Arnold Kling  

Free Trade in Tech Labor

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Consumption Tax?... St. Petersburg Paradox...

Is the case for free trade weaker when the traded good is high tech labor? Julian Sanchez says no.


[Protectionists] might fondly wish that highly educated professionals in Asia would be kind enough to lobotomize themselves and go back to farming for the sake of inflating U.S. programmers' wages. Alas, that's unlikely to happen. If American tech firms are unable to benefit from the skills of foreign workers, we may rest assured that their foreign competitors will.

For Discussion. Assuming that the recovery begins to generate job growth, will protectionist pressures subside?


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CATEGORIES: International Trade



COMMENTS (119 to date)
David Thomson writes:

The protectionist pressures will likely subside. I am betting that we are entering an economic boom era where most people will easily have a number of jobs to choose from. A few white collar technically trained folks, however, may never again earn the money they made in the mid to late 1990s. This is solely because those earlier salaries were often insane and unsustainable. Still, these valuable people should find a good paying job.

Lawrance George Lux writes:

Protectionism may or may not increase in the face of an economic boom, but the days of huge Free Trade are done. Techonology and Labor Education is equalizing throughout the World, meaning two things. Wages will begin to equalize, and the advantages of geographical Production will disappear. The cheapest form of Transportation will always remain raw Resources. Transportation Costs will increase their significance as Transportation requires higher capitalization with higher Fuel Costs. On-site Production will gain increasing advantage over geographical placement. Protectionism will devolve into simple Cost analysis. lgl

Bob Dobalina writes:

"The cheapest form of Transportation will always remain raw Resources"

Can you explain that, lgl?

Eric Krieg writes:

I don't have an answer to Arnold's question. But I would like to ask any real live IT people lurking out there if their views on free trade have changed since, say, 2001?

For instance, would you now be more reluctant to buy a Japanese or German car because of your (negative) experience with foreign IT competition? Has it given you more empathy to other professions impacted by foreign competition (like UAW members).

Steve writes:

I am an American programmer. I fear India and other places with $2/hr programmers more than I fear anything else on the planet.

I was a free-trade libertarian (idiot) until 2001. Now I am a Pat Buchannan/Ross Perot Conservative. We have got to look out for ourselves, folks.

Bob Dobalina writes:

Steve,

I think that you implied that, since I am a free-trade libertarian, I am an idiot.

I fear the $2/hour financial analyst just as you fear the $2/hr programmer, but why shouldn't a company be able to employ whomever does the job more cheaply? Why is it just for you to dictate who a company cannot hire, and determine the compensation for that labor?

Why is it fair that someone who needs programming should pay your inflated wages?

I'm not an idiot, and I'm not a busybody either. What two entities chose to do is not my concern. Maybe you should mind your own business?

Eric Krieg writes:

Steve, just out of curiousity, what do you drive?

Eric Krieg writes:

I think that the rush to India is yet another business fad that isn't well thought out. We are at the point in the business fad cycle where everyone is doing it because they think that everyone else is doing it, not because they have actually looked at the numbers.

In the end, people are going to underestimate the real cost of outsourcing IT to India. They will lose big bucks.

The final step is to have the whole outsourcing thing lampooned in "Dilbert".

Indian programmers may only cost $2 an hour, but the cost to manage then is enormous.

Steve writes:

Sorry!!! I didn't mean to implicate YOU were an idiot, I was saying that I look back at my formerly libertarian days (while studying to become a computer scientist AKA: victim of Globalization) as "Steve: you were an idiot".

Once I realized that being a Libertarian was for folks who had no fear of globalization (such as professors, politicians, and doctors), I opened my eyes up to the real world.

I drive a '95 chevrolet. Sorry to disappoint.

Steve writes:

I should mind my own business? Guess what, pal? Programmers are re-training. We will lower YOUR wages. I especially will because I'm working toward getting a CFA certification and getting the heck out of this downward spiral called" programming".

i fear the $2/hr Indian financial analyst, too. And the $2 lawyer, and the $2 CPA, (where does it end?)

What job can I re-train for after blowing 4 years on a high-end CS degree that in the grand scheme is only worth $2 an hour?

Boonton writes:

How much will utilities cost when we have $2/hr engineeers? How easy will it be to solve problems if I can just buy a few programmer hours for $2 instead of having to buy a $5000 script?

Eric Krieg writes:

>>I drive a '95 chevrolet. Sorry to disappoint.

Good man. The first thing anyone who is interested in personal finance needs to learn is that cars are depreciable assets. The "millionaire next door" drives a '95 Chevy.

As for the programming thing, I would hang in there. People with an actual degree in CS (as opposed to someone who is just a "Microsoft Certified Network Engineer") is probably the most competitive with foreign labor.

Like I said, much of the rush to India is unthinking, more of a kneejerk reaction by CEOs to their own perception of what other CEOs are doing, rather than a hard analysis of the numbers. I think that in the long term the phrase "outsourcing to India" will be said in the same breath as "total quality management" and "re-engineering".

Bruce Cleaver writes:

Boonton (and others) -

The phrases you are groping for are 'massive deflation' and 'tragedy of the commons'. Programming is the *second* high tech field I have punted, and time/energy grows short to retrain for a third (or fourth).

Ultimately, it probably benefits the US, but that is the long-term steady-state outcome. The time-varying portion of the outcome could induce significant pain (a generation's worth) that most democracies cannot abide by. This was Schumpeter's point, after all.

Bob Dobalina, CFA writes:

Steve,

"I especially will because I'm working toward getting a CFA certification and getting the heck out of this downward spiral called 'programming'"

In CFA-land, we call it a "charter". Certifications are for accountants and insurance salesmen.

Somewhere in the CBOK is a list of costs of protectionism and the consequences of artificially high wages. I think the conclusions are inescapable.

Steve writes:

Yes, Bob,,,, I know what CFA stands for. Computer Scientists need to know more than just how to compute present value using a bond calculator and what our various TLAs stand for. That's not to say that's everything you do, but really, let's be honest, everything in business/finacial analysis boils down to PV and FV in the end, am I wrong?

No matter how good of a software designer/engineer/coder whatever I am, I cannot compete with $2/hour, nor do I want to. I'm sure you guys think that I'm just yet another of the dolts out there who jumped on the bandwagon during the boom writing in VB or something, but I'm not. I'm more like the surviving code monkey that the company wants to keep after shipping 99.99% of the jobs off to India...even with my skills and confidence, my fear of unemployment is so much greater than my love for what I do. Free-traders can't fathom this because they are protected themselves! Have you ever heard of a layoff of college professors? Lawyers? SENATORS?

Is this what Globalization is supposed to be like? Sure, I make a lot today, but I am so scared I can't even sleep? I thought that Globalization meant coming together in harmony. All it does is make the educated folks hate the third worlders for taking our jobs.

No, before you ask, I have yet to be unemployed. That doesn't make the fear any less real.

Steve writes:

Eric--

I hope you're right and that this horrible episode will go the way of the dodo, but I don't see that happening.

All you folks claiming that our salaries are artificially high because of the boom, do any of you make less than $70k a year? If not, you have no room to talk.

Tom writes:

>Have you ever heard of a layoff of college professors?
No, not tenured professors, but I expect I will. Also, I *have* heard of badly treated (and essentially laid off) graduate students, post-docs, lecturers and adjuct-professors

>Lawyers?
Oh, yeah. Ton's of students don't pass the bar, or become a lawyer for a little while and can't hack it. Generally it is more often called "left to pursue other interests" than "laid off," but really its the same thing.

