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

[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.

[FITZ]

Of course --- I believe the self-reliant type in Sri Lanka who owns his own home, earns money to meet his expenses and has a little left over to save is less in poverty than your welfare queen who may look very properous but is only prosperous due to wealth redistribution. One is a productive working self-sufficient type, the other is a parasite living off the labor of others. Only a Marxist could believe that wealth redistribution programs actually create real wealth.

[Cacique]

ping

[MonroeDNA]

We agree then.

Welfare queens are a plague on the US.

They should be cut off from taxpayer dollars.

Right?

[#3Fan]

Good article. We need to save jobs by reducing liberalism, not increasing liberalism.

[A. Pole]

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.

"As a result", sure. If there were no Ghandi 1970's India would be wealthier than USA. The author is an idiot or thinks that his readers are idiots.

[Glenn]

Police officers and firefighters. (who are paid far less than they are worth)

Bull. I wish I had the pension and retirement options most civil servants get. I'd be surfing FR 24 x 7 by now.

[laredo44]

The industrial revolution ----especially the automobile is what made us far richer than the rest of the world. As a nation we've forgotten what made us rich.

Embracing liberty and its economic expression, capitalism is why we became and remain rich.

[Archangelsk]

golf professionals

Hitting a small dimpled ball with a stick is considered safe? Geez, this country's priorities are now officially ass backwards. :-)

[Paul Ross]

But, manufacturing is also moving overseas because Asians will do the hard work of getting college degrees in the sciences. They then are in a position to manage their own labor. Meanwhile, back in the homeland, fat ass Americans take easier ways out and seek degrees in the liberal arts where incompetents can't easily get caught. They are shaking down the remaining Americans who do produce real goods.

Looks like ignorance among the CATO-ites is running amok. Note, they always believe in a free (no matter how phony the actual game rigging is) market ... but then decry the results of the rigging when it finally becomes apparent to them that something isn't right. Must be those lazy no-good students, for instance. As if 'Free Choice' and the educational 'free market' are not being used there...and individually rational decisions ( no matter how nationally disappointing) being made.

If these bozos want to encourage excellence, it is time to demolish the rules of the 'market' that discourage americans and promote foreign students. Which, would mean restoring High Technology and Heavy Industry back to the shores of the US so that they could hire all the math and science grads we would want to have. This guy appears ignorant of how we have already lost 800,000 aerospace engineers in the last 14 years. They were laid off, fired, etc. And no Americans practically were hired. That is also a true depiction of what happened in Electronics...and how the U.S. in one generation went from the greatest R&D engine ever seen, to something bordering on third-rate in many cases.

I have come to the conclusion that CATO-ites are not Americans at all. Not in spirit.

[Paul Ross]

Walter Williams, sorry to say, is no genius. He is above average, and by contrast with the NAACP crowd would look like a genius. But he doesn't make the National Security connections in foreign trade imbalances that Reagan and his entire cabinet easily saw...and took appropriate measures to counter. Reagan was not so economically doctrinaire as to prevent his always looking at the situations with a clear and level head. Williams is too dogmatic to see the traps he would have us fall into.

[cp124]

Embracing liberty and its economic expression, capitalism is why we became and remain rich.

Economic expression? What the hell is that? I know it won't pay for my share of the government expansion we ahve seen over the past 10 years.

[William Terrell]

I believe the self-reliant type in Sri Lanka who owns his own home, earns money to meet his expenses and has a little left over to save is less in poverty than your welfare queen who may look very properous but is only prosperous due to wealth redistribution. One is a productive working self-sufficient type, the other is a parasite living off the labor of others

The problem is that the self-reliant type in Sri Lanka doesn't pay US taxes. He doesn't:

Have his car repaired in American shops
Buy groceries in American markets
Use and pay for US utilities
Buy his home from an American
Buy his gas from an American service station
Get his clothes cleaned in an American cleaning service
Eat in American restaurants
Buy clothes from an American retailer
Pay American state land taxes
Buy his car from an American dealership
Deposit in American banks

Whereas the man he replaced in America did. And even the welfare brood mare does. Not that I'm for redistribution of wealth; I'm for the people in America having the wealth the government wants to distribute.

