The Truth About Trade and Jobs

The mass exodus of jobs overseas is a great exaggeration. But the developed world still needs to prep workers to take on non-manufacturing jobs.

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To hear the anti-trade tirade, you’d think that emerging markets have stolen all the good jobs and decimated first-world manufacturing prowess. Countries such as Mexico and China have hijacked strategically important sectors in their quest to churn out shoddy goods and destroy the environment — or so many pundits insist.

But exasperated panelists at a recent conference at Columbia insisted the charges are wrong. Or at least vastly inflated.

First of all, not that many jobs have been lost, said panelists. Technology probably causes a bigger headwind to American, European and Japanese employment than does shipping jobs overseas.

And, as far as the United States specifically is concerned, American companies have continued to flourish, although undeniably some have moved production and a bigger chunk of their revenues overseas. And those trade pacts that left- and right-wingers alike love to disparage? They boost GDP even in the United States because a stronger global economy tends to raise all boats.

How Many is Too Many?

The conference, “Trade Issues Today” was cosponsored by Jerome A. Chazen Institute for Global Business, the School of International and Public Affairs, the Deepak and Neera Raj Center on Indian Economic Policies, and the Center on Global Economic Governance.

Panelists began by looking at the numbers. According to Amit Khandelwal, professor of finance and economics at Columbia Business School and director of the Chazen Institute, US manufacturing employment peaked in 1979 at about 20 million workers, a figure that’s fallen by about 2.6 million since. “This is my favorite statistic to describe the rise of Trump,” he said.

Speakers quibbled on how much to blame manufacturing losses on migration overseas vs. productivity gains achieved through new technologies — estimates on trade forfeiture ranged anywhere from just 20 percent to 50 percent of lost manufacturing jobs. “International trade and technology changes affect labor in developed markets the same way,” said Khandelwal. “Robots and emerging market labor are both cheaper than humans from developed countries.”

But all agreed trade has been scapegoated out of proportion. “You would need an electronic microscope” to detect job loss due to NAFTA, scoffed Alan Krueger, professor of economics and public affairs at Princeton University.

Besides, in a nation of 125 million current full-time workers, the panelists wondered, is the cost of a million or two jobs worth the price of cheaper goods, lower inflation and friendly trade relations?

What’s to be Done?

Regardless of the exaggerated scope of the problem, speakers at the conference agreed that society needs to better prepare workers for jobs of the future through both retraining and the primary/secondary education system. “The big issue of the future is not trade but technology,” said Khandelwal.

When it comes to this wholesale preparation, however, they admitted to more questions than answers. Education was a given solution among this conference of academics. But what trades should the training emphasize?

Further, panelists fretted that the system has not yet found the right way to train people displaced by trade, especially older populations. Caroline Freund, a senior fellow at the Peterson Institute for International Economics, suggested some answers might lie with the GI bill from World War II. “It’s the only large education assistance program undertaken that mattered,” she said.

Speakers appeared uncomfortable with the notion of direct cash transfers. Even proponents for trade adjustment assistance argued that it is all but impossible to prove a specific sector has lost jobs, particularly since many manufacturers eagerly shop overseas to fill their supply chain and labor force. Rather than shovel cash at an industry, they suggested, governments should focus on the individual whose job has disappeared.

But should assistance go beyond unemployment insurance? For example, “should it be conditional on moving out of depressed areas?” wondered Khandelwal.

Another issue is the dampened income that comes when lower-wage service jobs replace high-paying manufacturing jobs. Rather than making discretionary, unconditional cash transfers, several speakers recommended raising the minimum wage across the board.

Krueger visited the notion of wage-loss insurance. “If a worker replaces a job that pays $20 an hour with a $10-an-hour job, insurance can make up some of the difference,” he explained, pointing out that President Obama has proposed such a system, but Congress has not acted.

More broadly, as the very nature of employment shifts from lifetime jobs overseen by a paternal employer to a series of contract gigs that hire independent workers, the framework of employment may need to change. Freelancers generally don’t have unions to bargain for them, and employers don’t pay for benefits.

Despite the controversy surrounding Obamacare and disagreements over how tax dollars should be used, the speakers argued that a stronger social safety net may become a necessity in such a future economy. “People look on the safety net as charity,” observed Lief Pagrotsky, Swedish Consul General in New York and former Trade Minister of Sweden, a country well known for its public assistance programs. The whole conversation changes, he said, “if the safety net is seen as an integrated element in the policy of growth.”

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