Steve writes:

Tom--

The difference is that the tenured professor will get laid off because he is lazy or brings in no research money, NOT because of globalization.

Pro-globalizers:
What do you do for a living? Why do you think you're going to be immuned to the next wave of globalization of the white collar workforce? Your views WILL change when you are told that you have 30 days (or 30 minutes?) to find a new job because yours will be heading to India in that timeframe. So get off your high horses and start voting in a way that will slow this action long enough for new industries to form that will soak up our talents.

SoonToBeCPA writes:

CPA is a license, Bob, not a certification.

Bob Dobalina writes:

Steve--

"but really, let's be honest, everything in business/finacial analysis boils down to PV and FV in the end, am I wrong?"

That's true, I suppose, but it's like saying that everything in IT boils down to ones and zeroes.

"What do you do for a living? Why do you think you're going to be immuned to the next wave of globalization of the white collar workforce? Your views WILL change when you are told that you have 30 days (or 30 minutes?) to find a new job because yours will be heading to India in that timeframe."

You already know approximately what I do for a living. I may not be immune to the next wave of globalization, but I live well beneath my means, I'm not too proud to do work that's "below me" to make ends meet, and if my job disappears, I'll find something else to do.

SoonToBeCPA--
"CPA is a license, Bob, not a certification."

Well, I guess the "Certified" part of the name threw me.

Eric Krieg writes:

>>do any of you make less than $70k a year? If not, you have no room to talk.

I don't make anywhere NEAR 70k. And I live in Chicago. And my wife stays at home with the kids. The irony of globalization is that, while some jobs are lost, it lowers prices for everyone. It makes it MUCH easier for those of us trying to make it on a diminished income to afford to live like we do. Despite my circumstances, my family is not deprived in any way, thanks to, among other things, Wal-Mart.

My company didn't give out raises this year, and it doesn't look too good for next year either. Things are tough all over. IT'S CALLED A RECESSION!

Computer programmers talk like it is the appocolypse, but I am SURE that it is no worse for them today than before the bubble, say in 1994.

And, yes Steve, 1999 was a bubble. Anyone who expects a return to those unsustainable times is setting themselves up for disappointment.

Eric Krieg writes:

>>What do you do for a living?

Engineering in the petochemical industry. As global an industry as you are going to find. I'm working on a job in Saudi and and another in Romania right now.

>>Why do you think you're going to be immuned to the next wave of globalization of the white collar workforce?

Because salary is not everything. What about productivity? What about know how?

>>Your views WILL change when you are told that you have 30 days (or 30 minutes?) to find a new job because yours will be heading to India in that timeframe.

Just add the Indians and the Chinese to the long list of competitors we have faced over the years: the Japanese, Koreans, Taiwanese, Indonesians, Malasians, etc. etc. Why are the Indians any different?

I don't think people really understand the difficulties the Indians are going to have sustaining their growth in IT. Have any of you actually been to India? Have you ever worked with Indians? I have done both. It is not an easy country to get things done in. In my experience, the Indians have a very bureacratic mentality, so that it seems that 10 people are needed to get the job of one American done.


>>So get off your high horses and start voting in a way that will slow this action long enough for new industries to form that will soak up our talents.

Since when did a politician ever create a job.

Steve writes:

Yes, I know. It was a recession. I'm not complaining about wages. I'm complaining about job security. In 1994, there was no talk of a wholsale IT exodus to India, nor were politicians selling us out for cheap wal-mart crap. The idea behind globalization is that everyone will have a better standard of living. We were sold on EVERYONE counting "us", too, not just the Indians and the CEO fatcats. Now, although I make fabulous money, I know that I am only one "wild CIO hair" way from the soup kitchen. This is not what the globalizers promised us.

The difference this time (as upposed to the blue collar migration) is that the blue collar folks could re-train and become white collar types. Now that all the white collar jobs are heading to Asia, what are we supposed to do? There aren't any jobs left that have to be done in America (except, of course, the proverbial hair stylist or traffic chopper pilot).

Bob--Just wait, man. You'll be in the same boat as me as soon as your boss realizes that Indians can do PV as well as you can for 1/10th the price! Yes, everything in IT comes down to 1s and 0s, but we can agree that 1s and 0s are a lot further abstracted for the CS person than PV is from the CFA.

Do you guys think there will be any new high-wage jobs created in this country over the next decade (outside of positions like CEO that require being in that position at a prior company to be qualified?) Higher wage growth IS what the globalizers promised.

Talking about being okay with wage deflation is great, untilyou have a mortgage company that refuses to accept payment deflation. Now you're going to tell me that I should own a home?

Steve writes:

Why is India different? Let's see: I've got 1 billion reasons why they are different than the last 20 years of offshoring. Aside from population, they are taking high wage jobs, not the crappy and dangerous jobs the globalizers said "america doesn't want anyway". Japan has, what 1/10th the population of the US? Nothing to worry about there, singapore, malasia, etc, again, nothing to worry about. China and India have 10 times our population. THAT'S WHY IT'S DIFFERENT.

All that matters to corporations in the short run is salary and benefits. Unfortunately, since my mortgage co likes prompt payments, the short run is all that matters to me, too.

Eric Krieg writes:

>>All that matters to corporations in the short run is salary and benefits.

Well, that's all that matters to SOME corporations. But the better run ones aren't going to be fooled by the mirage of cost cutting that is Indian IT.

The cost of producing something derives from more than just the salary of the people producing it. Management costs are significant in any endevor, moreso in managing a project being executed in India. Companies that underestimate their costs for managing projects in India are ones that are going to lose BIG MONEY.

http://www.businessweek.com/technology/content/oct2003/tc20031027_9655_tc119.htm

Eric Krieg writes:

>>The difference this time (as upposed to the blue collar migration) is that the blue collar folks could re-train and become white collar types.

Oh really? You know, in Buffalo those are fighting words. Say something like that in a "blue-collar" bar and you'll get your butt kicked.

Not everyone wants to be a pencil pushing pc-jockey. I know a lot of welders, and they are generally guys who like to work with their hands. They aren't happy in the office.

But to you, their jobs are expendable. Thanks!

Like I said, I have VERY little sympathy for IT workers because they were silent during previous periods of outsourcing. Enthusiastic, even.

Why should IT workers be immune to globalization. Let them compete, just like autoworkers and welders. And engineers.

Steve writes:

I keep forgetting. Did our governement allow 200,000 new WELDERS into the country at substandard wages over the last 10 years and then refuse to ship them out when the downturn happened?

H1B and L1 are allowing the migration of IT work to India SO much easlier. You can bring them over here to train (at $10/hour), then ship them back with all the knowldege they need to take over.

Remember: the GLOBALIZERS said that welder jobs are expendable. I did not. I think isolationism and US self-reliance is the only way to fix our economic woes. CEOs won't like that, nor will any other globalizer, but that's the right answer.

Ray Gardner writes:

The protectionist fervor will subside in improving times but will never go away. It is simply a mechanism of our emotional, human nature.

History has inarguably shown that free trade raises the standard of living for all, even if a minority has to take it on the chin as the economy moves around them. Blacksmiths really hated the car but what would the 20th century have been like if they would have somehow been successful in restricting the growth of automobile use.

An economic upswing is needed to dispel such nonsense as protectionism as the average guy (even around such erudite places as an economics blog) only extends his rational thinking as far as his neighbor’s yard. As soon as his own life is affected “damn the consequences, save my job as a blacksmith – what do I pay union dues for anyway!?”

