More on job loss due to automation

[RVonse]

Read what you quoted from me again. A job lost from China is NOT a job lost from automation. They are completely different in net effect to the wealth of the US.

If you are too stupid to listen to what I have just said, then ask yourself this question: Why did the wealth of the US accelerate during the industrial revolution but decrease during the last 30 years?

Perhaps your points aren't as convincing as you imagine.

For example, I can't think of a reason why if I had a factory with 20 high skilled workers making widgets and I invented a machine that would replace all of them with one guy pushing a button, that one guy pushing a button would get paid 20x what those skilled workers got paid. My bet is he'd make less than one of them made. Regardless of the productivity.

As far as productivity and wealth to the particular nation (in our case the US), it really does not matter whether the workers are replaced. As long as the factory stays in the same country the productivity and (wealth if you will) stays in that country.

But here is that thing that is key. Once that wealth stays in that country, there is a good chance that it will create other support jobs. There is no chance of that at all if the factory moves to China.

 

[DBT]

The idea that a company which has automated in order to cut wage costs is going to share its profit with retrenched workers is absurd.

Steel workers (and workers in general) that have been made redundant have the options of welfare, retraining or finding similar work, perhaps in another city....mobility with its associated insecurity issues.

 

[LordKiran]

I propose a 35% tariff on all robot produced goods.

Not sure if that is a serious proposal from you....but it is actually something that may have merit to reduce poverty and increase employment. The problem I see is the same as with the carbon tax.....and that is that other countries would not participate.

Luddite policies like this never pan out in the end anyway. The best bet is to restructure our society to accommodate the ever increasing redundancy of human labor.

 

[arkirk]

This problem seems at the crux of an even larger problem. Classic economic theories deal with the notion that a person relates primarily to his/her society through employment. The employment model of civil participation has lost its relevance. What we really have always needed is democracy even in the realm of the economy.

The employment model of citizen relationship to the economy and one's society has some deep flaws. For one, it actually withholds full status as a citizen from those who are unemployed whether they choose to be unemployed or not. They get less and less from society to attach them to society and often life itself. The goal of a government should therefore be more than just making everybody have a job and denying the necessities of life from people if they have not earned enough to pay for them. Automation in conjunction with the employment model of human society disengages progressively larger and larger portions of society from participation and even loyalty to society. Democracy in the workplace is the only way to reconstitute a system of production that finds a useful engagement for society as a whole and the individual . The goal has to be no profit by some artificial calculation but instead engagement of all of society. Workers must feel they are a part of the organization and that they are not endangered by the failure of bosses to find a use for them. Without a firm recognition of the humanity of the worker, the worker's position and also one's status as a memeber of society is precarious and at the whim of non participating investors and their surrogates.

 

[dismal]

Perhaps your points aren't as convincing as you imagine.

For example, I can't think of a reason why if I had a factory with 20 high skilled workers making widgets and I invented a machine that would replace all of them with one guy pushing a button, that one guy pushing a button would get paid 20x what those skilled workers got paid. My bet is he'd make less than one of them made. Regardless of the productivity.

As far as productivity and wealth to the particular nation (in our case the US), it really does not matter whether the workers are replaced. As long as the factory stays in the same country the productivity and (wealth if you will) stays in that country.

But here is that thing that is key. Once that wealth stays in that country, there is a good chance that it will create other support jobs. There is no chance of that at all if the factory moves to China.

It turns out a lot of the benefit is passed on to consumers who get to enjoy cheaper goods. Which means they can have more goods and a better lifestyle. This statement is independent of whether we are talking about efficiencies gained through automation or imports.

There is not something magical about national borders in this regard that does not also apply to state borders, county borders, city borders, neighborhood borders, or your yard borders. We do not prosper by making the things we buy cost more.

 

[RVonse]

It turns out a lot of the benefit is passed on to consumers who get to enjoy cheaper goods. Which means they can have more goods and a better lifestyle. This statement is independent of whether we are talking about efficiencies gained through automation or imports.

As long as the cheaper goods mean better employment.......but it never is. If you don't get the better employment along with the cheaper goods, all you end up with is an economy like Mexico. Where goods are cheap and no one has a job to be able to buy the cheap goods. Taken to the other extreme, you have an economy like Silicon Valley or Los Angeles. Where goods and housing are extremely expensive but most everyone has a good job.

