“Jobs!”

This is not why people are opposed to free trade:

When factories move abroad, however, the shift is perceived to be due to poorer labour conditions, laxer environmental standards, and lower wages in the competing nation. This seems akin to breaking the rules, and is the source of anti-trade passion on the issue.

The Economist

The reason people don’t get up in arms about technological advances even though they do with trade-induced changes in labor demand is because technological advances are usually diffuse in time and space. Computers, for example, impacted almost every job in the economy. Today over 60% of workers use one on the job. The invention of computers and their subsequent diffusion in the economy put people like my Mom, a file clerk at a doctors office in the 80’s, “out of work” ((She wasn’t laid off or anything, she just got a job across the street and the doctor’s office didn’t have to hire a replacement.)) and it also reduced the demand for jobs like book keepers and secretaries. These changes didn’t happen suddenly and some sectors of the economy are still reorganizing work around computers.

Removing a trade barrier, on the other hand, has almost immediate, concentrated effect. Reducing steel tariffs results in the next orders of steel being to suppliers over seas. Steel workers lose their jobs and they do so all at once when the factory goes idle.

Why should people care about sudden and concentrated disruptions in the demand for labor, but not diffuse ones? Its easy to come up with psychological just-so stories (e.g. people just don’t like sudden shocks or they’re unable to discern more gradual changes). Just like their evolutionary psychology cousins, these stories are ultimately unsatisfying. You can explain any behavior by appealing to preferences.

The economic explanation is this: there is some time cost to bitching ((this is a technical term)). Bitching is unproductive and it takes resources. If there was no cost to bitching, that’s all people would do. There’s a possibility, though, if one bitches, they’ll get attention (in the form of political coddling of one form or other). So if a labor demand shift is short and severe, the costs of bitching are out-weighed by its expected benefits.

Notice I didn’t have to appeal to collective action.

The Economist’s psychological explanation is a little different; people care about “fairness.” This seems even more unlikely to be driving the opposition to trade than the just-so psychology cited above. Its not clear why some demand shifts would be unfair and some fair except if one appeals to just-so-ness. In any case, people may care about “fairness” (even though this hasn’t been experimentally proven), but in explaining economic phenomenon we should exhaust pure economic explanations before we resort to psychological ones.

4 thoughts on ““Jobs!””

  1. Here ya go.

    When you say “bitching,” do you really mean capital ‘B’ Bitching, as in “I’m gonna write my congress person and demand action and organize the union to strike over this!” As opposed to “grumble grumble took my jaerb” bitching while a worker cries into their beer at the local pub?

    Oh also – I don’t think computers cut the number of secretaries any more than automated phone switches cut the number of telephone operators. A better example would be coal miners and mining machinery.

  2. Also – aren’t there instances where local, expensive automation is replaced with remote manual labor? The recycling industry comes to mind.

    You ever been in one of those bathrooms with autoflush toilets? I have this weird notion of those sensors being replaced with tiny cameras, the flushes controlled by a small army of Bengali toilet operators.

  3. I’m definitely thinking of outsourcing in a broader sense, as in a company that goes to an external source for some good or service. Does outsourcing imply a direct, 1:1 substitution of foreign workers for domestic workers? *You* are being replaced by Pradeep/Guillermo/Shen Fen/etc. With a labor saving gadget, *You and the whole rest of the swing shift* are being replaced by an Acme Bend-o-Matic 9000.

    Though, I can’t think of too many instances where labor has been legislatively protected from technology. Toll booth workers come to mind, and even those jobs are fading.

    Hasn’t this played out in other countries?

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