So when the economy is on a strong upswing and some IT geek is complaining about foreign competition, the dock worker at Wal-Mart could care less, he has a job so all must be well.

Ray Gardner writes:

As for the Luddite rantings currently on display here:

Senators, college professors and lawyers are not, as a group, known for their free market tendencies, particularly the professors. This is important to point out as whomever made this statement (Steve I believe) is thinking from a very subjective and thus narrow view point.

Everyone is a free trader, consciously or otherwise, they only take on the mantra of protectionism whenever their own wallet is affected.

Competition is great unless your own piece of pie is at risk; the first artisans’ guilds came about as protectionist measures to isolate and presumably protect the artisans of that certain town or village. Thus it was prohibitively expensive to trade with the neighboring towns which of course retarded overall commerce and retarded the standard of living.

The immediate affect of protecting the local artisan seemed to be worth it but in retrospect, we know that allowing a free market will bring us better products for less money and less work per dollar spent. This is an increase in the standard of living.

If anyone here feels that “globalization” is threatening their livelihood, then perhaps they need to begin to adapt their skills to a world that is changing. Sanchez makes the all too true point that if American companies do not utilize the foreign talent, then foreign companies will. The world is constantly changing and we all have to change to keep up.

The alternative is for the rest of us otherwise productive citizens to subsidize Steve and a gaggle of union welders to the detriment of our overall economy.

Ray Gardner writes:

To argue otherwise is to argue in favor of saving the blacksmith's job at the expense of the automobile.

Ray Gardner writes:

And who said that anyone making less than X amount per year had no room to talk? Are we not all part of the economy, from the lowest tier of employment to the highest?

A really good story along these lines is the story of Standard Oil and Rockefeller.

What Rockefeller did to the petroleum industry so greatly improved the standard of living for everyone, lowest to the highest, that is difficult to imagine that he was once the embodiment of corporate evil.

The Luddites and socialists saw him as a predatory competitor, ruthlessly driving smaller companies out of business, slashing the bottom line regardless of how many petrol jobs it affected in other locales.

In reality, his innovations in technology and productivity directly raised the standard of living for everyone as everyone, even in the late 19th century, used petrol products. When even the poorest of slum dwellers could afford to heat their home throughout the night and still have money left over, that is a marked improvement in the standard of living. To reverse Rockefeller’s innovations in order to be fair to other wealthy or affluent petroleum company owners and workers would be to reverse the standard of living for even the poorest of citizens.

Eric Krieg writes:

>>the GLOBALIZERS said that welder jobs are expendable. I did not.

Actually, you did.

>>The difference this time (as upposed to the blue collar migration) is that the blue collar folks could re-train and become white collar types.

You said that blue-collar types aren't hurt as much by globalization, because they can become white collar workers. That means that their jobs are expendable, but white collar ones aren't.

And in reply, I submit to you the City of Buffalo, which has yet to make the transition from manufacturing to much of anything else. The white collar jobs passed that region behind, for whatever reason.

Ray Gardner writes:

Clicking on your web browser's back button will take anyone who is genuinely interested in this subject to a very good essay by Bryan Caplan on Bastiat and von Mises. He directly addresses protectionism and the mystery of its entrenchment in the psyche of the public.

Eric Krieg writes:

Hey Ray, when are YOU going to start complaining about Indian political cartoonists stealing the work of honest Americans like yourself?

Steve, I think you should retrain in the field of political cartoonery. It works for Ray, and it is one field I don't think that the Indians are going to crack!

Steve writes:

Personal attacks aside, what will be left to DO once all the white collar AND blue collar jobs are done offshore? What can I re-train in that will provide a good life for me and my wife? Does anyone really care that this country is heading to 3rd world status with 1% of the people owning 99% of the wealth?

Why is it that someone who disarees with your elitist opinions needs to be villified by your holier-than-thou attitude and labeled a Luddite?

When I say "professors", replace it with "economics professors".

Ray Gardner writes:

But the day job still requires skill. I'm a broker (financial advisor) with lots of licenses and such.

Only one problem, I'm not a very good salesman. So until I can make more money off of cartoons, I have to adapt my current skills to something that doesn't require front line retail ability.

Adapt, overcome, oohrah.

Ray Gardner writes:

To call someone with such economic views a Luddite is not a personal attack and I am sorry if it comes across as such. Nonetheless, the view that innovation across the economic spectrum should come to a halt in order to protect your individual income is a Luddite view.

The fear that you have of America becoming a third world country is understandable but far from reality.

Staying on the Luddite theme, they were convinced that machinery would drive us all out of jobs and into an eventual, society wide penury (your 1% vs. the 99%).

But if 99% of the populace is living in third world conditions, who in the world is buying the products that enrich that 1%? Without a lengthy explanation of why that is not going to happen, suffice it to say that our history is replete with the cries of every new industry or shift in technology destroying our way of life.

Ironically enough, it is this dynamic component of the American economy that makes us the greatest nation the world has ever seen and as long as we maintain a relatively free market, we have nothing to worry about.

Think of like this; the current IT scare could not be taking place without America first creating the market for the foreign labor (white or blue collar). We’re in the lead, everyone else is playing catch up and we’ll stay in the lead as long as we’re allowed to adapt and change with an ever changing world.

To resist the change will not stop the change, it will only freeze those resisting into an economic anachronism.

Lawrance George Lux writes:

Bob,
The whole concept of Transportation revolves around an enclosed space being pushed around the world by the use of fuel. Finished Products are injurious to efficient use of space, while Raw Materials allow for simple holds with efficient use of space.

Ray,
We live in a far more technologically-capitalized world, than that which made Free Trade such an economic advantage. Ideas and productions method plans transport far cheaper than Products.

Eric,
You perceive the primary tenant of Labor exploitation: Each laborer reaches his owned desired level of productive potential. They can be retrained, but rarely wish to rise above their previous level of potential. Unrestrained Free Trade will always create sectional disparities in the Job market because of this. An efficient(I use that word too much)Economy must be one which provides all levels of labor potential the possibility of earning a sustaining income. lgl

rvman writes:

Do the words "Giant sucking sound" mean anything to anyone here? We've faced foreign competition before. The US economy has faced competition from SE Asia in textiles, Japan and Korea in electronics, Mexico in small manufacturing, Egypt in cotton, Europe in aircraft. We adapt by letting them sell us that stuff cheap, and developing new industries making something else.

Computer engineers are not unique. Other professionals have face immigrant competition before. Did you look at the faces of the students around you in college? Did you look at the graduate students? Did you look at the professors? There are a LOT of PhD's out there, not in the job they want, partly because of foreign competition. We, as a country, won the nuclear race, the moon race, became the richest country in the world, on the backs of the accomplishments of 1st and 2nd generation immigrants. We long-term natives have ultimately benefitted from the inventions of these newcomers. Or should most Californians still be living in the midwest, working in the same jobs their parents did at RCA or AMC, US Steel or Zenith? We will benefit from low cost suppliers for programming, as well.

Steve writes:

Ray--

You say that it's not possible for1% to hold 99%, but it has grown to somehwere in the high teens owning somewhere in the high 80%s. That's close enough for me.

Most brokers are just salesmen. Sales people who need face-to-face contact will never be out of a job.

I understand the Luddie reference, but why can't you guys see this is different because it is the high-wage high-productivity jobs that we are losing, and not low-productivity jobs that we would rather not do anyway?

