Tag: jobs

The Great Job-Creating Machine

As the Guardian recently reported, technology has created more jobs than it has destroyed, and the new jobs it has created have been of higher quality. Technology eliminated many difficult, tedious, and dangerous jobs, but this has been more than offset by a rise in the caring professions and in creative and knowledge-intensive jobs, resulting in a net increase in jobs.  The sectors to lose the most jobs have been agriculture and manufacturing, which are both difficult and dangerous, while work opportunities in medicine, education, welfare, and professional services have become more abundant. (For example, there are more teachers per student, improving student-teacher ratios, and there are also more physicians per person than in the past).

In 1980, almost a quarter of the world’s employment was still in agriculture. Now, only around 15% of the world’s workers are engaged in agricultural labor. Yet we are feeding more people, undernourishment is at an all-time low, and food is becoming less expensive. Technological advances liberated humanity from toiling in fields by mechanizing many processes and boosting productivity, allowing more food to be produced per hectare of land, and freeing hundreds of millions of people to pursue less grueling work.

The elimination of so many unsafe jobs in manufacturing and agriculture means fewer worker deaths. According to data from the International Labor Organization, from 2003 to 2013, the number of work fatalities in the world decreased by 61% (i.e., over 20,500 fewer deaths). This occurred even as the world population grew by over 700 million over the same time period. If the most dangerous thing you have to face at work is the threat of a paper cut, you quite possibly have technological innovation to thank for that.

Even if in the future robots steal some jobs, advancing technology will likely make several higher-quality jobs available for every job lost. As the Guardian article cited earlier says, technology has proven to be a “great job-creating machine,” eliminating toilsome work but bringing into existence more—and better—opportunities than it takes away.

But note that behind every machine, there lurks human ingenuity. As Matt Ridley wrote in his book The Rational Optimist:

It is my proposition that the human race has become a collective problem-solving machine and it solves problems by changing its ways. It does so through innovation driven often by the market.

Learn more about what market-driven technological innovation has done to improve the state of humanity at HumanProgress.org.

Washington Post Half-Heartedly Seeks Clarity About Export-Import Bank Jobs Claims

It was good of the Washington Post Editorial Board to raise questions yesterday about the veracity of the “jobs-created-by-Export-Import-Bank-policies” claims proffered by the Bank’s supporters. I just wonder whether the editorial pulled its punches where a reporter on assignment or a more inquisitive journalist would have delivered an unabashed blow to the credibility of the Bank’s primary reauthorization argument: that its termination will lead to a reduction in U.S. exports and jobs.

Kudos to the Post for raising an eyebrow at the Bank’s claims of “jobs created” or “jobs supported” by Ex-Im financing:  

[W]hen it comes to jobs, well, just how rigorous are [Ex-Im’s] estimates, really? Congress ordered a study of that very question when it last reauthorized Ex-Im in 2012. In May 2013, the Government Accountability Office (GAO) produced its verdict: Meh.”

“GAO noted that Ex-Im must speak vaguely of “jobs supported,” rather than concretely of jobs created, since its methodology cannot really distinguish between new employment and retained employment. To get a number for “jobs supported,” which includes both a given firm and that firm’s suppliers, Ex-Im multiplies the dollar amount of exports it finances in each industry by a “jobs ratio” (calculated by the Bureau of Labor Statistics).

Using that approach, Ex-Im estimates an average of 6,390 jobs are “supported” by every billion dollars of exports financed. The Post is right to note the GAO’s conclusion:

These figures do not differentiate between full-time and part-time work and, crucially, provide no information about what might have happened to employment at the firms in question, or others, if the resources marshaled by Ex-Im had flowed elsewhere in the economy.

A Decent but Underwhelming Jobs Report

The headlines from today’s employment report certainly seem positive.

The unemployment rate has dropped to 6.3 percent and there are about 280,000 new jobs.*

But if you dig into the details of the latest numbers from the Bureau of Labor Statistics, you find some less-than-exciting data.

First, here is the chart showing total employment over the past 10 years.

Total Employment

This shows a positive trend, and it is good that the number of jobs is climbing rather than falling.

But it’s disappointing that we still haven’t passed where we were in 2008.