Which economy would you rather be part of Dismal? I would take Silicon Valley over Mexico any day of the week.

 

[RVonse]

This problem seems at the crux of an even larger problem. Classic economic theories deal with the notion that a person relates primarily to his/her society through employment. The employment model of civil participation has lost its relevance. What we really have always needed is democracy even in the realm of the economy.

The employment model of citizen relationship to the economy and one's society has some deep flaws. For one, it actually withholds full status as a citizen from those who are unemployed whether they choose to be unemployed or not. They get less and less from society to attach them to society and often life itself. The goal of a government should therefore be more than just making everybody have a job and denying the necessities of life from people if they have not earned enough to pay for them. Automation in conjunction with the employment model of human society disengages progressively larger and larger portions of society from participation and even loyalty to society. Democracy in the workplace is the only way to reconstitute a system of production that finds a useful engagement for society as a whole and the individual . The goal has to be no profit by some artificial calculation but instead engagement of all of society. Workers must feel they are a part of the organization and that they are not endangered by the failure of bosses to find a use for them. Without a firm recognition of the humanity of the worker, the worker's position and also one's status as a memeber of society is precarious and at the whim of non participating investors and their surrogates.

Sooner or later the free marketeers are going to have to come to grips with what will become a "Star Trek" economy. An economy more dependent on technology and less on the efforts of individual people. And (as usual) it will be up to our ruling elite, how the spoils will be distributed..

 

[arkirk]

This problem seems at the crux of an even larger problem. Classic economic theories deal with the notion that a person relates primarily to his/her society through employment. The employment model of civil participation has lost its relevance. What we really have always needed is democracy even in the realm of the economy.

The employment model of citizen relationship to the economy and one's society has some deep flaws. For one, it actually withholds full status as a citizen from those who are unemployed whether they choose to be unemployed or not. They get less and less from society to attach them to society and often life itself. The goal of a government should therefore be more than just making everybody have a job and denying the necessities of life from people if they have not earned enough to pay for them. Automation in conjunction with the employment model of human society disengages progressively larger and larger portions of society from participation and even loyalty to society. Democracy in the workplace is the only way to reconstitute a system of production that finds a useful engagement for society as a whole and the individual . The goal has to be no profit by some artificial calculation but instead engagement of all of society. Workers must feel they are a part of the organization and that they are not endangered by the failure of bosses to find a use for them. Without a firm recognition of the humanity of the worker, the worker's position and also one's status as a memeber of society is precarious and at the whim of non participating investors and their surrogates.

Sooner or later the free marketeers are going to have to come to grips with what will become a "Star Trek" economy. An economy more dependent on technology and less on the efforts of individual people. And (as usual) it will be up to our ruling elite, how the spoils will be distributed..

What I was trying to point out is that it will not be working if the ruling elite decide how the production is to be distributed. So far the empirical evidence indicates that as technology has advanced under this system, economic disparity has increased. I believe a good part of the reason for this is that the so-called "advances" have not always been well informed and the people pressing these developments have had increase in their personal wealth (monetary) the foremost consideration in their actions. I feel the standard will ultimately have to be whether or not a given technology is sustainable. As it stands at this moment in history, the technologies that dominate our culture are almost entirely non sustainable. The sustainability concept has to apply to the social economy as well as individuals. That does not appear to be an avoidable situation. The as usual ideas you express I feel are going to require a kind of social banishment, because we are so deeply affecting the world with our actions the environmental feedback threatens us all.

 

[dismal]

It turns out a lot of the benefit is passed on to consumers who get to enjoy cheaper goods. Which means they can have more goods and a better lifestyle. This statement is independent of whether we are talking about efficiencies gained through automation or imports.

As long as the cheaper goods mean better employment.......but it never is. If you don't get the better employment along with the cheaper goods, all you end up with is an economy like Mexico. Where goods are cheap and no one has a job to be able to buy the cheap goods. Taken to the other extreme, you have an economy like Silicon Valley or Los Angeles. Where goods and housing are extremely expensive but most everyone has a good job.

Which economy would you rather be part of Dismal? I would take Silicon Valley over Mexico any day of the week.

We don't want more expensive goods that we have to work harder to get.

If the goal was to maximize work done we could dig ditches with spoons and chop down forests with a herring.

Our standard of living is not improved by making things artificially more costly. Period.

