I found the (perhaps unintentionally) funniest piece of the day this one at the Wall Street Journal. In the piece James J. Heckman and Hanming Fang. Here’s the core of their piece:
Few academic papers have been as influential—or as misunderstood—as those by David Autor, David Dorn and Gordon Hanson. Politicians and pundits often use these authors’ papers to claim that China’s rise has cost the U.S. up to 2.4 million jobs due to surging Chinese imports between 1999 and 2011. But these studies focus narrowly on what happened to manufacturing employment in local labor markets, not the U.S. as a whole.
It’s true that communities exposed to heavy Chinese import competition saw steep drops in manufacturing jobs and a rise in local unemployment. Crucially, the displaced workers mostly stayed put rather than moved for new work. It’s no wonder these academic papers resonated because they highlighted real pain in America’s industrial heartland. But treating the China shock as a verdict on national employment is a mistake.
There is growing evidence that, while Chinese imports did hammer certain regions, they didn’t cause large net job losses across the entire U.S. Recent research from the National Bureau of Economic Research finds that job losses locally were mostly balanced by job gains in other regions. Manufacturing-heavy areas in the Midwest and South saw employment declines, but services jobs sprouted in coastal and high-tech hubs like the West Coast and Northeast. Import competition shifted jobs rather than eliminated them.
and here’s the piece’s slug: “The jobs harm was largely local and temporary, while overall jobs and consumer welfare increased”, a pretty good summary of the piece.
Let’s stipulate that the effects were temporary. Ira Gershwin said it well:
In time the Rockies may crumble
Gibraltar may tumble
They’re only made of clay
The Grand Canyon is temporary. The pyramids of Egypt are temporary. Everything is temporary. In human terms the reality is somewhat different. That is that the majority of those who lost their jobs as a consequence of the “China shock” have never recovered financially.
The authors’ argument, that trade with China benefited consumers, is true in part. Those in the lowest income quintile, those who devote the largest percentage of their income to necessities, benefited most along with those in the topmost percentage of income earners benefited the most from trade with China. Those in the third and fourth income quintiles benefited least. That returns to the point I’ve made previously about the “hollowing out” of the middle class.
Possibly the funniest part of the piece is their dismissal of the losses of income as “local”. Recently, there’s been an enormous furor over the loss of jobs in the Washington, DC region as a consequence of layoffs of federal employees. Those are local and temporary, too, but that doesn’t end the outrage over them. What I think the authors are actually saying is that nobody they care about was hurt so where’s the harm?
Let’s try a little thought experiment. I wonder what the authors’ reaction would be were the Congress to prohibit Americans from being paid to teach economics. Shocking as it may be that’s within the Congress’s authority, at least it has been since Wickard v. Filburn. I suspect they would consider the damage enormous.
Nowhere in the article do the authors demonstrate that the jobs that have been added since the “China shock” paid as much or more in real terms than those lost. In my view that’s the critical question and they sidestep it.
