Musings of a Patriot

Imports and Jobs

I had asked whether our markets would be better served with a tit for tat approach to tariffs rather than a more dedicated insistence on free trade on imports. If I had any lingering doubts on the subject they were laid to rest after reading Why Politicians Are Wrong about Imports and Jobs. Unless the graph in that post is entirely fabricated the free markets are the beneficiaries if they import goods that have been subsidized by more closed markets at a lower price than they could produce themselves.

Admittedly the graph is a bit confusing with the vertical scale changing from the left side of the graph to the right, but the trend is that over the last 48 years imports have doubled while unemployment has been cut in half. While these imports might take specific jobs away from the country they do not reduce the total number of jobs. The turnover creates the added benefit of encouraging those in the workforce to keep improving themselves. The relative ease and complacency that would undoubtedly come from a static economy would guarantee that we would become less competitive in a global market.

Update 2/27/08: Thanks to the persistent questions of mackenzie I went back to look at the graph to see if I had missed anything. A more accurate reading of the graph (remember the confusion I talked about with the different vertical scales) shows that imports went from 4% to 16% of GDP (a four-fold increase, not double) and unemployment fell from 9% to 6% (it fell by one third rather than by one half). While the actual statistics have changed I think the conclusion remains that imports do not appear to adversely affect employment rates.

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27 responses to “Imports and Jobs”

  1. Jeremy’s Jeremiad » The Flu

    […] David at Pursuit of Liberty links to an excellent description of why the free traders are right and Lou Dobbs is an idiot. […]

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  2. mackenzie Avatar
    mackenzie

    Since we design, produce,wholesale,and retail ceramics, it is hard to take those statistics seriously. Most of the stores that we sell to have said that they had a very slow season last year, and business has been slow for a number of years.The middle calss market has dropped out of our local economy, which relies heavily on summer tourism.

    The article doesn’t say what kind of jobs are replacing manufacturing jobs. It is not only manufacturing jobs that are being lost but service jobs as well. Recently Maine lost credit card processing jobs when it was moved overseas.

    I would not like to live in a country where everything is made somewhere else. It is not just the number or pay for jobs but the quality and type of work that is important.
    Also the article says that pay has increased 22% but doesn’t say how much the cost of living has increased. I don’t think the article provides enough information to be convincing.

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  3. David Avatar
    David

    You make a good point that the pay increase statistic is meaningless unless it can be compared to the cost of living increase and I agree that living in a country where everything is made somewhere else is far from ideal. If we cannot compete in the production of anything we should be asking ourselves what is wrong with our country.

    As for the kind of jobs being lost or what kind of jobs are replacing them, no matter how many or what types of jobs are leaving the country, the fact that unemployment has been cut in half over half a century while imports have doubled means that one of two things is true (take your pick) either there is no correlation between imports and unemployment or else there is an inverse correlation between them.

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  4. Reach Upward Avatar
    Reach Upward

    Whenever an economic trend causes negative impacts close to home, we seem to assume the worst. The tourist trade has turned down in M’s area (maybe due to the tax an regulatory structure or to competition from other areas?), so the assumption is that ‘good’ jobs have been lost only to be replaced by ‘bad’ jobs.

    Economic changes certainly can hit some regions hard, and of course they can hit individuals hard. It’s no fun to get laid off or to watch the industry in which you work evaporate or go offshore. But the overall picture is one of continuous economic improvement for everyone in the U.S.

    Go back and watch the Drew Carey clip from a few posts back. Measuring by income in faulty, especially because it fails, as M says, to consider cost of living. Also, income measures exclude many sources of revenue for political reasons. Measuring by consumption is far more accurate. And by that measure, all Americans are better off than they were a generation ago and the overall trend continues in that direction.

    Most of the ‘poor’ in the U.S. own homes, cars, and cell phones. The poorest class in the U.S. has 40% more dwelling space per person than do poor people in other first-world nations. In fact, we keep having to redefine the poverty level just to keep the people in the pvoerty advocacy industry in business.

    You can blather all you want about ‘good’ jobs and ‘bad’ jobs, but economically, people at all levels in the U.S. are increasingly better off. Why should we want to keep jobs here that could be done more efficiently elsewhere. Why should wee want to keep jobs for which demand is disappearing? When it comes to employment, a lot of what we call ‘bad’ is just an aversion to change.