 

[arkirk]

As long as the cheaper goods mean better employment.......but it never is. If you don't get the better employment along with the cheaper goods, all you end up with is an economy like Mexico. Where goods are cheap and no one has a job to be able to buy the cheap goods. Taken to the other extreme, you have an economy like Silicon Valley or Los Angeles. Where goods and housing are extremely expensive but most everyone has a good job.

Which economy would you rather be part of Dismal? I would take Silicon Valley over Mexico any day of the week.

We don't want more expensive goods that we have to work harder to get.

If the goal was to maximize work done we could dig ditches with spoons and chop down forests with a herring.

Our standard of living is not improved by making things artificially more costly. Period.

Your examples are silly. We need to make things better whatever the cost and also make sure the cost can be met by the users of these things. You are back in the gilded age with your thinking. Our standard of living is one of living well and being healthy and living long and not being oppressed. A thing needs to cost what it costs to be good enough to have. Otherwise we could sell spoiled food a lot cheaper and the people could feast on rotten food to their heart's content. We could have factories that pumped out lots of nutritionless food for real cheap. There has to be standards of performance and purity for products. You always ignore these needs and threat the issue as just a matter of quantity of cheap stuff.

 

[dismal]

We don't want more expensive goods that we have to work harder to get.

If the goal was to maximize work done we could dig ditches with spoons and chop down forests with a herring.

Our standard of living is not improved by making things artificially more costly. Period.

Your examples are silly. We need to make things better whatever the cost and also make sure the cost can be met by the users of these things. You are back in the gilded age with your thinking. Our standard of living is one of living well and being healthy and living long and not being oppressed. A thing needs to cost what it costs to be good enough to have. Otherwise we could sell spoiled food a lot cheaper and the people could feast on rotten food to their heart's content. We could have factories that pumped out lots of nutritionless food for real cheap. There has to be standards of performance and purity for products. You always ignore these needs and threat the issue as just a matter of quantity of cheap stuff.

Huh?

How about you provide examples of things we value that we should go out of our way to make more expensive to produce.

 

[Juma]

When the procesd of automation has completed, humans wont be needed and will be discarded with.

 

[Axulus]

Perhaps your points aren't as convincing as you imagine.

For example, I can't think of a reason why if I had a factory with 20 high skilled workers making widgets and I invented a machine that would replace all of them with one guy pushing a button, that one guy pushing a button would get paid 20x what those skilled workers got paid. My bet is he'd make less than one of them made. Regardless of the productivity.

As far as productivity and wealth to the particular nation (in our case the US), it really does not matter whether the workers are replaced. As long as the factory stays in the same country the productivity and (wealth if you will) stays in that country.

But here is that thing that is key. Once that wealth stays in that country, there is a good chance that it will create other support jobs. There is no chance of that at all if the factory moves to China.

Your math is wrong. You are discounting the possibility of the workers who lose their job getting replacement jobs, even if those jobs are lower paying.

Let's say a US company produces 1,000 tons of steel that sells for $10,000,000

It pays wages of $3 million to produce the steel.

It decides to relocate the factory to China. Now it pays wages of $500,000. The price of steel drops to $9,000,000 as more factories relocate to China and the competition and lower costs leads to lower prices. In other words, the wealth of steel consumers goes up $1,000,000 (actually a little bit more, as new buyers will enter the market due to the lower steel price, meaning steel production and consumption will increase a little bit and there is new wealth via consumer surplus created from that, but we'll ignore that for this example).

The company keeps US jobs with wages of $500,000 to handle import/export and other international supply chain issues.

So the company now has $1,000,000 additional profit with the move ($2,000,000 in labor savings minus $1,000,000 less revenue).

So, on the plus side, we have $2,000,000 increase in wealth.

However, you'll point to the $2,500,000 lost wages in the US and say that means the move actually decreased US wealth by $500,000. But that would only be true if none of those who lost their job are able to find a new job.

We know that is not the case. What happens is that these workers are often able to find other jobs (especially if they are willing to move to a different city), jobs that do pay a bit less, yes, but jobs that produce wealth none-the-less.

Let's say that 10% of those workers can't find a replacement job or find a way to retire early. The other 90% do find another job. Let's say that the new jobs pay 25% less wages/benefits on average.

Now, we have those workers earning wages of $1,687,500 at the new jobs.

Now when we add up the totals, we have wage decline of only $812,500 ($2,500,000 - $1,687,500). Add the $1,000,000 in company profits and $1,000,000 in consumer savings, total wealth increases by $1,187,500.

