That’s Nobel winner Paul A. Samuelson, one of this country’s top trade economists and the guy who invented modern economics. Now all of a sudden:
… eminent economists such as Paul A. Samuelson are beginning to question the basic tenets of free-trade theory. Is it possible that David Ricardo’s economic analysis doesn’t work for the 21st century? [Business Week 12/06/2004 subscription] (Story links open in new windows)
Damn right it doesn’t – I’ve told you that more than once.
Unfortunately, being able to say that doesn’t make me feel as good as it should. For one thing, Samuelson’s probably going to get credit for the idea, not me.
For another, we have a real problem here, a problem that Washington policy makers and the elite on The Street won’t even acknowledge, much less want to do anything about.
Why are they ignoring it, you ask?
Because they’re greedy, I reply:
… the great fear among economists is that if too many high-tech manufacturing and sophisticated service jobs shift to China and India at the same time, wages will fall in large segments of the American economy. Whole sectors could be hit hard. Then the benefits of the China trade would accrue to corporations and investors only, not to the workers or consumers. [Ibid. ]
Fear no more, economists, because it’s happening right now, even as you sit there, just starting to wake up to the issue.
Yet so far, nobody who might be able to do anything about the problem has moved a muscle in its direction because they’re all doing fine (mighty fine, thank you).
Sure, wages have fallen for about a quarter of the labor force.
But corporate profits (and the insanely misleading measure of "productivity") have been climbing for Wall Street and the wealthy elite (like your Congressman and mine). They just puff on their stogies and take another sip of latte as their limos cruise through town.
Now, though, they’re starting to worry – slightly – because their greed is starting to show:
If blue- and white-collar employees alike are thrown into the global labor pool, a majority of workers could end up losing more than they gain in lower prices. Then the benefits of increased trade would go primarily to employers. "It’s entirely possible that all workers will lose and shareholders will gain; you have to be concerned about that," says Harvard University trade economist Dani Rodrik. [Shaking Up Trade Theory Bus. Wk. 12/06/2004 subscription]
"If" my foot – it has happened and is happening, and the increasing flow of white-collar jobs off-shore will only accelerate the process.
Today, even R & D is moving out of the US, so we’re not going to save ourselves with "creativity and innovation." That’s just pap corporations have been feeding us to keep us calm as they picked our pockets and re-invested the money overseas.
You should be afraid, very afraid, for yourself, and your children, and their’s:
The more jobs that go, the greater the impact on U.S. wages. Already, some 14 million white-collar jobs involve work that can be shipped electronically and thus in theory could be moved offshore, according to a study by economists Ashok D. Bardhan and Cynthia A. Kroll at the University of California at Berkeley’s Haas School of Business.
The hit to wages could be powerful if that happens. Forrester analyst John C. McCarthy identified 242 service jobs as likely to be affected among the 500-plus major occupations tracked by the Bureau of Labor Statistics (BLS). He ranked each by the share of jobs employers are likely to shift abroad by 2015. His conclusion: The cumulative job outflow will total 3.4 million over that period. That comes to 6% of the 57 million people who work in these 242 occupations today.
If that’s in the ballpark, U.S. white-collar wages would get whacked, says Harvard University labor economist Lawrence F. Katz. [Shaking Up Trade Theory]
Once the jobs are off-shored to improve corporate profits, workers end up on the really short end of the stick:
Another way economists gauge the potential wage impact is to look at examples of how people fare when they lose a job and extrapolate for those who might get displaced by offshoring. Turns out that just 30% of laid-off workers earn the same or more after three years, according to a study of 22 years of BLS data by economics professor Lori G. Kletzer of the University of California at Santa Cruz. Only 68% even hold a job at that point, while the rest are unemployed, retired, or perhaps at home with children. On average, those reemployed earn 10% less than before, Kletzer found.
"Clearly, offshoring will be bad for U.S. wages, given what the job displacement numbers tell us," says Princeton University economics professor Henry S. Farber, who has written extensively about displaced workers. [Shaking Up Trade Theory]
And just as clearly, the 32% who won’t even have a job will be much worse off than that.
So what to do?
Sorry, kids – that’s your problem, not mine.
Readings (links open in new windows):
"Free Trade" – I Told You So 11/29/04
Bush Receives A Warm Welcome In Chile 11/21/04
Government Of Business, By Business, For Business – Part III 11/16/04
Bush Seems To Have Broken The American Jobs Machine 10/27/04
Bushonomics And Jobs: A Total Failure 10/17/04
"Results Matter" But Bush Flops On The Economy 08/06/04
Jobs – "Creativity And Innovation" Isn’t Cutting It 05/02/04
De-mythifying The Heritage Foundation’s ’10 Jobs Myths’ 04/05/04:
The "Cargo Cult" Is Alive And Well – Today It’s Called "Free Trade" 03/08/04
Small-biz Bankruptcies Up, Bush Slams The Door On The Job Machine 03/05/04
Off-shore Jobs: Bill Thomas Wants You To Subsidize Them 03/03/04:
Off-Shoring Jobs: An Ember of Hope in the Distance? 03/02/04?
The Shell Game On Jobs 02/26/04
A perfect example of "ignorance is bliss" on jobs 02/25/04
Why your job is moving to Bangalore 02/18/04
Neocons on jobs: are they totally losing it? 02/16/04
"Sending jobs overseas helps U.S." – more from our misleader 02/10/04
Free Traders and Globalizers – Waking Up At Last? 01/26/04
The Myth of Job Recovery 01/22/04
Stop Subsidies For Offshore Jobs 12/16/03
Let’s Sue the Republicans For Breach of Contract 12/08/03
Get a job – in Shanghai or Bombay 10/20/03
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