Usa Manufacturing Jobs


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  • Usa Manufacturing Jobs

    1. 1. “ The Great Hollowing Out Myth” The Economist , February 19, 2004 “ Contrary to what John Edwards, John Kerry and George Bush seem to think, outsourcing actually sustains American jobs”                                                                     
    2. 5. Why Have Jobs in Goods Industries Declined? <ul><li>International Trade? </li></ul><ul><li>Popular theory among Politicians, Businessmen, TV Commentators (Lou Dobbs Moneyline on CNN) </li></ul><ul><li>USA has Trade Deficit in Goods </li></ul><ul><li>USA is “Exporting Jobs” when it Imports Goods (and now Services) </li></ul>
    3. 6. More Import “Crimes” <ul><li>Unemployment is Higher than a few years ago. Caused by Imports? </li></ul><ul><li>Does Trade Lower Employment? </li></ul><ul><li>Does a Trade Deficit Lower Employment? </li></ul><ul><li>Why HAVE Jobs in Goods Industries Declined? </li></ul>
    4. 7. Theory <ul><li>Trade affects composition of employment but not the total level of employment: </li></ul><ul><li>Higher employment in export industries, and </li></ul><ul><li>Lower employment in industries that compete with imports, but </li></ul><ul><li>No effect on total employment. </li></ul>
    5. 8. Theory - 2 <ul><li>A Trade (Current Account) Deficit is Balanced by a Financial Account Surplus </li></ul><ul><ul><li>Capital Inflows Finance Domestic Investment </li></ul></ul><ul><li>I = S - CA </li></ul><ul><li>CA < 0 => I higher than Otherwise, given S </li></ul><ul><li>More jobs in I industries </li></ul><ul><li>No Effect on Total Employment </li></ul>
    6. 10. So Why HAVE Jobs in Goods Industries Declined? <ul><li>Why have Jobs in Services Industries Increased? </li></ul>
    7. 11. Expenditure Share: Services
    8. 12. Services Share
    9. 13. So Why HAVE Jobs in Goods Industries Declined? <ul><li>Consumption Expenditure on Goods has Declined (relative to Services). </li></ul><ul><li>=> Jobs Shift from Goods to Services </li></ul>
    10. 14. Productivity (Output per Worker)
    11. 15. Productivity
    12. 16. So Why HAVE Jobs in Goods Industries Declined? <ul><li>Expenditure Shifted from Goods to Services. </li></ul><ul><ul><li>Jobs Shift from Goods to Services </li></ul></ul><ul><li>Productivity Increased Much Faster in Goods Industries </li></ul><ul><ul><li>Jobs Shift from Goods to Services </li></ul></ul>
    13. 17. Do Productivity Increases Harm Workers? <ul><li>Politicians and Media </li></ul><ul><ul><li>Fewer Workers Required per Unit of Output </li></ul></ul><ul><ul><li>Fewer Jobs </li></ul></ul><ul><ul><li>Higher Unemployment </li></ul></ul><ul><ul><li>(and/or Lower Wages) </li></ul></ul>
    14. 18. Productivity in Economic Theory <ul><li>(Inverse) Demand for Labor = Value of Marginal Product: P*MPL </li></ul><ul><li>Equilibrium: Value of Marginal Product = Wage: P*MPL = W </li></ul><ul><li>Or, Real Wage = Marginal Product: W/P=MPL </li></ul><ul><li>Increase in MPL => Higher W/P </li></ul>
    15. 19. Productivity in Theory - II <ul><li>Assume : </li></ul><ul><ul><li>Two Sectors (Industries) </li></ul></ul><ul><ul><li>Equilibrium: Equal Wages in Both Industries </li></ul></ul><ul><ul><li>Faster Productivity Growth in Goods than in Services </li></ul></ul>
    16. 20. Productivity in Theory - III <ul><li>Predictions: </li></ul><ul><li>Falling Price of Goods </li></ul><ul><li>Rising Real Wage </li></ul><ul><li>No Δ Unemployment (except transitional) </li></ul><ul><li>Employment by Sector Depends on Preferences, I.e. </li></ul><ul><li>Goods Quantity Increases but is Demand Elastic or Inelastic? </li></ul>
    17. 22. USA Productivity and Wages 1959-2002 ERP, 2004; Tbl b-49; Business Sector Real Compensation/Hour
    18. 23. Conclusions <ul><li>Decline in Share of Jobs in Goods Industries </li></ul><ul><li>Primarily Caused by Domestic Forces: </li></ul><ul><ul><li>Expenditure Shift from Goods to Services </li></ul></ul><ul><ul><li>Rapid Technological Progress in Goods </li></ul></ul>
    19. 24. Conclusions <ul><li>Any Particular Technical Innovation … </li></ul><ul><li>Any Particular Increase in Trade … </li></ul><ul><li>Will Harm Some Workers </li></ul><ul><li>AND Capitalists </li></ul><ul><li>[Workers and Capitalists in the Same Industry Take the Same Position on Trade Issues 90% of the Time] </li></ul>
    20. 25. But Over the Long Run … <ul><li>Trade in Many Goods and Services </li></ul><ul><li>And Technical Progress In Many Industries </li></ul><ul><li>Have Benefited Workers AND Capitalists </li></ul>