    I would disagree with Jeremy that Lou Dobbs is an idiot. He pushes doom and gloom along with class warfare because it sells well. He knows what he’s doing. It’s insidious and disingenous, but not idiotic. Maybe Dobbs is an evil genius.

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  5. Jeremy Avatar
    Jeremy

    Fair enough Reach…but that was the best I could come up with on 800mg of Ibuprofen and a decent Sudafed buzz!

    I agree with your break down of the issue down in your comment and David’s analysis in this post. Americans are better off than they have ever been and it isn’t because we are buying goods and services that are exclusively provided by Americans. It is because the market, for the most part, is working.

    Now…if we could just get it through our heads that shutting down the border with Mexico and punishing illegal immigrants is as dumb (for the same reason) as the trade war Lou Dobbs is pushing we’d really be getting somewhere!

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  6. David Avatar
    David

    I think part of the problem with the immigration issue is that the laws we have are not being enforced, but having those laws on the books allows some people to mask their real desires behind the guise of respect for the law. (As Jeremy already showed at the Utah Amicus.)

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  7. mackenzie Avatar
    mackenzie

    Since we are wholesalers as well as retailers, we are dealing with the national economy and not only the state of Maine. The national economy had a very bad Christmas season in 2007. The effects that we are seeing in Maine are also seen nationally, and in some cases New England is doing better than in other regions. We sell to well-established national catalogs that are also experiencing the same sluggish retail atmosphere.

    Still I see no answer to the question as to what kinds of jobs are replacing jobs being lost in service and manufacturing. It doesn’t seem that this should be a difficult question to answer.

    If the statistics say that there is a 22% increase in income, that doesn’t tell you about the distribution of income.

    And if the statistics say there is an increase in employment, that doesn’t tell you what kind of jobs are increasing. The only thing I can imagine is an increase in bureaucratic jobs.

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  8. David Avatar
    David

    The question of how the increased income is being distributed is less important than the question of how consumption is being affected. The question of what kinds of jobs are increasing is again less important than the question of whether more people are able to raise their standard of living (another consumption issue).

    I don’t mean to avoid your questions – I don’t have the answers to those questions. It’s just that I think they are not necessarily the right questions to be asking.

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  9. mackenzie Avatar
    mackenzie

    David said”The question of how the increased income is being distributed is less important than the question of how consumption is being affected.”

    Why?

    “The question of what kinds of jobs are increasing is again less important than the question of whether more people are able to raise their standard of living (another consumption issue).”

    Once again Why?

    Our family business was started in the fifties with the philosophy of creating hand made objects affordable to the middle classes. That was during the golden age of the American middle class, long since gone.

    Now the number of sales has decreased but the price point of the sales has increased. We have to adjust to the market and sell to the people who have money.

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  10. mackenzie Avatar
    mackenzie

    By the way, is there a way to receive notice that someone has responded to one’s post?

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  11. David Avatar
    David

    In both cases, the answer to “why?” is that consumption is a better indication of economic quality of life than income is.

    In answer to your second post – there should be a check box when you leave a comment to “Send me Updates.” Checking that box should send you an email when someone replies to the post you are commenting on.

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  12. mackenzie Avatar
    mackenzie

    If consumpion is going to indicate anything, there has to be more information that just consumption or just a dollar figure representing consumtption. Statistics are misleading if they are not presented with adequate detail.

    I am still waiting for an answer to the question -“what kind of jobs are increasing- as manufacturing and service jobs are decreasing. I wouild imagine jobs in processing and distributing incoming goods- but that doesn’t seem like it would increase jobs since you also have to process and distribute goods that are manufactured in this country.

    I don’t see a checkbox for receiving updates.

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  13. David Avatar
    David

    I must have deleted the section of my previous comment where I stated that I don’t have information on what jobs are increasing. What I know from the data is that unemployment has been cut in half as imports have doubled but I saw no data on what new jobs were being created.

    I don’t understand why you would not be seeing that checkbox (it should be below the “submit comment” button). Do you see “You are subscribed to this entry” with a link to “Manage your subscriptions.” I see your email address listed as being subscribed to the comments for this post (and two other posts).