The point about "who's going to buy the stuff?" THAT'S MY POINT EXACTLY! Who's going to buy their stuff when all the jobs are gone? That's what will send us to 3rd worldiness. THEY DON'T CARE WHO BUYS THE STUFF! They've already made their $100 million, who cares about anyone else? They've already thrown their wife a $2 million togafest for her 40th, who cares about the 17,000 they laid off this week?

Eric Krieg writes:

>>Adapt, overcome, oohrah.

Actually, it's more like "Duff Gardens...Hoorah!"

I told you guys that everything I know I learned on the Simpsons. Or maybe it was South Park.

Steve writes:

Newsflash (AGAIN):

There are not 1 billion people living in Mexico
There are not 1 billion people living in Egypt
There are not 1 billion people living in Vietnam
There are not 1 billion people living in South Korea
There are not 1 billion people living in any other country we had "free trade" scares with in the last 100 years.

There ARE 1 billion people living in India
There ARE 1 billion people living in China

It will take another 50-75 years to get them all employed and start real wage growth for the average joe here in the states.

Eric Krieg writes:

rvman brings up Mexico. Mexico PROVES that it takes more than cheap labor to compete with the US.

Mexico is a piece of crap country that has done NOTHING to increase its competitiveness since NAFTA was signed. No privatizations, no restructuring of its antiquated educational system (my engineering professors used to warn us that Mexican engineers made some small fraction of what US engineers made then. Funny, but I don't hear too much now about the "threat" posed by Mexican engineers), no strenghening of their legal system, no investment in infrastructure, nothing.

If you think Americans have to worry about Chinese labor, you should talk to the Mexicans. The Chinese are eating their lunch.

The only difference now with China and India is, as Steve said, there are a billion people apiece in each of those countries. They have a huge supply of labor there, and it will be a long time before it is saturated with work. But that doesn't mean it will never happen.

Ray Gardner writes:

Steve,

Try going to the library of economic articles that this website hosts. There is no possible way for 270 million people to simply go from the richest, most robust economy the world has ever seen to that of third world penury.

We are the consumer, the evil business owners make their money off of us. If we die by the wayside, they die also.

Rockefeller did not single handedly raise the standard of living out of the goodness of his heart, he did it for a profit. So he was made one of the richest men in the world by supplying affordable heating oil to the poorest people in America. This did not hurt those poor, it helped them; but to listen to the popular press of the time, Rockefeller was taking advantage of them.

This is relevant to your view because you seem to see profit makers as someone taking advantage of those that they are making a profit from.

The more basic point of all of this is that when one job is made obsolete, more jobs are created somewhere else. This is why the economy must remain dynamic.

So my “elitist opinions” are not just my opinions but my citing of world history. Protectionism has never, in the long run worked while the most dynamic economy is always the dominant economy.

Eric Krieg writes:

Steve, with regards to the populations of China and India, that's also 2 billion CUSTOMERS.

China especially. They are a huge market with a relatively homogenous culture and only 2 dialects. The economies of scale offered by the country to marketers are huge. Really, they rival the US in scale.

For example, you don't think of economies of scale when it comes to advertising. But in a country like China, there ARE economies of scale in advertising. Coke can have one advertising campaign for 1 billion people. Their profits are potentially huge.

Once you get past just thinking about the costs of free trade, and get into the opportunities it provides, you'll get why it is a good idea.

Boonton writes:

"The phrases you are groping for are 'massive deflation' and 'tragedy of the commons'. Programming is the *second* high tech field I have punted, and time/energy grows short to retrain for a third (or fourth)."

Tragedy of the commons refers to a resource that is available for collective use so is destroyed because no one takes responsibility for maintaining it. Classical example would be a common grazing field. A more modern example may be a public bathroom that is filthy because everyone uses it but no one owns it. It has nothing to do with a surplus of labor driving down wages.

If millions of $2/hr lawyers, programmers and other professionals suddenly became available, that would be a favorable supply shock. Like discovering a Saudi Arabia sized oil deposit in America. Such shocks are only deflationary if monetary policy is not adjusted accordingly. In such a case, the Fed would expand the money supply allowing consumers to demand more goods and services. Everyone would become richer.

The $2/hr programmer is an exagerration anyway. As has been pointed out before, there are a limited number of areas that the remote labor can be applied & while the programmers may be paid $2/hr the management costs are significant. If you are a small business that needs some code written or needs a full time person to maintain your computers you are probably better off with an ad in the local paper than trying to do it from Russia or India.

rvman writes:

Ultimately, the price of a good - whether it is labor, a service, or a car - is driven by how costly it is to produce. In the case of labor, the "cost" consists of the level of training and skill required, hours worked, and the onerousness and riskiness of the working conditions and the training mentioned above. Computer programming requires a BA level of training, some, but not excessive, intelligence, a fair number of hours worked (but nothing like what entrepreneurs put in) and has almost no risk or discomfort - it is the ultimate desk job. In other words, when looking for the long run equilibrium wage, compare them to BS engineers at the top of the food chain, BA business, economics, or accounting in the middle. Anything more than 30-50k is going to be competed away, if not by foreign competition, than by undergrads rushing to the profession. Thus far, a Master's level programming professional track hasn't developed in the way it has in Accounting, say. I expect that to come along presently. MCSE-type certifications are rivals to, say, DeVry, in difficulty of acquisition - expect "technical" salaries in the 20-30 k range, ultimately. The BA is worth more.

Programmer wages were ever more than this because of a shortage driven by demand for programmers outstripping the rate we could supply them from the colleges. That time is over. Now the supply is greater than demand, and the price of programming labor needs to come down. Unfortunately, wages are sticky - people HATE paycuts - and so firms are substituting similar, but inferior, inputs such as overseas labor. (Inferior because it is expensive and difficult to set up and manage workers in a third world country, and they won't be anywhere near as productive per hour as already trained Americans, not because of any inherent inferiority of foreigners.) I suspect that foreign wages will rise over the next few years, American wages in those fields will fall, and the outcome will look much like what I outline above - Americans making 20k with AA, 35-40 with BA/BS, 45 and up with an MA/MS, with those numbers adjusted for inflation and overall increases in productivity. Foreign workers will make half or less as much, and be half or less as productive.

Ray Gardner writes:

I realize my explanations aren’t as much fun because of their simplicity but the real crux of this conversation really is the basics.

There will always be “a market;” a place where the people of the community meet to exchange the items they have for the items they need more. Leaving that market to a reasonable dynamic level will ensure that people will be able to continue to trade as their needs change in context to the overall market.

Attempts to protect individuals against market changes has always failed because those changes are happening, like it or not. To assume the loss of high paying IT jobs to cheaper foreign competition will be the start of the downfall is to assume that those displaced IT workers will not be able to find any kind of work ever again.

Using Rockefeller and Standard Oil again; he displaced many smaller petrol companies and their work forces but this was to the overall advantage of our economy and standard of living. This was not obvious at the time and such changes in innovation rarely are obvious in their initial stages. Again with the blacksmiths versus the automobiles, the typesetters versus the personal computers and so on.

Our prosperity does not rest on a set number of jobs or a certain kind of profession but on our ability to change as the world economy changes.

Ray Gardner writes:

Go to the home page and find "encyclopedia" at the left margin. Then peruse the articles that can be found by some of the greatest minds (many unknown names) in economic thought.

Or start here;
http://www.econlib.org/library/Enc/FreeTrade.html

Steve writes:

...and the CEOs' salaries won't drop one iota as I see mine drop 20% to compete with the Indians, et al.

Sounds great to me! Wow, this globalization is great for everyone!