Indeed, the current recovery is miserable and lags way behind the average of previous recoveries.

But the really disappointing news can be found by examining the data on how many working-age people are productively employed.

The Bureau of Labor Statistics has two different data sets that measure the number of people working as a share of the population.

Here are the numbers on the labor force participation rate.

Labor Force Participation

As you can see, we fell down a hill back in 2008 and there’s been no recovery.

The same is true for the employment-population ratio, which is the data I prefer for boring, technical reasons.

Emplyment Population Ratio

Though I should acknowledge that the employment-population ratio does show a modest uptick, so perhaps there is a glimmer of good news over the past few years.

But it’s still very disappointing that this number hasn’t bounced back since our economic output is a function of how much labor and capital are productively utilized.

In other words, the official unemployment rate could drop to 4 percent and the economy would be dismal if that number improved for the wrong reason.

* Perhaps the semi-decent numbers from last month are tied to the fact that Congress finally stopped extending subsidies paid to people for staying unemployed?

Four Charts Showing How Obama’s Statist Agenda Is Hurting Jobs and Growth

President Obama made a much-hyped pivot-to-the-economy speech yesterday in Chattanooga, Tennessee.

I already explained, immediately following the speech, why his “grand bargain” on corporate taxes was not a good deal because of all the hidden taxes on new investment and international competitiveness.

But I also had a chance to dissect the President’s overall track record on the economy for today’s Chattanooga Times Free Press.

Here’s some of what I wrote.

…he didn’t say anything new or different. His audience was treated to the same tax-spend-and-regulate boilerplate that the President has been dispensing ever since he entered political life. …with Obamanomics, not only has America failed to enjoy the traditional period of four-to-five percent growth at the start of a recovery, the economy hasn’t even gotten close to the long-run average of 3 percent. That’s a damning indictment. But it gets worse. The data on employment is downright depressing. A look at the numbers reveals that the nation is suffering from the worst period of job creation since the Great Depression. Most startling, we still haven’t recovered the jobs we lost during the recession.

That’s some strong rhetoric, but there are plenty of numbers to back up my assertions.

Let’s take a look at the interactive website maintained by the Minneapolis Federal Reserve Bank. This site allows users to compare all business cycles since World War II.

Let’s start by comparing the current business cycle to what happened under Reaganomics.

AFP Reagan v Obama GDP

As you can see, we’ve had a very sluggish recovery compared to the boom we enjoyed in the 1980s.

Not all of this is Obama’s fault, by the way. Here’s some more of what I wrote for the Chattanooga Times Free Press.

…all of these problems started before President Obama ever got to the White House. President Bush also was guilty of too much spending and excessive regulation, and his policies helped push the economy into a ditch. Unfortunately, even though he promised “change,” President Obama has been adding to Bush’s mistakes — and also raising taxes.

Some people may be wondering whether it’s fair to compare Reaganomics to Obamanomics. Maybe I’m cherry-picking data to make Obama (and Bush) look bad.

Trade-Skeptical Harold Meyerson Makes One Valid Point

Harold Meyerson, with whom I’ve rarely found occasion to agree, makes one point in today’s column (“Go Slower on Free Trade”) that didn’t cause my eyes to roll: that the Obama administration has been relentlessly secretive about the goings-on in the Trans-Pacific Partnership trade negotiations.

I cannot corroborate Meyerson’s claim that the administration has granted access to the negotiators and the negotiating text to “roughly 600 trade ‘advisers’ from big businesses,” but has excluded everyone else, including Congress. It may be true, but then again… Certainly, Congress (by which I mean Congress, and not just a few Senate Democrats) is very much in the dark about the details of these negotiations, and that presents an enormous logistical problem.

Article I, Section 8 of the Constitution vests power in the Congress “To regulate Commerce with foreign Nations,” which covers trade agreements. Traditionally, Congress has temporarily extended that authority to the executive branch, given the impracticability of having 535 trade representatives with 535 different agendas negotiating with foreign governments. That temporary grant of “fast track” or “trade promotion” authority is not a blank check. It comes with a list of congressional demands – items that can, cannot, must, and must not be included in the agreement. It is like doing the legislative process in reverse in the sense that amendments are articulated as conditions BEFORE the agreement is reached. Ideally, those congressional demands would be formalized before the negotiations BEGIN so that there are no false starts.