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  14. mackenzie Avatar
    mackenzie

    Ok it seems it doesn’t concern others here that there is no explanation about what jobs are being created to replace jobs that are being lost.

    I see the Submit Comment and The Manage Your Subscriptions, which provide the option of blocking notifications, but no option to select notifications.
    The system must believe I have selected notifications since it gives me the option of blocking them.

    There seems to be a connecting theme between the statistical discussion and the technology glitch- a General disconnect between what is said and what actually exists.

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  15. David Avatar
    David

    It seems that substantial evidence that jobs are being created leaves me unconcerned over what those jobs are – see More on Consumption for some explanation of why.

    As for the technical glitch – I’ll have to look into that.

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  16. mackenzie Avatar
    mackenzie

    Are you identifying the statistical report with substantial evidence?

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  17. David Avatar
    David

    I consider a half century trend where imports have doubled and unemployment has been cut in half as substantial evidence that either imports are beneficial to the economy or else imports have no correlation with unemployment.

    I don’t think we have enough evidence to prove conclusively that rising imports cause unemployment rates to fall, but we do have pretty good evidence that rising imports do not cause unemployment rates to rise.

    Actually – as I looked back at the graph I realize that I had misread it. Imports are 400% of what they were half a century ago and unemployment is 65% of what it was (rather than 200% and 50% as I previously thought).

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  18. mackenzie Avatar
    mackenzie

    But you are basing that “fact” of reduced unemployment on statistics and yet the statistics are supposed to represent a reality. When I hear such a statistic the first question that comes to mind is what kind of jobs would be replacing manufacturing and service jobs. Has the gross national economy grown in the absence of manufacturing and service jobs? Where is the growth sector? I can look around my local community and see that a lot of jobs are in construction, and landscaping, and most of those jobs relate to the housing market, and the housing market has slowed down. If the loss of manufacturing and service jobs results in a decrease in unemployment, then why wouldn’t the slowing down of the real estate market also result in a decrease in unemployment. The thing I still do not get is what accounts for the decrease in unemployment? Where is the growth sector that accounts for all the new jobs that are allegedly being created?

    If you want to compare the economy to the economy half a century ago that was a time when the distribution of wealth took the form of a bell curve, with the greatest concentration of wealth shared by the greatest number of people. That makes a better environment for the nurturing of a democracy than the way that wealth is distributed today.

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  19. mackenzie Avatar
    mackenzie

    Also fifty years ago a family could be supported on one salary, but today it requires two salaries, more often than not, so there you have a new job sector- day care centers.

    How it is counted when one person has two jobs – and how are partime jobs counted? Are the statistics based on a forty hour week?

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  20. mackenzie Avatar
    mackenzie

    How would a housewife have been counted fifty years ago? Would a housewife have been counted as unemployed? It was possible then to have one partner working and the other take care of the home and family, and so if you are comparing unemplyoment figures, the picure changes when you take into consideration the need to work outside the home.

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  21. Jason Black Avatar
    Jason Black

    Mackenzie,

    You’re mistaken on this point – unemployment figures do not count all those without jobs as unemployed (if it did, our unemployment would be well over the 5% mark we see today). To find the unemployment rate, a large sample of people are surveyed. They’re first asked if they are gainfully employed. If they answer no, then they’re asked if they are actively seeking work – if they want to be employed. If they ask my wife – a homemaker – she’d say no, and they’d leave her out of the equation entirely. The unemployment rate consists, then, of those without work, but who are able and willing to work, and who are actively seeking employment.

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  22. David Avatar
    David

    It seems you are asking me to identify answers in a fifty year national trend that would explain your recent local observations. However, I think you have started to identify the growth sector yourself with your reference to day-care centers. Over the last half century we have created not only new job sectors, but entire industries that were unthinkable 50 years ago.

    We have millions of new technology jobs. We have manufacturing sectors that didn’t exist before we had to manufacture microchips and circuit boards (for example). We have new service industries such as day-care and dog walking. Our ever-increasing body of knowledge has led to new academic disciplines and many more jobs in higher education as rising percentages of our expanding population seek college degrees at all levels in established fields such as accounting as well as newer fields like geophysics.

    In short, the growth is rampant in areas that we can’t even think of in the context of 50 years ago. If you want to know where the growth will be in the next 50 years I can’t predict that.

