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Jobs Come and Go (One of the smartest economists in the world hits the nail on the head)
www.townhall.com ^ | 11/26/2003 | Walter E. Williams

Posted on 12/18/2003 3:32:00 PM PST by sly671

Jobs come and go Walter E. Williams

In 1970, the telecommunications industry employed 421,000 switchboard operators. In the same year, Americans made 9.8 billion long distance calls. Today, the telecommunications industry employs only 78,000 operators. That's a tremendous 80 percent job loss.

What should Congress have done to save those jobs? Congress could have taken a page from India's history. In 1924, Mahatma Gandhi attacked machinery, saying it "helps a few to ride on the backs of millions" and warned, "The machine should not make atrophies the limbs of man." With that kind of support, Indian textile workers were able to politically block the introduction of labor-saving textile machines. As a result, in 1970 India's textile industry had the level of productivity of ours in the 1920s.

Michael Cox, chief economist at the Federal Reserve Bank of Dallas, and author Richard Alms tell the rest of the telecommunications story in their Nov. 17 New York Times article, "The Great Job Machine." Spectacular technological advances made it possible for the telecommunications industry to cut its manpower needs down to 78,000 to handle not the annual 9.8 billion long distance calls in 1970, but today's over 98 billion calls.

One forgotten beneficiary in today's job loss demagoguery is the consumer. Long distance calls are a tiny fraction of their cost in 1970. Just since 1984, long distance costs have fallen by 60 percent. Using 1970s technology, to make today's 98 billion calls would require 4.2 million operators. That's 3 percent of our labor force. Moreover, a long distance call would cost 40 times more than it does today.

Finding cheaper ways to produce goods and services frees up labor to produce other things. If productivity gains aren't made, where in the world would we find workers to produce all those goods that weren't even around in the 1970s?

It's my guess that the average anti-free-trade person wouldn't protest, much less argue that Congress should have done something about the job loss in the telecommunications industry. He'd reveal himself an idiot. But there's no significant economic difference between an industry using technology to reduce production costs and using cheaper labor to do the same. In either case, there's no question that the worker who finds himself out of a job because of the use of technology or cheaper labor might encounter hardships. The political difference is that it's easier to organize resentment against India and China than against technology.

Both Republican and Democratic interventionist like to focus on job losses as they call for trade restrictions, but let us look at what was happening in the 1990s. Cox and Alm report that recent Bureau of Labor Statistics show an annual job loss from a low of 27 million in 1993 to a high of 35.4 million in 2001. In 2000, when unemployment reached its lowest level, 33 million jobs were lost. That's the loss side. However, annual jobs created ranged from 29.6 million in 1993 to a high of 35.6 million in 1999.

These are signs of a healthy economy, where businesses start up, fail, downsize and upsize, and workers are fired and workers are hired all in the process of adapting to changing technological, economic and global conditions. Societies become richer when this process is allowed to occur. Indeed, because our nation has a history of allowing this process to occur goes a long way toward explaining why we are richer than the rest of the world.

Those Americans calling for government restrictions that would deny companies and ultimately consumers to benefit from cheaper methods of production are asking us to accept lower wealth in order to protect special interests. Of course, they don't cloak their agenda that way. It's always "national security," "level playing fields" and "protecting jobs". Don't fall for it -- we'll all become losers.

©2003 Creators Syndicate, Inc.


TOPICS: Business/Economy
KEYWORDS: trade; walterwilliams
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To: AntiGuv
All I am arguing is that economics is economics, and morality is morality, and these are distinct and often (not always) contradictory systems. No-one is helped by mixing them in a mushy pudding and trying to talk about the pudding.

My argument is that it is patently bad economics to protect jobs. Obviously bad economics. Always has been, always will be.

Now there may be other reasons to do it. National security is one, stemming from the fact that the lines around political entities (nations) do not coincide with the lines around economic ones (markets) and the market may need to be distorted to protect the nation. Nothing wrong with that argument.

But that is a political argument, not an economic one. My beef is with the people who argue that it is better ECONOMICS to protect jobs. This is like arguing the world is flat. It has long since been settled.

