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End Trade Adjustment Assistance

Posted By Don Boudreaux On May 28, 2011 @ 2:09 pm In Other People's Money,Seen and Unseen,Trade | Comments Disabled

Here’s a letter to the Wall Street Journal:

The Trade Adjustment Assistance program rests on the principle that consumers whose demands for American-made products help to create jobs for American workers should pay to train these workers for other jobs if these consumers ever shift their demands from American to foreign suppliers (“Dispute Threatens Key Deals on Trade [1],” May 28).

The merits of this program are doubtful.  If the value to workers of this fringe benefit (for that’s just what it is) were greater than its cost, it would be supplied privately on the market.  Enough employers would respond to worker demand for a ‘retraining’ fringe by offering, along with wages and other fringes, a promise to pay to retrain workers who lose their jobs to any import-related decline in demand for these firms’ outputs.

Of course, being costly like all other fringe benefits, provision of this fringe benefits would result in lower wages and lower values of other fringe benefits paid to workers.  Also like other fringe benefits, though, if the value to employees of this benefit is greater than its cost, employers competing for workers would be obliged to offer it.

But we see very few employers offering worker-retraining fringes – strong evidence that the value of these benefits to workers falls short of the cost of supplying them.  As such, it is unjust to force taxpayers to pay for a benefit for these workers that these workers themselves, through their own actions on the market, reveal is not worth its cost.

Donald J. Boudreaux

UPDATE: My buddy Dave Rose, at the University of Missouri – St. Louis, sent to me this e-mail:

Regarding “If the value to workers of this fringe benefit (for that’s just what it is) were greater than its cost, it would be supplied privately on the market.”

I’d put it differently. I’d say

“If one claims that the value to workers of this fringe benefit is greater than its cost even while it is not supplied privately, it is incumbent those making such claims to demonstrate the market failure problem at work.”

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