Still, nobody has given a solution for what field to re-train in that can maintain a living wage (ie: one that doesn't involve forclosure on my house). Why? BECAUSE THERE ISN'T A SOLUION except protectionism.

Those who say "it doesn't work": It must work well for the Europeans! Works just great for the Japanese (who claim to be in recession to keep the WTO off them over the 100+% rice tariffs), works just great for the Chinese ("we won't buy your stuff unless you build it here"), works great for the Indians, too (Ghandi told people to never buy goods made outside the country). Why are we the only ones who have an open market?

Before you give me that BS about how capitalism is the only -ism that works, I'll remind you that Finland (Socialist) is more competetive and Sweeden (also socialist) was the first to emmerge from the Great Depression.

Steve writes:

Ray--

The fact that "great minds" in economics espouse free trade will get you nowhere with me. AGAIN, they are completely protected from any sort of foreign competition!

Can you imagine if Smith had lost his job to some 1 shilling/year economist?
Can you imagine if Keynes lost his job to some $1/month economist?
Can you imagine if Freidman lost his job to some $1/hour economist?

Ray Gardner writes:

“As long as American workers remain more skilled and better educated, work with more capital, and use superior technology, they will continue to earn higher wages than their [foreign] counterparts.”

Blinder is making the point that our wage averages are not affected as greatly by trade policy as the actual productivity of our work force. If we, as a group, do more work more efficiently, we will be better off overall. The only way we can do this is to constantly adapt and innovate to stay ahead of the global economy.

That sounds more difficult than it really is. All we have to do is essentially keep our hands off of the economy, reasonably speaking. By keeping the market place dynamic, no one central power has to foresee or predict (nor could they if they tried – and they have) market changes but the needs of the individuals striving to make their own lives better will automatically adapt to the changes before them.

Ray Gardner writes:

Steve asks “Why are we the only ones who have an open market?”

What should follow that question is who has the strongest economy with the highest standard of living. The United States does of course.

There are one or two reports that float out once a year or so touting some of the more socialist nations as having higher standards of living but they are only measured on a few categories such as government supplied care of varying sorts.

For a better index of overall economic freedom, try freetheworld.com.

Ray Gardner writes:

Ok, so let us address Steve’s retraining.

It seems the best fit for Steve would be if the government came and dictated just what retraining he was to receive, regardless of what Steve’s actual personal needs might be. It may not seem like it on the surface, but Steve is asking for someone to do something for him.

The only problem is, and this is why central planning has failed in every national application in history, no one knows what is best for Steve but Steve. I’ll leave the long explanation of why it is desirable to let Steve decide such things for himself, but suffice it to say that the key component to a dominant economy is the dynamic factor.

If Steve lived in an economy where the government’s responsibility included retraining him, it would by definition not be a dynamic economy and thus as history teaches us, it would not be a healthy or dominant economy.

The irony being that Steve’s wished for solution, a stagnant centrally controlled economy does not have a position open for him, at least not one that he would enjoy.

Steve writes:

Chosing for myself has failed bigtime already. Why should I expect it to be different if I try again?

Eric Krieg writes:

>>In other words, when looking for the long run equilibrium wage, compare them to BS engineers at the top of the food chain, BA business, economics, or accounting in the middle. Anything more than 30-50k is going to be competed away, if not by foreign competition, than by undergrads rushing to the profession.

There is a lot of wisdom in that one paragraph. Speaking as an engineer, foreign engineers aren't the biggest restraint on my wages. New grads with experience with the latest software are my biggest competitors.

Interestingly, the same is true with doctors. The doctors got around this restraint in their income by getting hold of the medical school and artificially limiting the number of new doctors that are graudated every year.

Eric Krieg writes:

>>Why are we the only ones who have an open market?

Good question. Americans seem to have a higher risk tolerance than the Europeans and, especially, the Japanese.

BTW, who said protectionism "works" for the Europeans and the Japanese. Both would KILL for an unemployment rate of only 6.1%.

The Europeans in particular are getting dangerously used to seeing unemployment rates over 10%.

Steve writes:

*cough* Japan *cough* 5.5% unemployement...

So how does the housing market in california hold up with everything but the 30-50k/year competed away?

WHERE ARE THE HIGH WAGE JOBS WE WERE PROMISED?

Boonton writes:

"Still, nobody has given a solution for what field to re-train in that can maintain a living wage (ie: one that doesn't involve forclosure on my house). Why? BECAUSE THERE ISN'T A SOLUION except protectionism."

Steve, are all you neighbors computer programmers? Does everyone you know at your income level make their living as computer programmers? If not then there is obviously some other field that allows you a comparable lifestyle...unless you are being seriously overpaid at your current job.

There is no solution for what you should do in the same way there is no solution for whom you should marry, what hobbies you should have and so on. These are all decisions that are best made by yourself because only you know you.

Steve writes:

By the definitions used above, I am WAY overpaid. My neighbors are all in their 40s, I'm in my late 20s.

I fear that wage growth potential is already gone.

Eric Krieg writes:

>>*cough* Japan *cough* 5.5% unemployement...

Actually, it is slightly less than that in Q2 2003.

The point is that, by historic standards, that is VERY high for Japan. 6.1% unemployment is actually pretty good by US historical standards. The European unemployment rates are disastorously large by their historical standards.

http://www.oecd.org/dataoecd/41/13/2752342.pdf

Eric Krieg writes:

Hey Steve, I just want to say thanks for playing the game here. I'm glad that someone is taking the protectionist line, and giving commonly held reasons for doing so. Even if I don't agree with the reasons.

Did you ever read this article by Arnold on the subject?

http://www.techcentralstation.com/071403D.html

Steve writes:

I'm not just "playing the line" here. I really do believe what I said.

Are you guys just going to whistle past the graveyard as you see your country go down the tubes?

Steve writes:

Just read your techcentralstation article.

We're TIRED of waiting for India and China to buy goods and services from us isntead of manipulating their currencies by buying our t-bonds. Sure, it helps us keep deficit spending, but where does that money "trickle down" to? Yep, you guessed it : fatcat CEOs from Haliburton, etc who no longer need to spend money on local talent (outside of the local 5 star steak house).

Eric Krieg writes:

I read the article differently.

Their reinvestment results in lower interest rates. Those low rates are what fuel US business investment.

It also fuels things like home construction. Now is probably the best time ever to work in a trade, there is so much construction going on residentially and for the government.

Eric Krieg writes:

>>Are you guys just going to whistle past the graveyard as you see your country go down the tubes?

We just don't agree that anyone is dying. We have seen talk like your before (in the '80s about Japan, in the '90s about Mexico, etc.)

Been there, done that, still standing.

I think that's like an Elton John song or something.

Eric Krieg writes:

Economists might argue that the US is shifting towards a service based economy. While we are shifting, those low interest rates (courtesy of trade dollar recycling nations like Japan and China) make the transition much, much easier.

The answer to your career dillema is to become a service sector entrepreneur, and use those low interest rates to start a business.

Steve writes:

So the answer is that we're "okay" with forcing EVERYONE, including the risk averse (me), into the riskiest of all situations (entreprenurship) just for the sake of getting cheap trinkets at WalMart?

Sounds great!

I ask again, 20 months into 'recovery', WHERE ARE THE JOBS?

Bob Dobalina writes:

Steve, see the homepage link for a profitable job that won't be outsourced.

BTW, I know for a fact that a thirty-year-old Mercedes dealer tech can make over $100k, if he's very good at his job and willing to work a 50-hour week.

What do you think of a career as an auto tech? I'd imagine with your coding skills that you can probably troubleshoot an electrical system with a few weeks of training.