141 posted on 12/19/2003 9:40:57 AM PST by Taliesan
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To: Taliesan
I'm saying he is probably one of the few who don't have to worry too much about losing his job. He doesn't have some rapacious CEO breathing down his neck to increase profits in his division by 25% a year or face the ax. He isn't some cubicled IT worker being forced to train his replacement in Bangalore or risk losing his severance package. Not having to worry tends to color one's view of the issue.

It's the old adage, nothing is impossible for the man who doesn't have to do it himself. When you can look forward to working in your chosen profession until you retire (i.e., "guaranteed a job", as some here like to rant), it's easy to tell others to adapt or screw 'em, or quit whining and start a business, or get retraining in your late 50s, or whatever.

142 posted on 12/19/2003 9:52:04 AM PST by chimera
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To: Willie Green
Willie Green wrote:
Then I've proven my point.




In trying to find the point you imagine you've made, -- I came across this post of yours:

______________________________________


"Finding cheaper ways to produce goods and services frees up labor to produce other things."
-Walter Williams-

Yep. Labor saving technology is developed in response to costly, labor intensive production methods.
So what's your point, Walter?

Did you forget that globalization is a regressive force that acts against technological development?

It continually substitutes ever cheaper labor to undermine development and implementation of more sophisticated (and expensive) automated technology.

Go back to watching the Oprah Show, Walter. Quit pretending that you're a "conservative" economist. Heck, you might as well quit pretending you're an economist of any type, for that matter.





Willy, instead of bashing Walters logic, think about your own as regards to tech development..

Such development is a fact of life. - 'Slave labor' in manufacturing is dying out as it becomes cheaper to automate technology than to feed, clothe, & house the slaves.

Go back to watching the Oprah Show, Willie, until you formulate a rationale of your own on how we will deal with surplus workers in a high tech world. -- Can you even address the problem?

143 posted on 12/19/2003 10:10:56 AM PST by tpaine (I'm trying to be 'Mr Nice Guy', but FRs flying monkey squad brings out the Rickenbacker in me.)
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To: AntiGuv
Well, if you put it that way I would have to say that the price of exporting jobs would likely be higher than the price of keeping them in the U.S. if the cost of exporting jobs included disqualification from U.S. tax incentives and U.S. government contracts.

Give me an example of "exporting jobs."

I'm referring to an array of legal, economic, and social institutions that are much, much broader than collective bargaining.

Give me an example from your array of "legal, economic, and social institutions that are much, much broader than collective bargaining."

144 posted on 12/19/2003 10:36:00 AM PST by E. Pluribus Unum (Drug prohibition laws help fund terrorism.)
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To: Taliesan
All I am arguing is that economics is economics, and morality is morality, and these are distinct and often (not always) contradictory systems. No-one is helped by mixing them in a mushy pudding and trying to talk about the pudding.

Workplace safety laws such as requiring fire escapes, fire suppression, etc. incurred costs to companies, but the savings in insurance and from lawsuits has more than made up for the initial pinch, not to mention creating entire new industries which put more people to work, resulting in more revenues, resulting in the very public infrastructure upon which those companies came to rely.

Morals and economics are a good mix. How many lives and dollars are saved because clean water laws and anti dumping laws prevent diptheria and cholera?

My argument is that it is patently bad economics to protect jobs. Obviously bad economics. Always has been, always will be.

Then why are American companies rushing to protect jobs in India and China, rather than investing in the new labor saving technology that would open new doors and create new industries to fill the demand domestically?

Now there may be other reasons to do it. National security is one, stemming from the fact that the lines around political entities (nations) do not coincide with the lines around economic ones (markets) and the market may need to be distorted to protect the nation. Nothing wrong with that argument.

When you underemploy a population, you lose tax revenue to fund the military. You then must either run a huge deficit or raise taxes in the short term. People with lowered wages paying more in taxes become restless and rebellious. Bad news for all the Mme Antionette's out there. Civil war is bad for national security.

But that is a political argument, not an economic one. My beef is with the people who argue that it is better ECONOMICS to protect jobs. This is like arguing the world is flat. It has long since been settled.

Rather it is the mercantilists that protect foreign jobs on the American taxpayor's dime, and then spout economic theory, wrongly and hypocritically, as "proof" to defend the indefensable.