    Reply
  23. mackenzie Avatar
    mackenzie

    David I am not mistaken, it was a question not a statement.

    Just because I include local observations does not mean that I am only concerned about what is happening locally, as I have already explained in our business we deal with a national and sometimes international market and so you should not assume that because I use an example from what is closest to me that I am concerned only with my local community.

    I am asking you to hypothesize or else relate to some kind of a study that identifies actual jobs that have been created to replace jobs that are leaving the country.

    I identified a new job with day care centers and that new job also identifies a change in the quality of life, where by the responsibility for raising children shifts from the family unit to the community, This is a change in the quality of living that directly relates to an economic shift during the time period when unemployment has allegedly decreased. If housewives formerly did not need to work out side of the home, then, according to your explanation, they would formerly have been excluded from the statistics, If a second income is needed to support the family, then now a housewife would be included despite the fact that there is still a need to do the work that supports the home and family – another change in the quality of existence, women’s liberation aside. because a man or a woman could be a housewife, full time or part time. So we are not just dealing with a change in unemployment statistics, only. We are dealing with a different demographic upon which those statistics are calculated.

    Granted, technology changes over the years, but you are now arguing that we have replaced manufacturing jobs with manufacturing jobs and technology. Ok, but a lot of the technology that can be exported to a third world country, without environmental laws or worker’s rights, are being exported for those reasons and this erodes democracy. In this country manufacturers, (and hand crafted products qualify as manufacturers) have to pay a large percentage of parole to support workers rights that this nation has developed over the course of its history. Large corporations increase their profit margins by moving whatever manufacturing, technology development, and service industry they can to less democratic nations without ecology laws. One of our chief competitors in the job market is communist China, which also happens to be a heavily polluted nation with a competitive, inexpensive labor market. Any job that a large corporation can move to a less expensive economy will be moved.

    A lot of the jobs you mention depend on the existence a thriving economy to support those jobs. Our economy is riding on a huge amount of national and personal debt, which is probably supporting many of the types of jobs that you have mentioned.

    As I see it our economy has to look to small and medium sized business for it’s secure employment. This is not a bad thing, in my opinion, but I still do not have a picture of what those jobs are that secure within a non-competitive democratic economy, – (that is non-competitive with non-democratic economies).

    Over time, the peoples of the non-democratic nations are apt to be motivated to increase individual rights and environmental laws, whether through legislation or acts of violence. This has been the course of history whenever wealth becomes concentrated in the hands of the few.

    As for the unemployment statistics, the key question is who are the control groups? Is it a fair cross-section of the economy? If this question were answered, it would likely also answer the question of what new jobs are being created.

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  24. David Avatar
    David

    You are changing the subject. I stated that imports do not have an adverse affect on employment rates and now you are saying that the new jobs we are seeing are evidence of a change in quality of life. Quality of life was not the issue I was addressing. If it were I would be agreeing with you whole-heartedly that the move to households with two working parents is detrimental to our society. Based on our discussion so far I would venture to guess that we don’t see eye-to-eye on how much of the move to two-income households is necessary and how much is a result of the choices that people make.

    In fact, the argument that we are now living in a two-income society would seem to strengthen my argument that imports do not hurt employment rates because employment rates have dropped even with the doubling of our available workforce.

    You move the goalposts again when I answered your question about what jobs have replaced those we are losing when you begin to argue that we can and will lose many of those jobs to other nations and that others of those jobs apparently don’t count because they are supported by a debt-based economy. Once again I believe that our values are aligned here but the value judgment of whether our society is making sound financial decisions was not the point of discussion.

    The data cited, and the point of the post, was to show that losing jobs to imports does not lead to rising unemployment.

    Also – I never said that you were mistaken – that was another commenter.

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  25. mackenzie Avatar
    mackenzie

    OOk, we are not getting anywhere here and so I’ll say no more.

    Reply
  26. Jeremy Avatar
    Jeremy

    Mackenzie and David,

    I read an interesting article from Reason magazine’s website today that covers some of the issues you guys have brought up in the context of the debate over NAFTA.

    http://www.reason.com/news/show/125218.html

    It is short but gives some of the actual numbers I think Mackenzie was asking for.

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  27. David Avatar
    David

    Thanks for the link Jeremy.

    Reply

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