Trade: The Perils of Overstating Benefits and Costs [feedly]

Trade is important, but still only 15% of US GDP

Trade: The Perils of Overstating Benefits and Costs
http://conversableeconomist.blogspot.com/2019/09/trade-perils-of-overstating-benefits.html

A vibrant and healthy economy will be continually in transition, as new technologies arise, leading to new production processes and new products, and consumer preferences shift. In addition, some companies will be managed better or have more motivated and skilled workers, while others will not. Some companies will build reputation and invest in organizational capabilities, and others will not.  International trade is of course one reason for the process of transition.

But international trade isn't the main driver of economic change--and especially not in a country like the United States with a huge internal market. In the world economy, exports and imports--which at the global level are equal to each other because exports from one country must be imports for another country--are both about 28% of GDP. For the US economy, imports are about 15% of GDP and exports are 12%, which is to say that they are roughly half the share of GDP that is average for other countries in the world.

However, supporters of international trade have some tendency to oversell its benefits, while opponents of international trade have some tendency to oversell its costs. This tacit agreement-to-overstate helps both sides avoid a discussion of the central role of domestic policies both in providing a basis for growth and for smoothing the ongoing process of adjustment.

Ernesto Zedillo Ponce de León makes this point in the course of a broader essay on "The Past Decade
and the Future of Globalization," which in a collection of essays called Towards a New Enlightenment? A Transcendent Decade (2018, pp. 247-265). It was published by Open Mind, which in turn is a nonprofit run by the Spanish bank BBVA. He writes (boldface type is added by me):

The crisis and its economic and political sequels have exacerbated a problem for globalization that has existed throughout: to blame it for any number of things that have gone wrong in the world and to dismiss the benefits that it has helped to bring about. The backlash against contemporary globalization seems to be approaching an all-time high in many places including, the United States.

Part of the backlash may be attributable to the simple fact that world GDP growth and nominal wage growth—even accounting for the healthier rates of 2017 and 2018—are still below what they were in most advanced and emerging market countries in the five years prior to the 2008–09 crisis. It is also nurtured by the increase in income inequality and the so-called middle-class squeeze in the rich countries, along with the anxiety caused by automation, which is bound to affect the structure of their labor markets.
Since the Stolper-Samuelson formulation of the Heckscher-Ohlin theory, the alteration of factor prices and therefore income distribution as a consequence of international trade and of labor and capital mobility has been an indispensable qualification acknowledged even by the most recalcitrant proponents of open markets. Recommendations of trade liberalization must always be accompanied by other policy prescriptions if the distributional effects of open markets deemed undesirable are to be mitigated or even fully compensated. This is the usual posture in the economics profession. Curiously, however, those members of the profession who happen to be skeptics or even outright opponents of free trade, and in general of globalization, persistently "rediscover" Stolper-Samuelson and its variants as if this body of knowledge had never been part of the toolkit provided by economics.

It has not helped that sometimes, obviously unwarrantedly, trade is proposed as an all-powerful instrument for growth and development irrespective of other conditions in the economy and politics of countries. Indeed, global trade can promote, and actually has greatly fostered, global growth. But global trade cannot promote growth for all in the absence  of other policies. 

The simultaneous exaggeration of the consequences of free trade and the understatement—or even total absence of consideration—of the critical importance of other policies that need to be in place to prevent abominable economic and social outcomes, constitute a double-edged sword. It has been an expedient used by politicians to pursue the opening of markets when this has fit their convenience or even their convictions. But it reverts, sometimes dramatically, against the case for open markets when those abominable outcomes—caused or not by globalization—become intolerable for societies. When this happens, strong supporters of free trade, conducted in a rules-based system, are charged unduly with the burden of proof about the advantages of open trade in the face of economic and social outcomes that all of us profoundly dislike, such as worsening income distribution, wage stagnation, and the marginalization of significant sectors of the populations from the benefits of globalization, all of which has certainly happened in some parts of the world, although not necessarily as a consequence of trade liberalization.

Open markets, sold in good times as a silver bullet of prosperity, become the culprit of all ills when things go sour economically and politically. Politicians of all persuasions hurry to point fingers toward external forces, first and foremost to open trade, to explain the causes of adversity, rather than engaging in contrition about the domestic policy mistakes or omissions underlying those unwanted ills. Blaming the various dimensions of globalization—trade, finance, and migration—for phenomena such as insufficient GDP growth, stagnant wages, inequality, and unemployment always seems to be preferable for governments, rather than admitting their failure to deliver on their own responsibilities. 
Unfortunately, even otherwise reasonable political leaders sometimes fall into the temptation of playing with the double-edged sword, a trick that may pay off politically short term but also risks having disastrous consequences. Overselling trade and understating other challenges that convey tough political choices is not only deceitful to citizens but also politically risky as it is a posture that can easily backfire against those using it.