145 posted on 12/19/2003 10:54:14 AM PST by Jim Cane
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To: Jim Cane
I don't doubt many of these are good laws, but they are good because they prevent firms from externalizing their costs and they protect people. They can be good morally while compromising economics.

On the other hand, neither you nor anyone else can prove they have resulted in "more" jobs or revenues than if they did not exist. That is just dimwittedness.

Morals and economics are a good mix. How many lives and dollars are saved because clean water laws and anti dumping laws prevent diptheria and cholera?

You simply don't understand my point. Morals and economics do not "mix" at all. They are simply two comonents of a good society. And of course lives are saved by these laws, and that is a moral end, and it is neither good economics nor bad to tell a firm it must pay the costs (including criminal costs) of its product. It's just economics, which, in these cases, is also moral.

American companies are indifferent to jobs in India and China. Some are rushing to employ people in those countries because they will work cheaper. They would employ Antartic penguins if they could get them for a loer hourly rate.

They will invest in new technology when the cost of that investment is less than the labor cost. When the labor is cheaper, they will spend the money on the labor. What they save by buying the labor will go to the shareholders, who will invest it in technolgy. But you might have to think deeper than the surface to follow that thread.

When you underemploy a population, you lose tax revenue to fund the military. You then must either run a huge deficit or raise taxes in the short term. People with lowered wages paying more in taxes become restless and rebellious. Bad news for all the Mme Antionette's out there. Civil war is bad for national security.

Fortunately, economic theory is converting economies all over the world to capitalism, protectionist walls to trade are falling all over the world, "foreign jobs" are becoming available to American corporations in greater and greater numbers, and all this generates more and more wealth for Americans.

Good luck with your civil war. Man the ramparts, and all that. Maybe you should invest in a pitchfork factory. Or, better yet, just buy pitchforks from China, and spend the savings on bullets.

146 posted on 12/19/2003 11:36:14 AM PST by Taliesan
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To: tm22721
So because I am a university student I have no credibility? Sorry if I laugh at your thinking. It may come as a surprise, but people of "university tenure" do their research and CAN think on their own
147 posted on 12/19/2003 3:32:47 PM PST by sly671
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To: gcruse
Corrupt unions and corrupt power-mongering corporations are the reason for the outsourcing of jobs to third world countries. You can thanks our first socialist president FDR for the first. As for the second, those corporations have the right to acquire their stake. That's what competition(which creates the best products for the cheapest prices) is for. Would you rather have a company sell you a lower grade product (which you will have to replace over and over) so some person who doesn't want to try to succeed by staying at those dead end jobs can have a job for a period of time? Sorry, I would like to save the money I have by only buying something ONCE.
148 posted on 12/19/2003 3:39:23 PM PST by sly671
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To: kimoajax
"Who are the archtypical American heros today?"

Socialists?

149 posted on 12/19/2003 3:49:23 PM PST by Sam Cree (democrats are herd animals)
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To: Dog Gone
right on...most people blame the government. People keep forgetting that new jobs are being created for those who lose their jobs to third world countries. If we didn't, all the jobs that could be lost would be gone already.
150 posted on 12/19/2003 3:52:27 PM PST by sly671
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To: lelio
So you're telling me that if a group of switchboard operators lose their jobs, they're going to hire every single one back as a network administrator? What would be the point of spending the extra money on the labor saving machines? And those jobs could come back....it just might take a while. Finally, they aren't given money to come, they're given tax breaks that lower their costs and the consumers'.
151 posted on 12/19/2003 3:58:42 PM PST by sly671
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To: sly671
Blaming the government or blaming India or China may feel good, and it might be at least partially correct, but it doesn't accomplish anything.

It's up to the individual to figure out how to make a new living. No sugar daddy is going to offer someone a nifty new job simply because they blame their job loss on some evil entity.

152 posted on 12/19/2003 3:59:51 PM PST by Dog Gone
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To: sly671
And those jobs could come back....it just might take a while.

In the long run we're all dead.

they're going to hire every single one back as a network administrator?

Nope, most likely they'll hire back 1/10th tops. But there's a chance in there for people with some motivation to get hired on for a position that's more advanced and using the skill set. What's a laid off computer programmer that was displaced as someone in India will do the job for 1/15th of this cost supposed to do?

