foreign countries manufacturing here. Fourth, spread the blame around. Consumers buy largely on price, claims to the contrary notwithstanding.

  • steve Link

    Who has benefited the most from moving stuff to China? Certainly was not our workers. Consumers? Sure. Costs went down some. I suspect you could make the argument that so did quality for the most part, but that is another issue. But the big winners were clearly in the investor class, including senior management.


  • Guarneri Link

    Consumers, by a long shot. Whatever the cost structure, excess profits are quickly competed away. In fact, most of the move to China manufacturing was driven by destruction of profits for US based companies. Why would competing away profit be different for Chinese vs US based manufacturing cost structures?

    In either event, the other issue appears to escape you. The subsidy and tariff policies of foreign manufacturers/countries.

  • Guarneri Link
  • Gray Shambler Link

    Those needles save lives. Think of them as sharp cigarette butts.

  • bob sykes Link

    Alan Golombeck, Nicholas Bloom, Kyle Handley, Andre Kurmann and Phillip Luck. My God! The arrant stupidity of these men! There is no reasoning with mad men.

    The American working class, White, African, Hispanic, desperately needs a Mussolini. The time for action has arrived. Where is he?

    Or is the opioid crisis an actual government program to pacify the working class?

  • steve Link

    Thanks for reinforcing my claim that there is sustained campaign on the right to somehow prove that San Francisco is an awful place to live. All of thirds while real estate prices climb, suggesting that the demand is high enough to push up prices. (Guess this is something they dont cover at U of Chicago.) In the right wing bubble, San Francisco is the epicenter of all our drug problems.


  • My own view would be that San Francisco would be a delightful place to live but its “carrying capacity” is limited for environmental reasons. Basically, it’s a lousy place to have a big city.

  • steve Link

    Yup. We just visited there a couple of weeks ago. Definitely not a hellhole. If you dont like fog and you do like hot, sunny summers, not a good place. (Really enjoyed the evensong service at the cathedral and strangely enough didnt have to pick up needles off the pew, there weren’t homeless lying all over the altar, no commie flags and we had the Lord’s prayer instead of a reading from the Koran. )


  • If you dont like fog and you do like hot, sunny summers, not a good place.

    Fellow Missourian Sam Clemens is quoted as having said that the hardest winter he ever spent was summer in San Francisco.

  • Gray Shambler Link

    S.F. is a great city for car chase scenes. I was only there once, never saw it for the fog, but I did discover San Francisco sourdough bread at the wharf. And we were hungry and it was good.

  • Andy Link

    I love SF, but could never afford to live there. (Plus, I don’t want to live on a ticking geological time bomb) . The problem isn’t that SF sucks, the problem is that it’s a de facto wealthy enclave.

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