[optimistically_conservative]

Forgive me for not reading through th 200+ posts to see how far this point has been discussed, but ...

There is not much difference. Outsourcing to lower wage markets creates other jobs to support the operational, logistical and other business mechanisms to produce, transport, market, etc.

Since tech outsourcing is a hot topic, outsourcing has focused much of the indigenous techie minded into new technology areas. IT developers, programmers, administrators and other traditional techie jobs are being cut or their salaries reduced; and rightly so.

Those smart unemployed or underemployed techies will need to innovate the next technology or use their skills to innovate a new product.

Sounds good in theory, but I'm seeing it being done.

[optimistically_conservative]

In 1924, Mahatma Gandhi attacked machinery ...

A. Pole:

"As a result", sure. If there were no Ghandi 1970's India would be wealthier than USA. The author is an idiot or thinks that his readers are idiots.

Not sure how to read your response. Without Ghandi's anti-technology stance, India would have been economically poorer or wealthier in the 70s? If Ghandi had taken a more progressive capitalist stance instead of a collectivist stance, what would be different in your view? Based on ... ?

[chimera]

Embracing liberty and its economic expression, capitalism is why we became and remain rich.

Look, people, let's put this canard of an issue to rest once and for all. Capitalism per se is something I don't have a problem with. Most here on FR are dyed-in-the-wool capitalists and arguing that vs. socialism or Marxism or whatever really is a waste of time. Nobody will buy that. More to the point is the way it seems to be playing out in recent years, and what some here on FR seem to advocate. That is, a cruel, heartless, rapacious, greedy, out-of-control grubbing for every last one of those almighty dollars to put on the quarterly bottom line, and if anyone dare get in the way of that pursuit, look out. If that means destroying the jobs, careers, lives, and families of honest, hardworking people in the process, well, tough, screw 'em, let them eat cake, they deserve their fate.

I for one refuse to believe that American business cannot operate profitable and vibrant companies without throwing away the lives and jobs of their employees in the process. Sure, it might mean that, by not trashing your in-house IT department and offshoring it to Bangalore, that your quarterly bottom line shows a 19% growth instead of 20%, or that your dividend payout is $0.9999 per share instead of $1.00, but, goodness, is that really going to tank your stock price to the point of where it ruins your company? Yes, perhaps by retaining your company's R&D department, and thereby allowing you a patent on the next advance in data storage technology in the next ten years, your company's CEO might only get a $20 million bonus this year, instead of $25 million (because the BoD didn't see as much cost-cutting as they'd like). But is that really going to put that guy in the poorhouse? Sure, he might only be able to water ski behind three yachts instead of four, but that's a damned sight better deal than the IT grunt whose job he would have otherwise trashed would have had standing in the unemployment line or flipping burgers at Mac's.

[OldFriend]

Meanwhile back in the USA, the environmentalist wackos have done all in their power to punish manufacturers, demand unreasonable restrictions and regulations that are so punitive the owner soon seeks another venue if he is to remain in business.

The corporation is the perfect target for the powers that be to tax tax tax and tax some more....always whining the corporation isn't paying it's fair share.

Wake up people!

[Henchman]

Wow, what a genius! He explains why job loss is great I guess that exporting US jobs to foreign countries which will eventually employ our technological advances will enhance the unemployment payments here.</sarc>

[Age of Reason]

I'd take life in America during the 1970's over life in America in the 2000's any day.

[FITZ]

They should be cut off from taxpayer dollars.

Yes ---- on that we agree ---- I think all government socialist programs should be ended immediately. TANF, WIC, food stamps, Medicaid, SSDI, free government housing, CHIP, and all the many others.

We should probably end minimum wage too because many of the welfare queens aren't worth $5.15 an hour --- but they need to get to work. I have less problem with the bums begging on every street corner because that kind of charity isn't forced --- but the welfare queens --- the mothers of their children can get out and join the bums.

[RaceBannon]

He explained nothing

If the telephone operators jobs went overseas, then we would be comparing similar situations