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.

[lelio]

Spoken like a true union thug.

So you disagree that there's a difference between technical innovation job destruction (and later creation) and low wage job destruction?

[kimoajax]

Yes, Williams outlines a often made argument...with which I agree.

However, he, just as other like minded economists repeatedly do, fails to address the difficulty of pursuing free market economic goals within the context of an increasingly socialistic political climate - that views unfettered business people as the problem...not the cure.

When was the last time anyone heard the Horatio Alger story put forward recently by academia or media as an American cultural ideal or hero?

Who are the archtypical American heros today?

[E. Pluribus Unum]

So you disagree that there's a difference between technical innovation job destruction (and later creation) and low wage job destruction?

There is a difference between freedom and union thugs dictating who shall be allowed to work for whom and buy from whom and at what price.

Any questions?

[kimoajax]

Lelio's misdiagnosis of the problem makes my point....and yours E. Pluribus.

[Alouette]

Who are the archtypical American heros today?

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

[Mears]

As the mother of a police officer,I thank you.

[lelio]

Any questions?

Yes, how about answering the question instead of going off on some wild tangent about "union thugs."

[lelio]

Lelio's misdiagnosis of the problem

What diagnosis did I give?

[Cicero]

We don't need regional or state tarriffs within the country because Americans are free to move wherever the jobs are. Basically this is because we have a unified governmental system and a unified economic system.

You are free to move to China to get a job, I suppose, but the difference is that you would have to live in a Communist state with no freedoms, or possibly even move to a labor camp and risk having your body parts sold to the highest bidder. That's because China does not share our political system or economic system.

[Snoopers-868th]

Also a Mother of a State-Trooper. No they aren't! The general public wants to eliminate the number of police to save money and the people who use the police are the criminals and misfits.

[onemoreday]

.....
.....E......

Your "...freedom and union thugs....." dichotomy.....

....besides indicating that you are not one of the Americans who are going to die over these issues, nor one who would risk anything, materially not spiritually, over them, you really say nothing about the real economic circumstances unfolding.....

I assume you think you are defending something related to "conservatism"

I would be interested in your analysis of why you think this is so.

"union thugs!".....

...can't you do better than this tiresome (and meaninless) labelling?

I really don't think you can.

You are "free" to try.....or not to try. Such is the new definition of the "new freedom"

[1rudeboy]

Good article, even the third time around.

[Vision Thing]

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

He'll probably remain faithful to the title of the article by saying to himself: "Jobs come and go."

Given that he is a free marketeer, he'll understand that it is better to change careers, take a lesser paying job, or retire. He seems mature enough to not wallow in self pity because of those H1-B visas.

[1rudeboy]

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.

If your second case was true, then real wages would be dropping for these "higher paid, higher skilled" workers. Unless you qualify your typical UAW job as high pay, high skill.

[E. Pluribus Unum]

Yes, how about answering the question instead of going off on some wild tangent about "union thugs."

I did answer your question.

Freedom appears to be a problem for you.

Other peoples' freedom to purchase labor or televisions or athletic shoes where ever they please, that is.

You would pass laws to curtail their freedom to do so because they aren't buying your labor or widgets or BS.

[Sender]

I think there is a difference too, although technology and cheap labor may cause the same effects (loss of jobs here), they should not be lumped together.

We can't very well become luddites and say 'all technology is bad', especially since we are now addicted to technology and we could not be nearly as productive (nor do most jobs at all) without it. However it does result in a lot of jobs no longer being necessary, and those displaced workers must adapt. Productivity soars, and the end product is often better and more consistant than before the technology came along.

On the other hand, outsourcing to cheap labor is different. Instead of replacing many jobs with a single machine, we are replacing many jobs with many jobs...just not for us. While the low-paid workers in China and India deserve to make a decent living just as we do, the fact is that many of them DON'T make a decent living from outsourced jobs. The very fact that makes outsourcing appealing to CEOs is what makes it less than satisfactory for the workers...paying pennies on the dollar for the same work. Also, the quality of the end product is very often inferior when compared with the original...witness the rapid backtracking of Dell, Lehman, GE/Marquette, HP/Compaq and others who either have returned customer support from India to the USA or are considering it due to complaints. Although they get tech support done for pennies, callers say they get meaningless script reading by people who are hard to understand and know little about US business. Not at all a cheaper replacement for US tech support jobs, just cheap crap.

The article is thought-provoking though and raises some good points. It is good to admit that jobs do come and go, regardless of the administration or world politics. Otherwise the left seems to think there are only 2 types of jobs: ones magically created by Bill Clinton, and ones negligently lost by George Bush.

[Mick2000]

Walter Williams lost me as a fan when he posted this article in August, citing 1996 statistics to support his claim that there must be reasons companies preferred to go to high-wage companies rather than low-wage companies. What's enabling jobs to go to low-wage companies since then is the internet and improved technology and communication, but Walter doesn't address this for some reason and doesn't try to use current numbers even though I'm sure they're available, I wonder why not?

He lost any credibility with me when he cited 7 year old figures to support his case and I would be highly suspect of his numbers in any article at this point.

http://www.townhall.com/columnists/walterwilliams/ww20030820.shtml

"Let's turn to the next part of the exporting jobs nonsense namely that corporations are driven solely by the prospect of low wages. Let's begin with a question: Is the bulk of U.S. corporation overseas investment, and hence employment of foreigners, in high-wage countries, or is it in low-wage countries?

The statistics for 1996 are: Out of total direct U.S. overseas investment of $796 billion, nearly $400 billion was made in Europe (England received 18 percent of it), next was Canada ($91 billion), then Asia ($140 billion), Middle East ($9 billion) and Africa ($7.6 billion). Foreign employment by U.S. corporations exhibited a similar pattern, with most workers hired in high-wage countries such as England, Germany and the Netherlands. Far fewer workers were hired in low-wage countries such as Thailand, Colombia and Philippines, the exception being Mexico.

The facts give a different story from the one we hear from the left-wing and right-wing anti-free trade movement. These demagogues would have us believe that U.S. corporations are rushing to exploit the cheap labor in places like the Democratic Republic of the Congo, Rwanda and Ethiopia. Surely with average wages in these countries as low as $10 per month, it would be a darn sight cheaper than locating in England, Germany and Canada, where average wages respectively are: $12, $17 and $16 an hour. "

[E. Pluribus Unum]

You are "free" to try.....or not to try.

Not. Bye.

[FITZ]

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.

Because that's where the jobs are in a service industry. It would be stupid for Americans to study engineering and then not get a job ---- the jobs are gone whether Americans are seeking degrees in them or not.

[FITZ]

toward explaining why we are richer than the rest of the world.

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.