Trade Job ‘Destruction’ in Perspective for the United States

by Don Boudreaux on March 19, 2018

in Creative destruction, Myths and Fallacies, Trade

Here’s an open letter to valued Cafe Hayek commenter Craig Walenta:

Mr. Walenta:

You discount my criticism of Paul Craig Roberts’s 2004 prediction that, if we Americans don’t dramatically reduce our trading with China and other low-wage countries, America by 2024 will be a third-world country.  I point out that, with now only six years to go on Mr. Roberts’s timeline, America isn’t close to being a third-world country – to which you reply: “No, but large swaths of the country, while not Third World, don’t look like they’re of the First World.”

While I believe that it’s silly to suggest that even the poorest Americans today have living standards remotely close to as low as those of the typical citizens of countries such as Chad and Malawi, let’s stipulate here that parts of America “don’t look like they’re of the First World.”  If so, why blame trade?

Trade critic Lori Wallach estimates that NAFTA destroyed, during its first 20 years (1994-2013), one million jobs in the United States.  Let’s double this figure to two million.  “China Shock” authors David Autor, David Dorn, and Gordon Hanson estimate that U.S. trade with China from 1999 through 2011 destroyed another two million jobs.  Let’s assume that in the five years leading up to 1999 another two million U.S. jobs were destroyed by trade with China, and then let’s double the resulting total estimate of U.S. jobs lost to trade with China from four to eight million.  This estimate is certainly wildly excessive, but let’s go with it.  From 1994 through 2011, then, we have an estimate of American job losses caused by trade with Mexico and China of ten million.  Let’s further assume – again, unrealistically, but it strengthens your case – that since 2011 another ten million jobs have been destroyed by U.S. trade with China and Mexico.  That leaves us with an ‘estimate’ of 20 million U.S. jobs destroyed by trade with China and Mexico over the past 24 years.  Now let’s assume – again, wildly unrealistically – that 20 million other U.S. jobs were destroyed by Americans’ trade during these years with countries other than China or Mexico.

We now have an estimated 40 million American jobs destroyed by international trade over the past 24 years.

Now let’s look at the U.S. Bureau of Labor Statistics’s (BLS’s) most-recent estimate of monthly layoffs and discharges.  From January 2007 through December 2017 that average is about 1.7 million.*  That is, on average for the years 2007 through 2017, the number of Americans who were either laid-off or discharged from their jobs was 1.7 million monthly.  Therefore, over the eleven-year period of January 2007 through December 2017, 224.4 million Americans in total were either laid-off or discharged from their jobs.  (These job separations do not include workers who quit their jobs.)  Of course, the vast majority of these dismissed workers soon found other jobs, which is why the unemployment rate is today lower than it was over all but the final three months of that period.

So now comparing our wildly over-estimated number of jobs lost to trade since January 1994 (40 million) to the total number of Americans whose jobs were destroyed by all factors just since January 2007 (224.4 million) we find that trade accounts for a mere one-sixth of such job losses.  The other five-sixths of job losses are due to non-trade factors, such as changes in consumers’ tastes and the introduction of labor-saving technologies.

Given the relatively tiny role that trade plays in destroying American jobs, do you therefore believe that, in order to help those parts of America that you describe as not looking “like they’re of the First World,” Uncle Sam should punitively tax American consumers whose tastes change?  Would you endorse a moratorium on the creation of new businesses (which, after all, destroy some jobs in existing businesses)?  And are you in favor of government-imposed restrictions on technological innovations that save labor?  Unless you support each of these policies, you are inconsistent in supporting punitive taxes on Americans who buy imports.

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030

* In its report released this past Friday, the BLS reports that in January 2018 there were 1.8 million layoffs and discharges.

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