On top of that, the money paid by US customers for the Chinese steel tends to make its way back to the US. This is because when the steel is imported from China, US dollars are sold on the international market to buy Chinese currency to pay for the steel (or, in the case of a multinational company, to pay for the expenses of their Chinese factory to produce the steel). When those dollars are sold, who do you think buys them? Someone looking to spend that money in the US (after maybe going through a currency dealer, the dealer then wants to find a buyer for those dollars). The buyer is looking to either buy US products/services to import into their own country, or they are looking to buy US investments (stock, real estate, bonds, company expansion for their own US branch of an international company, etc.). Thus, you can't discount the effects of a significant portion of the money coming back to the US either and the effect that has on our export industries or our capital stock.

Finally, the 25% wage decline for the workers who find a new job is a short-run effect. In the long term, those workers will retire and the new, younger generation will enter into areas of the economy, at a young age, that is more thriving and has the potential for higher wages over time. These jobs that are getting lost to China are stagnant areas of the job market. Putting things like tariffs or other restrictions on them is trying to preserve the jobs of yesterday rather than preparing/adapting to the jobs of tomorrow.

 

[RVonse]

As long as the cheaper goods mean better employment.......but it never is. If you don't get the better employment along with the cheaper goods, all you end up with is an economy like Mexico. Where goods are cheap and no one has a job to be able to buy the cheap goods. Taken to the other extreme, you have an economy like Silicon Valley or Los Angeles. Where goods and housing are extremely expensive but most everyone has a good job.

Which economy would you rather be part of Dismal? I would take Silicon Valley over Mexico any day of the week.

We don't want more expensive goods that we have to work harder to get.

If the goal was to maximize work done we could dig ditches with spoons and chop down forests with a herring.

Our standard of living is not improved by making things artificially more costly. Period.

I'm not against more technology or automation. Never once said that. Show me where I have written I am against productivity from automation. What I am against is moving the factory to China! Make all you want here in the US (and as efficiently as possible) but keep the jobs here. You and Loren and his article and even the Carrier CEO's can come up with all the automation red herrings you can think of, but in the final analysis its the factory and whats left of the jobs that has to stay in THIS country. Otherwise you are slowly going down the drain and building up China at the same time. It is past time that the US gives China any more employment welfare. Not that I am necessarily a China hater but I live here in the US. Detroit used to be one of the richest cities in America and look what it has become today. Contrast Detroit to Shanghei which is where you will find the worlds most advanced state of the art mag lev train.

And I am pretty sure that's how Trump feels about this too. Fortunately he is smarter than you are....but even if he isn't it is encouraging to me that at least he has been given an opportunity (the first time in 30 years) to find out.

 

[RVonse]

We don't want more expensive goods that we have to work harder to get.

If the goal was to maximize work done we could dig ditches with spoons and chop down forests with a herring.

Our standard of living is not improved by making things artificially more costly. Period.

Your examples are silly. We need to make things better whatever the cost and also make sure the cost can be met by the users of these things. You are back in the gilded age with your thinking. Our standard of living is one of living well and being healthy and living long and not being oppressed. A thing needs to cost what it costs to be good enough to have. Otherwise we could sell spoiled food a lot cheaper and the people could feast on rotten food to their heart's content. We could have factories that pumped out lots of nutritionless food for real cheap. There has to be standards of performance and purity for products. You always ignore these needs and threat the issue as just a matter of quantity of cheap stuff.

Yes. This too.

 

[RVonse]

Your examples are silly. We need to make things better whatever the cost and also make sure the cost can be met by the users of these things. You are back in the gilded age with your thinking. Our standard of living is one of living well and being healthy and living long and not being oppressed. A thing needs to cost what it costs to be good enough to have. Otherwise we could sell spoiled food a lot cheaper and the people could feast on rotten food to their heart's content. We could have factories that pumped out lots of nutritionless food for real cheap. There has to be standards of performance and purity for products. You always ignore these needs and threat the issue as just a matter of quantity of cheap stuff.

Huh?

How about you provide examples of things we value that we should go out of our way to make more expensive to produce.

The list would be too long to print here but let me show you a few anyway:
1. We put safety belts in cars
2. We put air bags in cars
3. We put tempered glass in car windows
4. We put a bunch of pollution control crap on car engines
.......and all of it is going out of our way to make the price of the car more expensive.