Eric Krieg writes:

>>I ask again, 20 months into 'recovery', WHERE ARE THE JOBS?

I'm glad you asked!

http://www.econopundit.com/archive/2003_10_01_econopundit_archive.html#106762820241958617

Steve writes:

Thank you, Bob, finally a good idea in response. That is actually a fantastic idea. I do love cars and I'm not afraid of a 50+ hour workweek.

I assume that I'd have to travel to Germany to get the kind of training needed to work on such a fine automobile, though... Might be worth it.... I'll have to read the article from home tonight.

I guess CEOs have to drive SOMETHING, so MB will be fixing cars forever.

Eric Krieg writes:

>>What do you think of a career as an auto tech?

Unfortunately, Bob, many Americans don't want to get their hands dirty at work, generally.

What would Steve's mom say if he told her he was going to forgo college to go to autotech school?

Probably the same thing mine said when I told her I was joining the Marines: "Over my dead body".

Our educational system discriminates against the trades as well. It is nothing more than a college prepratory system, which is great if you want to go to college, but not so great if you want to learn a trade.

Anyway, I predict that in 10 years, all the trades (including auto-techs) will be staffed by Mexicans. They (rightly) percieve college as an inferior choice to learning a trade. A generation from now I predict that Mexican Americans will rival white Americans in terms of income. It is simple supply and demand, combined with demographics.

Eric Krieg writes:

>>I assume that I'd have to travel to Germany to get the kind of training needed to work on such a fine automobile, though...

And you would be wrong. They provide training all over the place. MB has a training center right here in the Chicago area. They were actually recruiting for it during the Chicago Auto Show, right from their display.

Steve writes:

So the big "free market" guy got his education paid for by the government via the Marine Corps!

Not that I'm ungrateful for your sacrafice, but you're hypocritical to be so "open market" yet you take a government handout to pay for a college education!

Bruce Cleaver writes:

Boonton - I was not meaning my words as criticism! The tragedy of the commons (TOC)I refer to is our intellectual and legal infrastructure. It is going to be tough to persuade people to study engineering, computer science, etc. if the prevailing wage is so low - yet defense, technology advancement, and infrastructure maintenance demand such people. Can *all* of that be outsourced?

More generally, I haven't seen anyone answer my other point, which is that humans have a limited capacity to tolerate change. If it were just IT jobs, then I would not raise a fuss....but _all_ knowledge-based jobs are another matter. Can we expect people to undergo intensive and costly retraining every 3 years (say) and the attendant disruption? Sure, the steady-state outcome is better for us in the aggregate, but the time-varying component could be quite severe. Again I say this was Joseph Schumpeter's point.

Steve writes:

Bruce--

Yes, we will have 3 years of good times followed by 3-4 years retraining.

No, the globalizers don't care, because they can sit in their ivory towers and "theorize" while we toil away.

The globalizers who shouldn't be (financial analysts, etc) will care as soon as they are forced out by foreigners. It's so fun to hear back from them after the event happens.

I thought tragedy of the commons was when you go to a resturant with 50 people and everybody ends up ordering lobster because "my little extra cost will get split up and spread around". Ie: the argument against communism.

Mcwop writes:

Steve writes: "So the big "free market" guy got his education paid for by the government via the Marine Corps!

Not that I'm ungrateful for your sacrafice, but you're hypocritical to be so "open market" yet you take a government handout to pay for a college education!"

I would not define that as a handout, as you are required to provide a service (you work) for that "handout". The ROTC guys that graduated with me (I was not ROTC) in 1990 headed straight to the gulf war and in harms way. Remember David Robinson, he had to serve before the NBA. Hardly a handout. Giving a poor person money (or other goods) simply becuase they have a baby they cannot afford and provide zero in return; that is a handout.

Steve writes:

I'm really not going to argue this point with you because it makes me look ungrateful (which I am certainly not), but to take money from the government (AFTER YOUR SERIVCE IS DONE, not during!!!) and then criticize me for being a protectionist is the height of hypocricy!

If you were for a free market, you would have gotten loans to pay for school, not a free ride from the "big bad government". OR, since you couldn't afford it on your own, maybe you could work at McDonald's! That's what you think people should do who lose their jobs as programmers, right?

I think the government can be a force for good. I think that somewhere in the constitution is says "PROTECT us from all enemies foreign and domestic". Guess who are enemies are now???

Eric Krieg writes:

The "New GI Bill" (the educational benefits Steve referred to) should be considered deferred compensation.

It's a good deal for the government. It entices you to join, but not every ex-soldier takes advantage of their deferred compensation.

When your dad is a mailman and your mom is a hippie, you get an education any way you can, Steve.

Knowing what I know now, I probably would have become an auto-tech too!

Eric Krieg writes:

You know, Steve, the government provides soldiers lots of benefits. Housing, medical care, day care, etc. It's really a welfare state, in a way.

And they also pay privates in the Army something like $160 a week! I don't think its even the minimum wage, to tell you the truth.

The way they get people to sign up is to promise them the educational benefits. Those benefits acrue based on your time served, so really in every way it is deferred compensation.

I don't know. You can make it out to be a free market thing, but I just don't see it.

Eric Krieg writes:

People are so hung up by hypocrisy. I also went to public school for 12 years and went to college at a state school. Does that also make me a hypocrite?

You can be against something while still benefiting from it. There is no shame in taking advantage of the system as it exists.

Eric Krieg writes:

>>OR, since you couldn't afford it on your own, maybe you could work at McDonald's! That's what you think people should do who lose their jobs as programmers, right?

No, I think that they should get another job as a programmer, because their perception that there are no programming jobs out there is incorrect.

Eric Krieg writes:

>>I'm really not going to argue this point with you because it makes me look ungrateful

Don't worry about it. It's a volunteer army. No one is forced to be there. The "sacrifice" is compensated (except for the ultimate sacrifice, of course. Those guys are the ones who should be honored, and those, like my father, who were drafted and actually went to war).

Even a volunteer army at war is a situation in need of more respect than a volunteer army at peace. I respect the Gulf War vets more than the guys who only served between the 2 wars.

And the guys fighting today, they're unbelievable.

Boonton writes:

"More generally, I haven't seen anyone answer my other point, which is that humans have a limited capacity to tolerate change. If it were just IT jobs, then I would not raise a fuss....but _all_ knowledge-based jobs are another matter. Can we expect people to undergo intensive and costly retraining every 3 years (say) and the attendant disruption? Sure, the steady-state outcome is better for us in the aggregate, but the time-varying component could be quite severe. Again I say this was Joseph Schumpeter's point. "

One way to address this problem is to make the change less hurtful to people's lives. If you have good unemployment insurance coupled with generous training vouchers you can make a period of shifting jobs less terrifying to people like Steve.

This would be much more efficient than protectionism. I recall one stat that said American consumers spent $100,000 extra for every steel job saved by protectionist measures. That's $100K every year! It would have been cheaper for everyone to have simply gave the steel workers a $45K per year stipend and $20K education/business startup voucher.

Instead the added inefficiencies caused by 'protecting' a handful of jobs dampens people's standards of living accross a host of industries.

Steve is upset about outsourced programmers but he should remember the reason he once made such great money at programming was because he was helping with the automation that eliminted thousands of clerical jobs.

