Wednesday, December 24, 2008

How Trade Affects Jobs

There have been lots of articles that have compared the profit margins of Apple versus those of some of their manufacturing partners, but what about American jobs? From the Economist Blog:

The authors found iPods employed 41,170 people worldwide. About 27,000 of those jobs went overseas, but most of those were the low-wage and low-skill jobs involved in production. Only 30 Americans had jobs involved in iPod production. But 13,890 jobs were created in the engineering or retail sector. These Americans earned $753m from iPods, while overeases employees earned $318m. Americans earned more because Apple kept the high-skill jobs (the R&D side) at home and sent its manufacturing abroad. But America's lower-skill workers also benefited, mainly in the retail, non-professional sector. These jobs earned American workers more than $220m.

As long as America has a labour force of competitive, skilled workers, it will still reap the benefits of innovation and benefit from trade. An interesting question is what wages and jobs would have been if more production had taken place in America. If that had been the case, iPods would have been more expensive. Apple would have faced less demand for the new models that are constantly being trotted out. This probably would have meant fewer well-paid skilled jobs.

Unfortunately as is usually the case in economic downturns, trade barriers are mounting (Washington Post) - this despite the overwhelming evidence that trade creates more jobs than it destroys, makes us wealthier and makes life more affordable for the poor. With China's rapid economic deterioration (Economist Blog reporting growth possibly dropping down to 0% from an originally forecast 5-8%), one possible silver lining is that it's not only China's leaders who are worried about social unrest.

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