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.