Steve writes:

Boonton--

That's what I'd rather see. If I my job gets globalized, the gov should pay my mortgage while I re-train (I'd cover that myself). Then the globalizers will see the TRUE cost of what they did to this country. Shifting jobs nowadays invloves forclusures on houses while trying to survive on $250/week! in unemployment "benefits". It didn't used to. See how many jobs are going offshore? See the rising rate of forclosure? SEE THE CONNECTION? I know it's not that simple, but put 2 and 2 together!

Eric--Of course you're a hypocrite! You say you're a LIBERTARIAN, but you are okay with going to public education and college on the dole? HOLY COW (as a former Chicago resident used to say) that's a WHOPPING hypocracy!

I payed for (and am still paying for) everything out of pocket, myself, without help from my family.

Yes, programming causes clerical layoffs, but it's possible to go from being a clerk to being a programmer! there is NOTHING more technical (or next to nothing at least) than pounding out code, and the government claims we need more "technical" people. No, Georgie, we need more "technical" JOBS, the people will follow the money.

All this talk about entreprenurship is crap! Do you think that during a recession when people are cutting WAY back is a good time to start a business? ESPECIALLY when your business will compete against foreign businesses that will undercut you with subsidized, currency-manipulated, cheap labor?!?!?!?

Steve writes:

20 Months into "recovery" and 10+ years into NAFTA:

WHERE ARE THE HIGH PAYING JOBS WE WERE PROMISED?

Yes, I've read "The Choice" by Roberts, and I've read a some of Wealth of Nations (tough read). I'm not an unlearned idiot protectionist. I understand the theory, but 99% of the time theory doesn't work in practice.

Steve writes:

Eric--

Well, gosh, if YALE ( the prez's alma madre ) says that there is job growth (even though the guy on the street says there ISN'T) then there MUST be job growth! Break out your 1999 party hats, folks! Stable, meaningful employment for everyone!

Boon--

That's a great article about automotive tech jobs. I'm certainly interested in the possibilities. Having to take 2-4 years off work to train is worrisome, but I'll just wait until my job gets offshored where I'm at. Nothing but free time after that day, eh?

Mcwop writes:

Steve here are four tech oriented jobs on the first website (First Data corp) I visited looking for you:

# System Administratornew - (Omaha, NE) - $33,000-$88,000 - First Data Resources (005NE10300892)
# System Administratornew - (Omaha, NE) - $33,000-$88,000 - First Data Resources (005NE10300891)
# MGT-MGT-Manager - (Englewood, CO) - $41000-$109000 - Technology Solutions Inc (013CO10300003)
# Production Support Analyst - (Moorpark, CA) - $20000-$59000 - Cardservices International (055CA40300065)

Salary ranges are not too bad either. You may have to move, but sometimes people do that.

Oh, by the way ROTC guys put in training WHILE in college, they don't just work afterwards. Two of my friends did Ranger training. One twice, because he broke his leg the first time, which is automatic failure.

Eric Krieg writes:

>>HOLY COW (as a former Chicago resident used to say) that's a WHOPPING hypocracy!

It's called taking advantage of the system as it exists. It is not hypocrisy.

And, quite frankly, if you can't be a libertarian if you ever took advantage of government schools then there are going to be VERY FEW libertarians.

Also, there are a lot of REALLY conservative guys in the Military. A lot of libertarians, too. Not too many liberals. Maybe after being exposed to the government organization that invented the phrase SNAFU (and you DO know what that stands for, right?) you become a little skeptical of government bureacracy?

Hypocrisy is being for free trade until it impacts your job, and then changing your tune, Mr. I was a Libertarian until 2001.

Eric Krieg writes:

>>Eric--

Well, gosh, if YALE ( the prez's alma madre ) says that there is job growth (even though the guy on the street says there ISN'T) then there MUST be job growth! Break out your 1999 party hats, folks! Stable, meaningful employment for everyone!

Great argument there, Steve. Are you familiar with the type M argument?

http://www.techcentralstation.com/100703B.html

Eric Krieg writes:

>>the prez's alma madre

That actually sounds like something Dubya might say.

If you go to a Mexican college, is it your alma madre?

Isn't madre the word for "manure" in French?

Bob Dobalina writes:

I think that's merde, Eric...

Eric Krieg writes:

Ce la vie. Or something.

Everything I know about the French I learned from dating French chicks. Which, I can assure you, is VERY educational, although I still prefer Italian girls (married to one, need that disclaimer).

Eric Krieg writes:

Hey Steve, what did you think about that jobs report this morning?

Right on track to have a NET increase in jobs for Dubya by the end of Q4.

Boonton writes:

"That's what I'd rather see. If I my job gets globalized, the gov should pay my mortgage while I re-train (I'd cover that myself). Then the globalizers will see the TRUE cost of what they did to this country. Shifting jobs nowadays invloves forclusures on houses while trying to survive on $250/week! in unemployment "benefits". It didn't used to. See how many jobs are going offshore? See the rising rate of forclosure? SEE THE CONNECTION? I know it's not that simple, but put 2 and 2 together!"

The point you ignored is the TRUE cost of protectionism. Saving some steel jobs sounds like a great thing until you consider that American's are paying an implicit tax of $100K per steel job per year. While in theory we could pay off the laid off steel workers house with that money I don't think that would be the fairest use of the money. I would have unemployment with retraining opportunities, we already have a lot of that now. You can very easily get a Federally insured loan for college.

Reality check here, I don't know what your local market is for programmers but I do not buy that the US economy no longer has any opportunities available for programmers. I also do not buy that the skills necessary to be a good programmer cannot be translated into other careers that still offer good money.

"Yes, programming causes clerical layoffs, but it's possible to go from being a clerk to being a programmer! there is NOTHING more technical (or next to nothing at least) than pounding out code, and the government claims we need more "technical" people. No, Georgie, we need more "technical" JOBS, the people will follow the money."

What world are you living in? You make it sound like all the goods and services produced in the economy are made by robots & you were the last human worker whose last task was to run the 100% automation program. Even in the Matrix people still have jobs my friend.

"20 Months into "recovery" and 10+ years into NAFTA:

WHERE ARE THE HIGH PAYING JOBS WE WERE PROMISED? "

Speaking of NAFTA, one of the things Clinton agreed with in order to get it passed through Congress was retraining grants for the thousands of workers who were supposedly going to lose their jobs. LAst I heard only a handful of people bothered applying for it.

Steve writes:

I think it's great that only 350k people applied for unemployement benefits instead of 450k. I think 350ish is still WAY TOO HIGH. That means that 6 stadiums full of people are going to lose their house/car/spouses this week. I also think that the Thursday morning report is notoriously volitile and unreliable (similar to the headline unemployment %ages).

All that matters is the payroll number, we will see tomorrow at 8:30 eastern. I'm geeked up over it, actually.

Unlike the Dems who share my feelings on trade/protectionism, I really want to see this economy do well regardless of who is sleeping in 1600.

Steve writes:

RETRAINING?!!?!? RETRAIN FOR WHAT??!?! I went through 4 years of college, I don't need RETRAINING grants! Give me a friggin break!

There are no jobs being created for programmers. Sure, sysadmins can find jobs, but when you have Java/C++ on your resume, they don't consider you for those jobs. when they get 1000 resumes for each job opening on the first day, you only have a few minutes of window to get your resume in, anyway.

I'm still paying off a large loan from the first time through college! A second trip would cost 2x as much, PLUS I've got a sizable mortgage. I still have no chance at a job because ALL knowledge based jobs are flooding out of the country, not just programmers.

Eric Krieg writes:

Yo B, right on about the $/ job involved in protectionism.

When you put it in raw numbers like that (and I think your numbers for the steel jobs are right on) the folly that is protectionism comes through.

