How Should We Think About the Exportation of Jobs?
It looks like productivity increases in the U.S. are accommodating growth with little increase in the number of jobs. Doesn’t it suggest that the jobs that people do hold must be getting better?
The exportation of jobs "will create bigger markets and opportunities to sell goods and services from the developed economies," says reader Suman Das. "This is indeed very troubling, as the classic answer of 'retrain those who lost jobs for higher paid jobs' begins to fall apart" with increased training times and more rapid changes in international job markets, according to Michael Lindsey. "We're headed for a two-tier economic society..." says Mike Dorkoski. While Brad Leach opines, "The real question is how to deal with the disproportionality of this impact: the broad, shallow, positive impact on product prices versus the narrow, deep, negative impact on individuals."
These quotes help sum up the nature of the thought-provoking debate stirred by this month's column. On the one hand, arguments based on accepted macroeconomic theory generally came down in support of the free exportation of jobs, regardless of how imperfect labor markets are in comparison with markets for capital, goods, and services. Those arguing for some kind of intervention in this market activity cited the negative impact on jobs and people (especially their self-esteem), increasing long-term disparities in incomes, a negative impact on the ability of disadvantaged workers to invest, and an ultimate decline even in economic activity in net job-exporting countries. Some argued that these phenomena were irreversible. Others suggested that even if painful, they were transitory. As Sudip Sen put it, "The 'export' of any activity, be it manufacturing or service outsourcing, is driven by pure economics. True, it has a social and political impact; but more often than not the latter adjusts against the former and not vice-versa."
The pattern of responses did not correlate well with country of origin. One interesting example concerned fears about the two-tiered economy created by job exportation. Before concluding, "These trends cannot be stopped by any government," A. J. Balasubramanian pointed out that due to job importation, "In India, we are creating two different societies with a large disparity in income as well as access to knowledge and information."
In large part, the comments seemed to reflect reactions to both differences in the fluidity of markets for capital and labor as well as the increasing fluidity in markets for labor fueled by dramatic improvements in communication. Those with a global, macro economic view tended to regard these developments as long overdue. Those concerned about the psychological and social impact of job exportation on people and communities emphasized the need of some kind of intervention ranging from increased job training to incentives to those organizations willing to restrict the flow of jobs. Dan Barr's comments suggest that the issues raised create a false dichotomy (something of which I would never want to be accused). As he said, "The productivity improvement that I am familiar with seems to always create jobs and grow companies and countries." What do you think?
It has taken economists, journalists, and the rest of us years to get used to the idea that over 80 percent of the jobs in any developed economy are service jobs. And that the "good old days" of relatively strenuous, dangerous, and boring manufacturing jobs are not coming back. Many of those jobs have been exported for good. Now we are confronted with a new reality: Service jobs are just as exportable as many of the manufacturing jobs that left the U.S. and other highly-developed economies before them. And not all of them are relatively boring and low-paying. How should we think and feel about these trends?
Much of the current commentary would lead us to believe that we are being left with jobs, many of them low-paying, that cannot be exported—those involving personal services such as face-to-face retailing and repair work. The Wal-Martization of work in the U.S. is emphasized while the fastest-growing types of service jobs in medicine, high-tech maintenance and development, and construction are downplayed.
At the risk of oversimplifying, job quantity and quality is a function of growth and productivity. If growth occurs that is roughly equivalent to increased productivity, little change occurs in the number of jobs although the quality of those jobs (assuming that higher output per person leads to higher income as well) should increase. Growth without a change in productivity ought to lead to more jobs, but jobs of about the same quality as before. Growth with a loss in productivity is likely to lead to more but poorer-paying jobs. Only when the growth rate exceeds productivity increases should more and better jobs be created. Of course, these relationships hold only as long as an economy is closed and self-contained with no exportation or importation of jobs. Those days are long gone.
What is the situation we face in the U.S. today? It appears that productivity increases are accommodating growth with little increase in jobs. But doesn't that suggest that the jobs that people do hold must be getting better? And to the extent that productivity can fuel growth that exceeds the rate of job export, doesn't that bode well for the future of employment in the U.S.?
On the other hand, it can be argued that jobs have an intrinsic value regardless of their quality. They keep people occupied and out of trouble. Crime rates historically have varied inversely with employment. The loss of any job has social costs greater than the loss of income. But do we have to export jobs in order to create better ones? Does it matter if the jobs exported are those involving relatively little "ownership" potential and they are replaced by those created by the entrepreneurial, small-business engine that has fueled the U.S. economy for decades with jobs that involve either psychic or actual ownership? How should we think about job export? What do you think?