International Trade and American Jobs

Transcription

1 Does Trade Cause Job Losses? International Trade and American Jobs Douglas J. Young Professor of Economics Montana State University Popular Idea If we made it ourselves, more people would be employed. Trade in Economic Theory Jobs are Created in Export Industries and Lost in Import-Competing Industries Overall, No Long Run Effect on Employment or Does a Trade Deficit Cause Job Losses? Trade Deficit: Imports > Exports Common Sense: More Jobs are Lost to Imports than are Gained from Exports Balance of Payments Current Account = Exports minus Imports plus Miscellaneous Capital Account = Foreign Investments in US minus US Investments Abroad Current Account + Capital Account = 0 1

2 Percent of GDP US Balance of Payments, 2006 $Billions Current Account Exports - Imports Income & Transfers Capital Account -758 Net Foreign Investment -54 Statistical Discrepancy TOTAL -811 TOTAL June 19, 2006 When Foreigners Invest in the US Provide Funds to Capital Markets to Finance: New Structures and Equipment New Housing And/Or Build Factories Themselves Either Way, Domestic Investment Increases US Saving, Investment, and Net Foreign Investment into the US Saving Investment Net Foreign Investment Foreign Investment Creates Jobs in Construction and Other Industries that Produce New Structures and Equipment Two Theories US Labor Market Common Sense Trade Deficit => Economic Trade Deficit => % 63.4% Fewer Jobs and/or Higher Change in Mix of Jobs, but No Change in Employment or % 5.1% Rate Employment/Population 2

3 (2000) Dollars per Worker Percent of GDP or Labor Force and Trade Conclusion: 9% 8% 7% 6% 5% 4% 3% 2% 1% Correlation = Trade Deficit Economics Wins! Yes, trade changes the mix of jobs in the economy. But there is no evidence that trade reduces overall employment or increases unemployment. US BLS and US BEA So, Is Everything Peachy-Keen? 1. Trade Deficits are a Symptom of Low Saving in the US 2. Some Industries (Workers and Businesses) are Hurt by Trade Thanks for Your Time! This presentation is available at: Click on Papers djyoung@montana.edu 339 Johnson Hall: Home of the Luddites Technology Destroys Jobs! Smash the Looms! Productivity in the USA 180, ,000 Grow th = 388% 140, , ,000 80,000 60,000 Grow th = 35% 40,000 20,000 - Goods Services Industry 3

4 Indices: 1992=100 Do Productivity Increases Harm Workers? Common Sense Theory Fewer Workers Required => Fewer Jobs Higher and/or Lower Wages Productivity in Economic Theory A Worker s Value to the Firm is his/her Productivity Increases in Productivity => Workers are More Valuable => Higher Real Wages Two Theories Common Sense Higher Productivity => Higher And/Or => Lower Wages Economic Theory Higher Productivity => No Change in And Higher Wages USA Productivity and Wages Y/L W/P(Deflator) ERP, 2004; Tbl b-49; Business Sector Real Compensation/Hour A Two-Sector Model Assume: Two Sectors (Goods and Services) Workers Free to Choose Industry => Equal Wages in Both Industries Faster Productivity Growth in Goods than in Services Two Sector Model - II Predictions: Falling Price of Goods Increased Standard of Living (Consumption) Employment by Sector Depends on Preferences 4

5 Indices: 2000=100 Indices: 2000= Price of Goods Relative to Services Durable Nondurable Consumption per Capita Durable goods Nondurable goods Services Table B-7, Economic Report of the President, Economic Report of the President, 2007 and BEA USA Jobs by Industry: Shares 9 83% % % % Goods Industry Services Payroll Jobs, Economic Report of the President, 2006 The Effects of Trade Job Shares 9 83% 81% "No Trade" 64% % % 19% Goods Services Industry Were the Luddites Wrong? Some Workers are Displaced Hand Weavers, Buggy Whip Makers, Elevator Operators, Ditch Diggers The Luddites Missed the Big Picture Productivity Increases: Increase Not Decrease Real Wages Do Not Cause Long Term 5

6 140 Productivity and Productivity (Y/L) (%) Productivity Increases Release Labor to be Used in Other Industries Or even to Go Skiing! Compared with 200 Years Ago, We Enjoy BOTH more Goods and Services, and more Leisure Time! Bottom Line Income per Person = Output per Person The Way to Enjoy a Higher Standard of Living is to Be More Productive 6