I just learned that I’ve not published at Cafe Hayek the full text of my March 28th, 2018, New York Times op-ed, titled “Trade Is Not a Job Killer.” That op-ed is now available beneath the fold.
Trade Is Not a Job Killer
By Donald J. Boudreaux
March 28, 2018
The many Americans now cheering President Trump’s willingness to fight a trade war with China no doubt believe that trade in recent years with that Asian nation has destroyed too many American jobs. Not long ago an academic paper by the economists David Autor, David Dorn and Gordon Hanson garnered an unusual amount of public attention because of its estimate that trade with China from 1999 to 2011 destroyed 2.4 million jobs in the United States.
Our anxiety about trade-related job loss is not confined to China. Just a few weeks ago Mr. Trump declared that the North American Free Trade Agreement caused a “massive relocation of companies and jobs.” On Nafta’s 20th anniversary, in 2014, the trade skeptic Lori Wallach complained that the agreement had destroyed one million American jobs.
These estimates of jobs destroyed by trade sound big, but they’re actually tiny. Relative to overall routine job destruction and creation — “job churn” — the number of American jobs destroyed by trade is minuscule.
In January alone, the number of American workers who were laid off or dismissed from their jobs was 1.8 million. The number of workers who quit their jobs that month was 3.3 million. Adding in workers who left their jobs for other reasons, such as retirement and disability, the number of job separations in January was 5.4 million. But there were 5.6 million hires in January, too. Those numbers are typical of most months.
Awareness of job churn should calm Americans’ fears about imports. The Bureau of Labor Statistics has data on monthly nonfarm discharges and layoffs since September 2006. Unsurprisingly, this number peaked during the Great Recession, at 2.57 million in January 2009. But even excluding the recession months, the monthly average number of workers in the United States who lose their jobs is around 1.75 million. In a normal year, then, the number of workers laid off or dismissed averages 21 million.
Compared with the number of total annual job losses, therefore, job losses from trade shrink into insignificance.
Ms. Wallach’s estimate that Nafta destroyed one million jobs in its first 20 years means that it took freer trade with Mexico two decades to destroy as many American jobs as are now destroyed every 18 days on average. Mr. Autor, Mr. Dorn and Mr. Hanson’s calculation that 2.4 million American jobs were ended by trade with China from 1999 through 2011 implies that the 13-year “China shock,” as the paper called it, eliminated as many jobs as are eliminated, on average, every 41 days.
Clearly, trade is a trifling source of job loss when compared with other sources. These other sources are ordinary economic changes that, like trade, fuel our high standard of living.
Every time our tastes as consumers change, we alter the way we spend our money. The number of jobs producing things that we lose our taste for, such as cigarettes, decreases, while the number of jobs producing things that we now have a greater fancy for, such as exercise gear, increases.
Perhaps the major source of job destruction and creation is technological innovation. In the early 1900s automobiles famously destroyed jobs for buggy-whip makers and blacksmiths. Starting in the 1980s, personal computers and email killed jobs for stenographers and document deliverers. Today, A.T.M.s and online banking apps are eliminating jobs for bank tellers.
Yet despite these and innumerable other innovations that caused the demise of particular jobs, the number of jobs in the United States economy is today higher than ever — and contrary to popular myth, the earnings of ordinary Americans recently hit an all-time high.
The reason is that job destruction in a market economy is also job creation. When consumers buy less of a particular product, they spend or invest more money elsewhere, thus creating not only new and better products but also new jobs. Consumers’ freedom to change how they spend their money prompts entrepreneurs and investors to produce things that consumers value most highly, and to do so as efficiently as possible. The result is economic growth.
Fears of losing jobs to trade are inconsistent with our larger embrace of innovation and competition. More ominously, given that trade-induced job losses are a tiny portion of all job losses, such fears are wildly overblown — so much so that they now have America and the world on the brink of a potentially calamitous trade war.
And all for naught. President Trump’s protectionism will simply not create the multitude of jobs that its champions predict. Far worse, however, is the fact that the longer we tolerate this hostility to one particular source of economic change and growth, the more likely we are to grow hostile to technological innovation and other more significant sources of economic change and growth. And it would then become impossible to make America great again.
Donald J. Boudreaux is a professor of economics and a senior fellow at the Mercatus Center at George Mason University.