The most extreme cases of such a deflection of responsibility are found among populist politicians. More than any other kind, the populist politician has a marked tendency to blame others for his or her country's problems and failings. Foreigners, who invest in, export to, or migrate to their country, are the populist's favorite targets to explain almost every domestic problem. That is why restrictions, including draconian ones, on trade, investment, and migration are an essential part of the populist's policy arsenal. The populist praises isolationism and avoids international engagement. The "full package" of populism frequently includes anti-market economics, xenophobic and autarkic nationalism, contempt for multilateral rules and institutions, and authoritarian politics. ... 

Crucially, for globalization to deliver to its full potential, all governments should take more seriously the essential insight provided by economics that open markets need to be accompanied by policies that make their impact less disruptive and more beneficially inclusive for the population at large.

Advocates of globalization should also be more effective in contending with the conundrum posed by the fact that it has become pervasive, even for serious academics, to postulate almost mechanically a causal relationship between open markets and many social and economic ills while addressing only lightly at best, or simply ignoring, the determinant influence of domestic policies in such outcomes.

Blaming is easy, and blaming foreigners is easiest of all. Proposing thoughtful domestic policy with a fair-minded accounting of benefits and costs is hard. 

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Tim Taylor: Employment Patterns for Older Americans [feedly]

Employment Patterns for Older Americans
http://conversableeconomist.blogspot.com/2019/09/employment-patterns-for-older-americans.html

Americans are living longer, and also are more likely to be working in their 60s and 70s. The Congressional Budget Office provides an overview of some patterns in "Employment of People Ages 55 to 79" (September 2019). CBO writes:

"Between 1970 and the mid-1990s, the share of people ages 55 to 79 who were employed—that is, their employment-to-population ratio—dropped, owing particularly to men's experiences. In contrast, the increase that began in the mid-1990s and continued until the 2007–2009 recession resulted from increases in the employment of both men and women. During that recession, the employment-to-population ratio for the age group overall fell, and the participation rate stabilized—with the gap indicating increased difficulty in finding work. The ensuing gradual convergence of the two measures reflects the slow recovery from the recession. The fall in the employment of men before the mid-1990s, research suggests, resulted partly from an increase in the generosity of Social Security benefits and pension plans, the introduction of Medicare, a decline in the opportunities for less-skilled workers, and the growth of the disability insurance system. Although those factors probably also affected women, the influence was not enough to offset the large increase in the employment of women of the baby-boom generation relative to those of the previous generation, most of whom were not employed."

Here are some underlying factors may help in understanding this pattern. If one breaks down the work of the elderly by male/female and by age groups, then it becomes clear that while men ages 55-61 are not more likely to be working, the other groups are. An underlying reason here is that women who are now ages 55 and older were more likely to be in the (paid) workforce earlier in life than women who were 55 and older back in 1990. Thus, part of the rise in work of older women just reflects more work earlier in life, carried over to later in life.  But

One possible reason for people working older in life can be linked to rising levels of education: that is, people with more education are more likely to have jobs that are better paid and involve less physical stress, and thus more likely to keep working. However, it's interesting that the rise in employment share for males ages 62-79 is about the same in percentage point terms for different levels of education; for females, the increase in employment share for this age group is substantially  higher for those with higher levels of education.

There's an interesting set of questions about whether working longer in life should be viewed a good thing. If the increase is due to those have jobs that they find interesting or rewarding and who want to continue working, then that seems positive. However, it's tempting to feel that if people who had their jobs but work longer primarily just because they need or want the money, and they would otherwise be financially insecure, then working longer in life is potentially more troublesome.

From this perspective, one might argue that it would be more troubling if the rise in employment among the elderly was concentrated in those with lower education levels --who on average may have less desirable jobs. But if the rise in employment among the elderly is either distributed evenly across education groups (males) or happens more among the more-educated (females), then it's harder to make the case that the bulk of this higher work among the elderly is happening because of low-skilled workers taking crappy jobs under financial pressure.