Ditto for the point about Steve packing up and moving. America is a dynamic place, but there are still regions that fall behind economically. California has become one of those regions. I hope the Terminator does something about that, but that doesn't help Steve right this minute.

Eric Krieg writes:

>>I'm still paying off a large loan from the first time through college!

How about the Army? I hear that they're hiring, and they'll take care of those loans for you ;)

Just don't forget your sunscreen. I hear that that Iraqi sun is a little strong.

Eric Krieg writes:

>>I really want to see this economy do well regardless of who is sleeping in 1600.

I think that even the Dems want to see the economy do well. The 1990s showed that, even when the economy does well, there are PLENTY of arguments about WHY it does well.

Mcwop writes:

Steve writes: "There are no jobs being created for programmers. Sure, sysadmins can find jobs, but when you have Java/C++ on your resume, they don't consider you for those jobs. when they get 1000 resumes for each job opening on the first day, you only have a few minutes of window to get your resume in, anyway...

...ALL knowledge based jobs are flooding out of the country, not just programmers."

Steve, please back up your claims with some sort of evidence.

Boonton writes:

Steve,

If you have 4 years of college then you have skills that can be used at jobs other than just programming (even jobs outside of IT altogether). You may have to move, you may have to sell your house. Maybe you took on too big a mortgage thinking the boom would go on. Maybe your area is just really bad.

That doesn't mean protectionism would do anything to help you much without inflicting a much greater cost on everyone else.

Steve writes:

Like I said in a post about 40+ posts ago, I'm trying my best to get out of IT and into financial analysis. I sure hope I don't have to labotomize myself over trade issues in order to become a CFA (I have yet to meet a CFA who doesn't believe in free trade). Again, I say that once the Indians learn how to use a bond calculator and start moving in on CFA turf, American CFAs will be just as protectionist as I am!

Bob Dobalina, CFA writes:

Steve,

First, CFA is never to be used as a noun, only as an adjective. This will be on the LI exam, I assure you.

Second, foreign analysts still make quite a good living. Even in HK, the average salary is in six figures.
http://aimr.org/pdf/memservices/03exec_sum.pdf

Last, if you think all analysts do is bang out DCF all day, you are sorely mistaken.

Have you even signed up for level I yet?

Steve writes:

I don't REALLY believe that being an FA invloves doing NPV all day. I am smarter than that, I meant no disrespect.

No, I haven't signed up for the Level 1 yet. The only reason why is that I've seen some job postings that say they are only interested in you if you passed the level 1 on the FIRST try. Given my obvious risk aversion, I don't want to play cards unless I've got 4 of a kind. Guess sometimes you've just got to go for it, huh?

Something else I'm concerned about is that in order to take the exam, you must FIRST be working as a financial analyst (I don't remember the exact requirement, but it is some nearly chicken-and-egg type thing). I may have to "stretch" what a programmer does to include some sort of FA.

Ross N. writes:

One thing I always like to ask protectionists is, if protecitonism is so great, why not let each of the 50 states practice it as well? Clearly, each state could experience its own economic boom by forcing its citizens to buy in-state, right? Montana could jump-start its orange groves by putting a 100% tariff on Florida oranges. Mississippi could start its own Silicon Valley by prohibiting the importation of out-of-state software. I'm sure it all makes sense to Steve...

Steve writes:

Ross--

Trade between the states doesn't cause weakness in the dollar, nor does it destroy the tax base. That "trade between the states" argument is so laughably different than what is going on now, I can't believe economists still bring that up.

Steve writes:

Oh, and one more thing, Rossie--

States probably WOULD try to implement tariffs (even though, as I've said above this is a DIFFERENT situation) to protect themselves, but they cannot because of the interstate commerce clause in the constitution.

Eric Krieg writes:

>>Trade between the states doesn't cause weakness in the dollar, nor does it destory the tax base.

Once again, the good people of Buffalo would take issue with that statement. Many big aerospace companies had big operations there, but they were cherrypicked by California and Texas over the years.

States don't have the power to raise tarriffs, but they DO have the ability to give tax breaks and stuff like that to attract companies. That's how Boeing's headquarters came to Chicago. They didn't come here for the climate, that's for sure.

Steve writes:

As long as the dollar is continuously traded around in the states, there should be no downard pressure on it. Once you give it to a foreigner to buy his stuff or services, it will cause downward pressure (unless he buys your stuff or services in return). Less buying of his stuff, less downward presure.

Some would say that the Chinese et al are just "recycling" the dollars, but their currency reserve pool would suggest otherwise.

Ross N. writes:

Stevie,

Are you saying that if India and China used dollars, then they wouldn't be able to "steal" our jobs? As for the constitutional issue, so what? The fact that the states are prevented from doing so, doesn't mean such prevention is good economics (although I think so).

The situation isn't that different at all, you just won't admit that you're wrong, no matter what.

Steve writes:

How are the two situations even remotely close to the same thing? China uses a different currency than we do. Montana uses the same currency as Florida. China hoards our dollars and uses them strategically to keep our currency overvalued, and therefore keeping her people employed. Montana and Florida can't do that.

The other reason this is COMPLETELY different is that I can drive from Montana to Florida if all the jobs start popping up in Florida. Have you ever read about an IT person getting a visa to work in India??????????? India frowns up on that, unlike the US, because they care if an Indian loses a job to an imported American.

Steve writes:

Ross--I might be wrong about free trade, but I am not wrong about saying that "free trade" between the states is totally different than free trade with other countries for the reasons I stated above.

If it is exactly the same in your eyes, why did Europe feel the need to become one state with one currency?

T L writes:

Steve-Europe hasn't become one state yet, but one of the reasons it adopted a common currency is to eliminate transaction costs on their substantial regional trade.

Steve writes:

If it's only about transaction costs (which IS, admittedly what they claimed it was about), why is the stability pact enforced? Clearly there are other benefits to merging lots of small countries into a large country (I know, you say they are not "one", but they really are because of the currency issue) other than just transaction costs of going between the states.

T L writes:

If a country is to share a currency with other countries, it's in their interest to agree on a set of rules to prevent immoderate fiscal practices (such as excessive deficit spending) that could cause inflation-hence the stability pact.

Among the hoped for benefits of the single currency are the elimination of exchange rate volatility, closer ties among participating countries, and the possiblity of becoming the world's reserve currency.

Europe (for the present) remains a group of separate nations, they have only conceded some sovereignty over monetary & fiscal matters.

Kyle Markley writes:

Steve,

I got here very late, but if you do see this, I've written a long proglobalization essay that addresses your concerns:
http://arbyte.us/blog_archive/2003/10/Globalization.html

Feel free to e-mail me.

Steve writes:

Kyle--

Good read, but it's still the same old free-trader mantra: Good, better, awesome, higher-paying, lower effort, higher productivity jobs will be created when other jobs are lost to offshore locations. I've heard it 1,000 times, but I have yet to actually SEE the 300,000 new jobs per month that it would take to sop up all the "extra" labor forces (I won't say "surplus", just for you). Yeah, I can buy a t-shirt at wal-mart for $1, and I can now get Java development tools for free, but I couldn't possibly find a new job as a Java developer because they're all gone to India.

I'm sick of hearing "lagging indicator" and all of that. So, for the 10th or so time, I will say:

WHERE ARE THE HIGH PAYING JOBS WE WERE PROMISED BY THE GLOBALISTS?

--Steve

Eric Krieg writes:

Steve, this one is for you...

http://www.businessweek.com/magazine/content/03_46/b3858064.htm

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