 

[RVonse]

As far as productivity and wealth to the particular nation (in our case the US), it really does not matter whether the workers are replaced. As long as the factory stays in the same country the productivity and (wealth if you will) stays in that country.

But here is that thing that is key. Once that wealth stays in that country, there is a good chance that it will create other support jobs. There is no chance of that at all if the factory moves to China.

Your math is wrong. You are discounting the possibility of the workers who lose their job getting replacement jobs, even if those jobs are lower paying.

Let's say a US company produces 1,000 tons of steel that sells for $10,000,000

It pays wages of $3 million to produce the steel.

It decides to relocate the factory to China. Now it pays wages of $500,000. The price of steel drops to $9,000,000 as more factories relocate to China and the competition and lower costs leads to lower prices. In other words, the wealth of steel consumers goes up $1,000,000 (actually a little bit more, as new buyers will enter the market due to the lower steel price, meaning steel production and consumption will increase a little bit and there is new wealth via consumer surplus created from that, but we'll ignore that for this example).

The company keeps US jobs with wages of $500,000 to handle import/export and other international supply chain issues.

So the company now has $1,000,000 additional profit with the move ($2,000,000 in labor savings minus $1,000,000 less revenue).

So, on the plus side, we have $2,000,000 increase in wealth.

However, you'll point to the $2,500,000 lost wages in the US and say that means the move actually decreased US wealth by $500,000. But that would only be true if none of those who lost their job are able to find a new job.

We know that is not the case. What happens is that these workers are often able to find other jobs (especially if they are willing to move to a different city), jobs that do pay a bit less, yes, but jobs that produce wealth none-the-less.

Let's say that 10% of those workers can't find a replacement job or find a way to retire early. The other 90% do find another job. Let's say that the new jobs pay 25% less wages/benefits on average.

Now, we have those workers earning wages of $1,687,500 at the new jobs.

Now when we add up the totals, we have wage decline of only $812,500 ($2,500,000 - $1,687,500). Add the $1,000,000 in company profits and $1,000,000 in consumer savings, total wealth increases by $1,187,500.

On top of that, the money paid by US customers for the Chinese steel tends to make its way back to the US. This is because when the steel is imported from China, US dollars are sold on the international market to buy Chinese currency to pay for the steel (or, in the case of a multinational company, to pay for the expenses of their Chinese factory to produce the steel). When those dollars are sold, who do you think buys them? Someone looking to spend that money in the US (after maybe going through a currency dealer, the dealer then wants to find a buyer for those dollars). The buyer is looking to either buy US products/services to import into their own country, or they are looking to buy US investments (stock, real estate, bonds, company expansion for their own US branch of an international company, etc.). Thus, you can't discount the effects of a significant portion of the money coming back to the US either and the effect that has on our export industries or our capital stock.

Finally, the 25% wage decline for the workers who find a new job is a short-run effect. In the long term, those workers will retire and the new, younger generation will enter into areas of the economy, at a young age, that is more thriving and has the potential for higher wages over time. These jobs that are getting lost to China are stagnant areas of the job market. Putting things like tariffs or other restrictions on them is trying to preserve the jobs of yesterday rather than preparing/adapting to the jobs of tomorrow.

Axulus that is some pretty impressive accounting, and I will concede to that. But none of it is valid unless it is true. Its just a hypothetical case of how you might be right and Trump may be wrong.

The biggest problem is that the world is a LOT more complicated than either you, I, or even the professional economist can be able to model. What you have just done above is like taking a stock price of a company and then justify with math that it is going to go down or up in price.

What we do know for sure is that the US has embraced your way of thinking the past 30 years and now virtually all of the high paying manufacturing jobs are gone now. And we also know for sure that Germany still does have high paying manufacturing jobs in their country, so that tells us that the politics of a country does have an effect on whether those jobs stay or leave the country. And we also know for sure, that China has done something horribly right that we have not, because China has gained what the US has lost.

Rather than put him down, let Trump do this experiment to find out what does happen. You can't know for sure until he actually does start a trade war with China. How can this hurt the US rust belt any further than it is today?

 

[Axulus]

Your math is wrong. You are discounting the possibility of the workers who lose their job getting replacement jobs, even if those jobs are lower paying.

Let's say a US company produces 1,000 tons of steel that sells for $10,000,000

It pays wages of $3 million to produce the steel.

