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.

[sly671]

This man is a genius. Every article he writes just explains the topic of interest so well and so truly. This article is great because it exposes the myth that Clinton created so many jobs in the 1990s and Bush has lost so many in his administration. Well, Clinton lost an awfully large amount of jobs too even in a boom that he had absolutely nothing to do with. Thank you Reagan for creating the atmosphere for the 1990s to happen.

[cyborg]

BTTT

[BADROTOFINGER]

Dont change the titles of the articles, as it prevents the search engine from working properly and results in multiple postings of the same article. You are new, so it is cool, but the Mods hate it...JFK

[CWOJackson]

"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."

Not to besmirch Williams, but I don't think Gandhi had to contend with American labor unions. The 1970's Indian textile workers were probably being paid at our 1920's workers rates.

[ZGuy]

I didn't even notice who the author was. Then I read your comment that the man is a genius and I thought "I wonder if it's Walter Williams?"

[lelio]

Finding cheaper ways to produce goods and services frees up labor to produce other things.

Like entering the low pay and low skill retail sector, which is what is happening.

[MissAmericanPie]

ROFLOL, this situation is just a taaaad bit different, and he knows it.

[vbmoneyspender]

I hope Mr. Williams will write his next article on why tariffs are so beneficial to a coutry's economy that we should revise our Constitution to allow states and even cities and towns to impose tariffs on good coming in from other states and cities so as to keep each state's workers fully employed. </sarcasm off>

[At _War_With_Liberals]

First you change the name, then you replace it with hyperbole. Bad form. Live and learn.

That not withstanding... Welcome to FR.

[Pro-Bush]

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.

BUMP!

[SpaceBar]

Wait till Mr. Williams is replaced by an H1-B visa economics teacher from Bangalore. See if he sings the same tune.

[LoneRangerMassachusetts]

Finding cheaper ways to produce goods and services frees up labor to produce other things.

Like entering the low pay and low skill retail sector, which is what is happening.

Manufacturing is moving overseas where labor is cheaper. That is true. 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.

[kylaka]

LOL. He's tenured.

[LiteKeeper]

SPOTREP - ECONOMICS

[AntiGuv]

There is a fundamental difference between certain sectors of the job market becoming obsolete due to technological advancement versus certain sectors of the job market being exported to cheap labor foreign markets.

In the first case, jobs which are lost - such as switchboard operators - are replaced by generally equal or higher paying jobs - such as network administrators.

In the second case, higher paid, higher skilled workers are displaced by low-wage foreign substitutes, which generally forces either a competitive reduction in domestic salaries or a downscaling of employment opportunities.

Stated differently, there would be no ultimate distinction between shipping these jobs to lower paid workers overseas or simply removing the worker protections which by and large ensure higher domestic wages.

It is merely an end-run around the various institutions which have developed to protect workers and elevate the broad standard of living and quality of life in this nation. Over time, this process would inevitably diminish the purchasing power of the most vibrant economy in the world, by transferring its wealth capacity overseas.

Congratulations. Don't hurt yourself patting yourself on the back.

[AntiGuv]

Ummm.. Most liberal arts majors end up becoming university professors, lawyers, or MBAs - which certainly have greater job security in today's labor market than do many in the sciences or technology. You can't export legal services, unfortunately.....

[listenhillary]

Wait till Mr. Williams is replaced by an H1-B visa economics teacher from Bangalore. See if he sings the same tune.

Would be a good thing, then he would start his own private university. I would send my kids there if he did so.

[E. Pluribus Unum]

Great article, but union thugs are into extortion, not productivity.

All they care about is getting what's coming to them, and what's coming to somebody else.

[E. Pluribus Unum]

It is merely an end-run around the various institutions which have developed to protect workers and elevate the broad standard of living and quality of life in this nation.

Spoken like a true union thug.

[Snoopers-868th]

I happened into this page and it looks like a good place to start learning about Globalization and the role of economics. I have to study it myself.

http://www.pbs.org/wgbh/commandingheights/