But with the administration still aiming to conclude negotiations in October, no fast track legislation in sight, and anti-trade legislation metastasizing in a Congress that has largely been excluded from shaping the deal’s terms, there are long battles ahead.  Meyerson’s counsel that we “go slower on free trade” is probably already a done deal.

As to the rest of Meyerson’s claims that trade is a boon for big business, which comes at the expense of workers and consumers, we have harvested countless forests here at Cato explaining why that is just false. The most persistent U.S. trade barriers are imposed on food (tariffs and tariff-rate quotas), clothing (tariffs), and shelter (trade remedies restrictions on lumber, steel, cement, paint, nails, appliances, flooring, furniture, etc.), making them the most regressive taxes in the U.S. system.  Lower-income Americans (those for whom Meyerson claims to speak) devote larger shares of their budgets to these basic necessities than do white-collar fat cats.

I’ll leave you with these three charts, which demonstrate positive relationships between import and jobs, price decreases over time for heavily traded items, and price increases over time for less frequently traded services, all exposing the errors of Meyerson’s claims.

Immigrants Are Attracted to Jobs, Not Welfare

Unauthorized and low skilled immigrants are attracted to America’s labor markets, not the size of welfare benefits.  From 2003 through 2012, many unauthorized immigrants were attracted to work in the housing market.  Housing starts demanded a large number of workers fill those jobs.  As many as 27 percent of them were unauthorized immigrants in some states.  Additionally, jobs that indirectly supported the construction of new houses also attracted many lower skilled immigrant workers.

Apprehensions of illegal crossers on the Southwest border (SWB) is a good indication of the size of the unauthorized immigrant flow into the United States.  The chart below shows apprehensions on the SWB and housing starts in each quarter:

 

Fewer housing starts create fewer construction jobs that attract fewer crossings and, therefore, fewer SWB apprehensions.  The correlation holds before and after the mid-2006 housing collapse. 

What about welfare? 

Here is a chart of the national real average TANF benefit level per family of three from 2003 to 2011 (2012 data is unavailable) and SWB apprehensions:

 

Prior to mid-2006, TANF benefit levels fell while unauthorized immigration rose.  During the housing construction boom, unauthorized immigrants were attracted by jobs and not declining TANF benefits.  After mid-2006, when housing starts began falling dramatically, real TANF benefit levels and unauthorized immigration both fell at the same time.  If unauthorized immigration was primarily incentivized by the real value of welfare benefits, it would have fallen continuously since 2003.   

The above chart does not capture the full size of welfare benefits or how rapidly other welfare programs increased beginning in 2008.  As economist Casey Mulligan explained in his book The Redistribution Recession, unemployment insurance, food stamps (SNAP), and Medicaid benefits increased in value and duration beginning in mid-2008.  Including those would skew welfare benefits upward in 2008 and beyond, but unauthorized immigration inflows still fell during that time.

In conclusion, housing starts incentivize unauthorized immigration while TANF does not. 

Ed Glaeser Makes Lamentably Rare Case for the Freedom to Trade

Support for free trade, especially from politicians, often rests on tired mercantalist arguments about the benefits of exports and jobs. That can backfire, as we’ve seen recently with trade figures showing that the U.S. trade deficit with Korea has widened since the Korea-U.S. Free Trade Agreement came into force. That’s why I’ve argued that relying on rhetoric about all the exports and jobs that free(r) trade will create is a dangerous game: where, might trade skeptics ask, are all those exports you promised us, and why should we support trade liberalization if the results we were promised don’t materialize? So I was thrilled today to see a small post on Bloomberg.com from Harvard economics professor Ed Glaeser calling for the president to make a strong push for a U.S.-EU trade agreement, because of the benefits it would bring U.S. companies and consumers:

He should use his address to make the U.S. a leading voice once again for economic freedom: the freedom of consumers to buy European goods and the freedom of producers to sell their goods on the other side of the Atlantic.

It is gratifying to see a principled case for free trade, resting on a foundation of freedom, in the media. Here’s hoping President Obama read Professor Glaeser’s article, and heeds his advice.

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