It's also true that the share of older people reporting that their health is "very good/excellent" has been rising in the last two decades, and the share reporting only "good" has been rising too. Conversely, the share reporting that their health is "fair/poor" has been falling for both males and females. Again, this pattern suggests that some of the additional work of the elderly is happening because a greater share of the elderly feel more able to do it.

One other change worth mentioning is that Social Security rules have evolved in a way that allows people to keep working after 65 and still receive at least some benefits. The CBO explains:

"Changes in Social Security policy that relate to the retirement earnings test (RET) have made working in one's 60s more attractive. The RET specifies an age, an earnings threshold, and a withholding rate: If a Social Security claimant is younger than that age and has earnings higher than the specified threshold, some or all of his or her retirement benefits are temporarily withheld. Those withheld benefits are at least partially credited back in later years. Over time, the government has gradually made the RET less stringent by raising earnings thresholds, lowering withholding rates, and exempting certain age groups. For instance, in the early 1980s, the oldest age at which earnings were subject to the RET was reduced from 71 to 69, and in 2000, that age was further lowered to the FRA. (In 2000, the FRA was 65, and it rose to 66 by 2018.) Lowering the oldest age at which earnings are subject to the RET allowed more people to claim their full Social Security benefits while they continued working."

The question of how long in life life someone "should" work seems to me an intensely personal decision, but a decision that will be influenced by health, job options, pay, Social Security rules, rules about accessing retirement accounts and pensions, and more. But broadly speaking, it seems right to me that as Americans live longer and healthier, a larger share of them should be remaining in the workforce. The pattern of more elderly people working is also good news for the financial health of Social Security and the broader health of the US economy.  

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The News Media’s Blind Spots Covering the Working Class [feedly]

An interesting take on "working class" mainstream news stories internal bias that feeds the "white workers for Trump" memes and links whenever the "working class" term comes up.  

However, I am not sure this article does commit a comparable error. The export of capital and factory operations was ongoing long before NAFTA. The poverty of Latin America from a century of corruption, exploitation and extraction was reaching revolutionary boiling points in numerous places. Trade agreements replaced raw imperial intervention techniques. US working class interests were never safe from globalization by right wing nationalism in any form. Mexican auto workers have a different view.

The News Media's Blind Spots Covering the Working Class
https://workingclassstudies.wordpress.com/2019/09/23/the-news-medias-blind-spots-covering-the-working-class/

At midnight on Sept. 15, 49,000 UAW-GM workers walked out on strike at locations across the country, a day after their 2015 collective bargaining contract with General Motors expired and the union declined to extend the provisions of the agreement.

In a statement, UAW Vice President Terry Dittes said "While we are fighting for better wages, affordable quality health care, and job security, GM refuses to put hard-working Americans ahead of their record profits of $35 billion in North America over the last three years. We are united in our efforts to get an agreement our members and their families deserve."

The President promised then punted on saving the GM jobs, and never seemed to imagine that the UAW would later be leading the fight. Given their news coverage from earlier this year, neither did the New York Times imagine the UAW would take on GM.

While the auto industry is increasingly profitable, autoworkers have been suffering. Ground zero of that story is the iconic GM Lordstown plant in northeastern Ohio, which lost the discontinued Chevy Cruze and was shuttered when GM moved production of the revived Chevy Blazer to a Mexican assembly plant.

Beyond its regular reporting, the New York Times committed an amazing level of resources to the story of the Lordstown closing, producing an episode of The Dailypodcast on July 5, an episode of The Weekly (on FX and Hulu) on July 7, and an earlier New York Times Magazine interactive piece with photos and text (May 1, 2019).

I have watched The Weekly episode on Lordstown several times, listened to The Daily podcast many more times, and re-read the multimedia piece. I've also gone back to review the Times' 1992-1993 editorials and opinions on NAFTA, the trade deal that eventually caught up with Lordstown and many other manufacturing plants.

The Times's impressive investment and multiple stories across multiple formats cover the human injury of GM's boardroom decisions and note that the unwritten rules of the "social contract" have changed. These workers are victims of changing times, and the story is told with drama and great empathy.

Still, this is both a story we have heard before, and, as I discuss I my recent book, the kind of narrative that emerges with the built-in blind spots of a news organization focused on stories for upscale readers, listeners, and viewers.

The Times' stories are mostly framed as national political stories, even as they acknowledge that the workers they interview are weary of that angle. The Dailymakes this clear, stating "There's got to be some political fallout from [the Lordstown closing]. What is the consequence for Trump in this scenario?" In framing the issue this way, The Daily and The Weekly focus on white, male workers who voted for Trump.

