Job Losses and Trade: A Reality Check

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Fears about job losses and chronic job shortages are on theloose again. Over the past few years, millions of U.S. jobs havedisappeared, and foreign competition is increasingly taking theblame. Manufacturing jobs are supposedly fleeing to China, whileservice‐​sector jobs are being “offshored” to India.

Job losses are always painful, and the recent recession andsluggish recovery have meant real hardship for many Americans. Itis important, however, to shun hysteria and demagoguery inassessing what is going on with the labor market and why. Theemployment picture today is that of a temporary, cyclical shortageof jobs caused by the recent downturn; there is no permanentshortage of good jobs on the horizon.

Even in good times, job losses are an inescapable fact of lifein a dynamic market economy. Old jobs are constantly beingeliminated as new positions are created. Total U.S. private‐​sectorjobs increased by 17.8 million between 1993 and 2002. To producethat healthy net increase, a breath‐​taking total of 327.7 millionjobs were added, while 309.9 million jobs were lost. In otherwords, for every one new net private‐​sector job created during thatperiod, 18.4 gross job additions had to offset 17.4 gross joblosses.

International trade contributes only modestly to this freneticjob turnover. Between 2000 and 2003, manufacturing employmentdropped by nearly 2.8 million, yet imports of manufactured goodsrose only 0.6 percent. Meanwhile, despite the new offshoring trend,the Department of Labor is forecasting a 35 percent increase incomputer‐​and math‐​related jobs over the next decade.

Calls for new trade restrictions to preserve current jobs aremisguided. There is no significant difference between jobs lostbecause of trade and those lost because of technologies or workprocesses. All of those job losses are a painful but necessary partof the larger process of innovation and productivity increases thatis the source of new wealth and rising living standards.

Brink Lindsey

Brink Lindsey is the director of Cato’s Center for Trade Policy Studies.