It decides to relocate the factory to China. Now it pays wages of $500,000. The price of steel drops to $9,000,000 as more factories relocate to China and the competition and lower costs leads to lower prices. In other words, the wealth of steel consumers goes up $1,000,000 (actually a little bit more, as new buyers will enter the market due to the lower steel price, meaning steel production and consumption will increase a little bit and there is new wealth via consumer surplus created from that, but we'll ignore that for this example).

The company keeps US jobs with wages of $500,000 to handle import/export and other international supply chain issues.

So the company now has $1,000,000 additional profit with the move ($2,000,000 in labor savings minus $1,000,000 less revenue).

So, on the plus side, we have $2,000,000 increase in wealth.

However, you'll point to the $2,500,000 lost wages in the US and say that means the move actually decreased US wealth by $500,000. But that would only be true if none of those who lost their job are able to find a new job.

We know that is not the case. What happens is that these workers are often able to find other jobs (especially if they are willing to move to a different city), jobs that do pay a bit less, yes, but jobs that produce wealth none-the-less.

Let's say that 10% of those workers can't find a replacement job or find a way to retire early. The other 90% do find another job. Let's say that the new jobs pay 25% less wages/benefits on average.

Now, we have those workers earning wages of $1,687,500 at the new jobs.

Now when we add up the totals, we have wage decline of only $812,500 ($2,500,000 - $1,687,500). Add the $1,000,000 in company profits and $1,000,000 in consumer savings, total wealth increases by $1,187,500.

On top of that, the money paid by US customers for the Chinese steel tends to make its way back to the US. This is because when the steel is imported from China, US dollars are sold on the international market to buy Chinese currency to pay for the steel (or, in the case of a multinational company, to pay for the expenses of their Chinese factory to produce the steel). When those dollars are sold, who do you think buys them? Someone looking to spend that money in the US (after maybe going through a currency dealer, the dealer then wants to find a buyer for those dollars). The buyer is looking to either buy US products/services to import into their own country, or they are looking to buy US investments (stock, real estate, bonds, company expansion for their own US branch of an international company, etc.). Thus, you can't discount the effects of a significant portion of the money coming back to the US either and the effect that has on our export industries or our capital stock.

Finally, the 25% wage decline for the workers who find a new job is a short-run effect. In the long term, those workers will retire and the new, younger generation will enter into areas of the economy, at a young age, that is more thriving and has the potential for higher wages over time. These jobs that are getting lost to China are stagnant areas of the job market. Putting things like tariffs or other restrictions on them is trying to preserve the jobs of yesterday rather than preparing/adapting to the jobs of tomorrow.

Axulus that is some pretty impressive accounting, and I will concede to that. But none of it is valid unless it is true. Its just a hypothetical case of how you might be right and Trump may be wrong.

The biggest problem is that the world is a LOT more complicated than either you, I, or even the professional economist can be able to model. What you have just done above is like taking a stock price of a company and then justify with math that it is going to go down or up in price.

What we do know for sure is that the US has embraced your way of thinking the past 30 years and now virtually all of the high paying manufacturing jobs are gone now. And we also know for sure that Germany still does have high paying manufacturing jobs in their country, so that tells us that the politics of a country does have an effect on whether those jobs stay or leave the country. And we also know for sure, that China has done something horribly right that we have not, because China has gained what the US has lost.

Rather than put him down, let Trump do this experiment to find out what does happen. You can't know for sure until he actually does start a trade war with China. How can this hurt the US rust belt any further than it is today?

I don't think you are looking at it from the right perspective or using the right terminology when you talk about "wealth" in the US declining when jobs are offshored.

Wealth, when you measure the net value of all assets per person and the value of real income per person has been increasing and is at record levels in the US. Do you dispute this? I'll dig up the numbers if you want.

What we are really talking about is the _distribution_ of that wealth. Consumers and savvy multinational companies win when jobs are offshored (via increase in profits and lower prices for imported goods), workers in affected industries lose. On net, it is pretty clear from the data that the country gains as a whole. However, the real issue seems to be who gains and who loses? Evidence and reason point concentrated losses on those middle class rust belt workers who formerly had these jobs, distributed gains to consumers who buy imported products, and concentrated gains to those business owners who earn more profits (thus helping to contribute to income inequality).