To understand the politics of this and so many other "working class" stories since Trump's election 2016, imagine that The Daily interviewed a black woman worker from Lordstown who didn't vote for Trump. The political angle would vanish in such a story. But the national media is more interested in politics than in people. They would rather feature a white male worker who voted for Trump and who now (presumably) struggles with the cognitive dissonance of his beloved president not saving his job. This means ignoring the wide range of people who are working class – including those at this plant.

Conversely, the multimedia piece, featuring interviews and photos by an African-American freelancer, takes a different perspective. Not framed as a political story, it is also the only part of New York Times coverage of Lordstown that includes multiple representations of African American workers and women workers.

"The system" that the Times says is broken extends beyond their limited political framing of the story. It includes a blind spot about the paper's complicity with that system. The nation's newspaper of record ran  many editorials in favor of NAFTA in 1992-93, labeling workers and their unions as "protectionist," and stating that there would be only "a few visible losers," with "many in low-paid occupations." The Times' economics columnist wrote pieces with headlines such as "Job Loss in Pact Is Seen as Small" and "Trade-Pact Fears Seem Overstated," which supported its editorial position.

In its recent reports on Lordstown, the New York Times fails to acknowledge how its editorial support of NAFTA contributed to what has happened to America's "losers." In fact, a number of negative outcomes for Lordstown and the Mahoning Valley extend from NAFTA: the pressure for concessions and givebacks to save jobs, the export of jobs to Mexico (where GM assembly plants grew from one to four after NAFTA), the granting of millions in tax breaks and incentives to keep jobs (but draining needed public funds for schools and municipal infrastructure).

The New York Times failed to be a countervailing power (to use John Kenneth Galbraith's term) for working people in 1992-93, precisely at the time when it was most needed, as government (with majorities in both parties lined up in favor of NAFTA) had failed to be a countervailing power for working people. Government and the mainstream news media were in the corner of GM and other corporations. No one was in labor's corner.

Because of this, the Times also failed to recognize the UAW as a solution in their coverage. In the early 1990s, the union was a protectionist loser, and in 2019 it was an institution down for the count, whose members' only remaining power was their individual ballots for Democratic or Republican presidential candidates with whom they could place their faltering hope.

So, in 2019 there is a poetic justice for the UAW-GM workers themselves, all 49,000 of them, who decided to take a stand and be a countervailing power to the auto industry, despite the lack of support from the government or the news media.

Their audacity elicited a rarity from the pages of the Times a few days later: an opinion piece that avoided framing the UAW's actions in the politics of Trump. David Leonhardt's column "Why I'm Rooting for the G.M. Strikers," in a story long overdue for the working class.

Yes, Lordstown and the working class are political stories, but they are stories so much larger than that, too. They are even stories about journalism itself, and the role it has in "the system" that it often fails to see.

Christopher R. Martin

Christopher R. Martin is author of No Longer Newsworthy: How the Mainstream Media Abandoned the Working Class (Cornell University Press). He is professor of Digital Journalism at the University of Northern Iowa.

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Wage Trends: Tell Me How You Want to Measure, and I'll Give You an Answer

http://conversableeconomist.blogspot.com/2019/09/wage-trends-tell-me-how-you-want-to.html

More than eight million workers will be left behind by the Trump overtime rule: Workers would receive $1.4 billion less than under the 2016 rule [feedly]

First rule of the Higher Wages Party: IF IT CUTS LABOR INCOME, ITS BAD!

More than eight million workers will be left behind by the Trump overtime rule: Workers would receive $1.4 billion less than under the 2016 rule
https://www.epi.org/blog/more-than-eight-million-workers-will-be-left-behind-by-the-trump-overtime-rule-workers-would-receive-1-4-billion-less-than-under-the-2016-rule/

Yesterday, the U.S. Department of Labor announced its final overtime rule, which will set the salary threshold under which salaried workers are automatically entitled to overtime pay to $35,568 a year. The rule leaves behind millions of workers who would have received overtime protections under the much stronger rule, published in 2016, that Trump administration chose to abandon.

For quick details on the history of this rulemaking, see this statement. The two tables below show just how many workers this administration is turning its back on with this rule, and how much money workers will lose. Using the same methodology used by the Department of Labor in their estimates of the economic impact of the rule, I estimate that 8.2 million workers who would have benefited from the 2016 rule will be left behind by the Trump administration's rule, including 3.2 million workers who would have gotten new overtime protections under the 2016 rule and 5.0 million who would have gotten strengthened overtime protections under the 2016 rule. As the table shows, this administration is turning its back on 4.2 million women, 2.7 million parents of children under the age of 18, 2.9 million people of color, and 4.6 million workers without a college degree.

