To save you the trouble of reading Bryan Riley’s post at RealClearPolicy, “Trade With China Is a Net Plus for Americans”, here’s a summary. The number of jobs lost in manufacturing since 1991 has been more than made up by the number of jobs in fast food and hospitality.
Yeah, but Warren Buffet is a lot richer now, so WIN!
A graphic that routinely makes it to Zerohedge and which I referenced in Doug M’s post on the recent jobs report at OTB and was scoffed at because a) it doesn’t fit the narrative or b) it came through the vehicle of ZH…………or both.
Lets see, one textile fixer had $18/hr (and fringe benefits) is replaced by two fast food workers at 8.50/hr with minimal benefits, plus there is the fact the lower the pay the less likely one will vote. Sounds like a winner to me. two jobs for the price of one and fewer who vote against their interests!
The problem, Walt, is of course the purchasing power increase of people who benefit from lower textile (clothes, sheets, etc) prices. And then repeat the situation for myriad product groups. And now there are entire groups of people who have adjusted, in fact rely on, their purchasing behavior and power according to these price structures.
This trade situation is a bitch to sort through in a globalized world.
Prices haven’t declined as fast as the number of manufacturing jobs have. Most of the economic surplus is going to the highest income earners.
There are any number of considerations. A very large percentage of those who earn minimum wage but are not teens are immigrants. When you add more people roads, education for their kids, sewers, policing, etc. all cost more. At minimum wage their taxes don’t even come near to paying for the infrastructure support they require.
$18/hour X 2,000 hours = $36,000 plus benefits
FICA plus Medicare on that is 7.65% X 36,000 = $2,764
Cost = X
(2 @ $8.50/hour) X 2,000 = $34,000
FICA plus Medicare on that is $2,601 but there are two beneficiaries rather than one
As I said, lots of considerations, not the least is what sort of country you’d like to live in. I’d like to live in a mostly middle income country.
If I had been thinking ahead I would have saved an analysis I saw several months ago that attempted to put forth net winners and losers from trade. Included in the analysis was a stab at the purchasing power benefit to consumers (just imagine Wal-mart alone), apportionment of income related to job losses and gains and even imputed quality issues from competition. It was pretty lopsided in favor. And knowing how people love to shoot or disqualify the messenger here, no, it wasn’t some conservative think tank.
I think we could all agree the analysis task is prodigious. Further, probably a moot point. Imagine the politics. Imagine the effect if people woke up one morning to vastly more expensive goods including food and clothing. The best we could hope for would be gradual transition, but I have no doubt the political momentum would be lost.
I think we could all also agree on a dominant middle class. Yet all I see from the political class is how to harm the rich, all while setting up yet more government structures that provide additional opportunity for manipulation by the rich and extraction of contributions by pols.
The two most robust yet near term feasible proposals I can think of to address the issues at hand are enforcement of legal immigration law and existing visa restrictions, and reduction in commerce restricting (or big business friendly) regulations and licensing. Isn’t it odd that Trump comes closer to each than Clinton?? And yet I’ll bet anyone some of those shiny dimes that those posing and claiming most vociferously for the average guy will vote Clinton. And they will call you a racist and xenophobe, and declare you want to poison children’s food and water to boot.
What a strange society we have today.
One of the problems is that goods would not be “vastly more expensive”. Goods would be more expensive but not by a lot. I don’t know how expensive a shirt or a pair of underwear would be but I’ve published the estimates of how much more expensive an iPhone would be in the past. It would be 1-2% more expensive.
I have no idea what an iPhone price increase would be. I have a lot, if anecdotal, of direct experience with more basic consumer and industrial goods. Things that are relatively labor intensive. Try 20% to 80%. Your predicate won’t even be close, Dave. Not even close.
Could you please provide a specific, concrete, substantiated example? Every study I’ve ever seen shows a net differential of less than 4% and, as I’ve previously documented, for the high tech goods I’m more familiar with it’s lower than that. I think you’re just citing hourly wage differentials which don’t tell the whole story.
It is simply untrue that the prices of goods have fallen by 80% since offshoring of manufacturing began in earnest. It’s not even true that prices have fallen by 20%. Most of the economic surplus has been captured by stockholders and/or top management.
That’s the real history of the last couple of decades. Very little of the economic surplus has gone either to consumers or labor.
Here’s the reference for the iPhone. Even if manufactured in the U. S. labor costs would be a small percentage of the total cost of the iPhone.
I would like to see the free-traders prove their theory in Venezuela. I am sure the Venezuelans would love to have their store shelves stocked with low cost goods. Call me when you are making money. People with no jobs are the best customers. You all are no different than the socialists you deride. You want the private sector to create free money and lend it to people to purchase low cost goodies.
What is amazing is that you all really do believe that the world can create credit as fast as possible with absolutely no downside.
Free traders believe that after several thousand years of technological advances in manufacturing, humans suddenly decided to forego technology and revert to slave labor. According to this theory, the English should have packed up the factories and opened sweatshops in the New World employing Native Americans for a few beads a day. Instead the idiot British built an Empire. I guess the British needed a lesson in proper trade practices.
No. The British were good capitalists, and they used their capital to invest in the best technology of the day. Interestingly, they did not consider humans to be the best technology. This is why it was not called the Human Revolution. I realize some of you have been terribly confused all these years.
Following the massive advances in computer technology, there should have been a corresponding manufacturing revolution requiring skilled labor. Instead, skilled labor was laid-off, and the advanced technology was used for pets.com and other nonsense websites.
(For the youngsters or those who cannot remember, how fast one of these useless web ventures was spending money, and the higher, the better. The “burn rate” was one of the numbers used to judge the performance of a start-up. I thought it was a joke the first time I heard about it.)
The fully functioning capitalistic system was reverting to labor intensive means of production, and at the same time was investing in companies that were destroying their capital as fast as they could. This is the what free traders would like to hold up as the bright shining example of free-market capitalism. A second grader could figure out that this was a load of bullshit, but your typical free trader either thinks you are dumber than a second grader or they are.
Free traders’ theories are based upon the same mistakes as their socialist brethren. They are both parasites that need a wealthy host country in order to function properly.