Note that a similar pattern happens when we talk about automation which is why several people are bringing it up. It may be arguable that the gains/wealth increase more when automation is implemented within the country rather than when the production is sent offshore, but the general trend of benefits to consumers, benefits to companies, and losses to workers whose jobs are lost to automation holds.

So the question then becomes should we do something for those workers who were affected? We could do things like wage subsidies for those with low paying jobs, training assistance for those who are laid off to try to get different kind of work, moving assistance so they can move to a city that has a more thriving economy, etc to reduce the negative impact on them. And we'll even have additional wealth to use to afford that.

You seem to want to try a policy that tries to reverse or slow down the offshoring all together, which will decrease overall wealth, keep the jobs of yesterday and make our economy a little less competitive as a whole, worsen our relations with other countries, with the only benefits seeming to be to help reduce income inequality a little bit (do you have any actual analysis that this will have a real impact on inequality?) and keep the rust belt areas and middle-class workers limping along on a band-aid covering over a deep wound. And please note that this completely ignores all the benefits to humanity as a whole that occurs when absolute poverty in China goes from something like 80% to less than 10% today, something which you say you don't care about (but some people do). What new technologies, discoveries, and companies will come from China that benefit humanity (and by extension, those of us in the United States) as a result of their much more prosperous economy and better educated workforce? Like it or not, we are in this together and we need all the brainpower we can get working on the problems humanity faces.

 

[RVonse]

What we are really talking about is the _distribution_ of that wealth. Consumers and savvy multinational companies win when jobs are offshored (via increase in profits and lower prices for imported goods), workers in affected industries lose. On net, it is pretty clear from the data that the country gains as a whole. However, the real issue seems to be who gains and who loses? Evidence and reason point concentrated losses on those middle class rust belt workers who formerly had these jobs, distributed gains to consumers who buy imported products, and concentrated gains to those business owners who earn more profits (thus helping to contribute to income inequality).

Income inequality is reason enough right there to stop doing this. It is why the middle class is being wiped out right now and also why Trump won the election.

And the other point you bring up about automation also provides another excellent reason I had not thought of, and why we strategically do not want our factories in China right now. If the factories remain in the US, the US is still able to control some of the output (income) and redirect in order to provide less inequality to the population. If all the factories go to China, then China controls all the means of production. And that political system controls what happens to the output of those factories in terms of economic assistance to the middle class in the US. I'm betting that China could care even less about America's middle class than I care about China.

 

[Canard DuJour]

Let's say a US company produces 1,000 tons of steel that sells for $10,000,000

It pays wages of $3 million to produce the steel.

It decides to relocate the factory to China. Now it pays wages of $500,000. The price of steel drops to $9,000,000 as more factories relocate to China and the competition and lower costs leads to lower prices. In other words, the wealth of steel consumers goes up $1,000,000 (actually a little bit more, as new buyers will enter the market due to the lower steel price, meaning steel production and consumption will increase a little bit and there is new wealth via consumer surplus created from that, but we'll ignore that for this example).

The company keeps US jobs with wages of $500,000 to handle import/export and other international supply chain issues.

So the company now has $1,000,000 additional profit with the move ($2,000,000 in labor savings minus $1,000,000 less revenue).

So, on the plus side, we have $2,000,000 increase in wealth.

However, you'll point to the $2,500,000 lost wages in the US and say that means the move actually decreased US wealth by $500,000. But that would only be true if none of those who lost their job are able to find a new job.

We know that is not the case. What happens is that these workers are often able to find other jobs (especially if they are willing to move to a different city), jobs that do pay a bit less, yes, but jobs that produce wealth none-the-less.

Let's say that 10% of those workers can't find a replacement job or find a way to retire early. The other 90% do find another job. Let's say that the new jobs pay 25% less wages/benefits on average.

Now, we have those workers earning wages of $1,687,500 at the new jobs.

Now when we add up the totals, we have wage decline of only $812,500 ($2,500,000 - $1,687,500). Add the $1,000,000 in company profits and $1,000,000 in consumer savings, total wealth increases by $1,187,500.

99% of people don't see a penny of those increased profits and the consumer savings are more than eaten up by housing and other fixed costs, plus the hidden costs of chasing crappy zero hours contracts from city to city - in and of itself a big reduction in living standards quite apart from the financial hit. Meanwhile millions of other workers lose bargaining power and this happens :



plus all the hidden costs of inequality. Eventually people get so sick of being told how much better off they are that they vote for Trump, Brexit and far right nationalist parties.