In that case there's no "construction" side to the creative destruction of capitalism. There's just a hole. Now you can say "Well he can move on to another field" -- joining his 10k fellow programmers / radiologists / CPAs / etc.
153 posted on 12/19/2003 4:12:18 PM PST by lelio
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To: MonroeDNA
What a bunch of whiners. What a bunch of pansies. My gift to you is to wish upon you that you somehow end up living in your car, so that you can start over and appreciate the opportunity you have.

You might be happy to walk through snow to get to your McDonalds job. I don't work at a McDonalds and am lucky to have 2 jobs and I'm not having to live in a car and I do have a pretty nice home.

Two people aren't what matters ---- just watch Jerry Springer someday --- both the guests and the audience ---- you'll realize that there are people who can't finish college, can't find make a whole bunch of choices --- look at the bell curve and the average IQ of 100 ---- for everyone with an IQ of 120, there is someone with an IQ of 80, for everyone with an IQ of 130, there is someone with an IQ of 70. They need jobs or they all end up being supported by the rest of us --- and with all their free time living on welfare, they will tend to out-reproduce the over 100 IQ types.

154 posted on 12/19/2003 4:14:58 PM PST by FITZ
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To: Dog Gone
No sugar daddy is going to offer someone a nifty new job simply because they blame their job loss on some evil entity.

The entire Democratic party from FDR onwards is based on this premise. A sugar daddy exists -- its those of us that are working and whose money is stolen by the government.

People will say "Well its their tough luck they got outsourced" I'm sure people said that during the Depression right up until the New Deal was enacted.
155 posted on 12/19/2003 4:16:32 PM PST by lelio
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To: MonroeDNA
Was I lucky? lo f*in lol! He!! no! I was homeless because I was too stupid to try

I've never been homeless ---- but I don't think the issue is even homelessness ---- most of our welfare populations aren't homeless at all. I do consider it lucky that I am in the population that can have choices and jobs --- more than I even need ---- if we head into a two-tiered society like they have in all the third world countries --- some of us could hope to make it to the elites and live nicely enough --- for a while --- but what about the masses? What happens when we're a country like Mexico and facing a Revolution? There might not be a place for us to flee like they have now. We shouldn't be so eager to give up the country our Founding Fathers had in mind.

156 posted on 12/19/2003 4:20:24 PM PST by FITZ
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To: BiffWondercat
X-Rays and MRIs are now being transmitted over to India for evalutation for a great savings

Who's taking the x-rays?

157 posted on 12/19/2003 4:22:04 PM PST by syriacus (Schumer's unhappy federal judges have lifetime positions, so he should work to amend that.)
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To: lelio
" I'm sure people said that during the Depression

Even in the worst of the Depression, the majority of people still had jobs --- I've read that joblessness was 20-30% ---- but I think ours is that now if you add unemployment in with welfare rates and SSDI rates ---- which were very low in those days. Welfare rates are over 35% in the region I'm in ---- and over 50% in some counties along the border now. That's worse than Great Depression statistics.

158 posted on 12/19/2003 4:23:33 PM PST by FITZ
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To: sly671
"It's my guess that the average anti-free-trade person wouldn't protest, much...about the job loss...He'd reveal himself an idiot.

Whoop, too late.

159 posted on 12/19/2003 4:28:46 PM PST by HighWheeler (def.- Democrats: n. from Greek; “democ” - many; “rats” - ugly, filthy, bloodsucking parasites.)
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To: On the Road to Serfdom
Your wrong, there is no economic difference between new machines and cheap forign labor,

Except that machines are cheap and cheap foreign labor isn't at all cheap. Machines don't have babies that cost the taxpayers $10,000 each every year, they don't require food stamps, free taxpayer provided health care, they aren't jamming the emergency rooms. Machines don't require any taxpayer money.

If foreign labor was a factor in productivity --- then Mexican farms would be doing very well because labor costs less than $4 a day there and is 8 to 10 times that for the same worker in the USA. Mexican farms can't compete against mechanized American farms --- in spite of very cheap labor.

160 posted on 12/19/2003 4:28:53 PM PST by FITZ
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