Table 1

With this rule, the Trump administration is cheating workers out of billions. The annual wage gains from this rule are $1.4 billion dollars less than they would have been under the 2016 rule—and these annual earnings losses balloon over time because the Trump administration neglected to include automatic indexing in their rule. Once again, President Trump has turned his back on the working people of this country.

Table 2

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Re: Your post about cashiers

Hey guys. Wondering if you had a chance to look over our career resource tool:
https://www.zippia.com/cashier-jobs/#career-paths

And whether or not you thought it was worth adding a link to on your page:
http://economics.enlightenradio.org/2016/09/

Thanks!
Kristy

--
Kristy Crane
Public Relations
Zippia.com

Zippia is a resource site for job seekers who want to empower their career aspirations with knowledgeable data. We've been featured in USA Today, Forbes, Fortune, CNBC and the NY Times, among other leading publications.

As a union leader, I've learned one big lesson: Workers can't just rely on promises from CEOs [feedly]

As a union leader, I've learned one big lesson: Workers can't just rely on promises from CEOs
https://www.businessinsider.com/workers-unions-fight-benefits-pay-not-rely-on-corporate-ceos-2019-9?utm_source=feedly&utm_medium=webfeeds

• CEOs are promising to take better care of workers with stronger benefits and higher pay.
• But as a union leader, I know firsthand that workers can't take these promises for granted.
• I led a strike of 20,000 AT&T workers fighting for better pay and working conditions.
• Our strike proved that workers must be willing to put up a fight to get better conditions.
• Richard Honeycutt is the vice president for District 3 of the Communications Workers of America.
• Read all of Business Insider's WeWork coverage here.

Some say the era of corporate accountability is here, pointing to statements like the one recently put out by the Business Roundtable in which executives from companies like JPMorgan Chase, General Motors, Lockheed Martin, and Walmart affirmed their commitment to doing right by customers, employees, and the communities in which they work.

But with another Labor Day behind us, and now 49,000 General Motors employees represented by the United Automobile Workers on strike around the US, the truth is that trusting corporations to hold themselves accountable is like trusting the fox to guard the henhouse. True accountability comes from workers who join together to fight for fairness, respect, and dignity for themselves and their communities.

That was made clear when more than 20,000 members of my union across nine Southeastern states launched an unfair-labor-practice strike against AT&T — the largest private-sector strike in the South in over a decade. We entered into contract negotiations with AT&T in good faith, but the company sent negotiators to the table who lacked the authority to make a deal.

Among the CEOs who signed the recent Business Roundtable statement was AT&T's Randall Stephenson. In recent years, when it has come to investing in employees by compensating them fairly, providing them important benefits, offering training and education opportunities, and supporting the communities where the company works, AT&T more often than not fails to back its talk with action.

Our experience with AT&T and other employers shows that workers can't rely on letters from CEOs to get the treatment they deserve but instead need to raise their voices as one to make sure they are treated and compensated fairly.

We had to fight for a fair shake

When we began bargaining for a new contact this summer, AT&T negotiators came to the table with a list of demands that would dramatically increase healthcare costs, require employees to take on more responsibilities without additional compensation, force employees to be on call at all times, and make it easier for the company to send work to low-wage contractors.

Not only did this multibillion-dollar corporation no longer feel the obligation to share its record-breaking profits with the people who make it all possible, but it wanted to pad those profits by taking even more away from its highly trained, dedicated union workforce.

CWA members at AT&T already put in long hours to support our business and residential customers. Because AT&T has been cutting jobs, they are often forced to work overtime, and night and weekend work requirements force them to be away from their families, missing important milestones. Customer-service representatives at call centers are not only expected to provide assistance to customers, but they must also sell additional services or risk being fired.

We brought our own list to the bargaining table, ready to negotiate fair wage increases, continued access to affordable healthcare, and improvements to job security. But once we got into the tough issues, we discovered that AT&T's negotiators thought we were on a one-way street. They had their list of demands but did not have the authority to make decisions on the issues our members had brought to the table. Once it became clear AT&T was not going to bargain in good faith, it was only a matter of time before workers walked off the job.

I've heard people say that unions are unnecessary, that if you don't like what the boss is offering, you should just find another job. Is that what we really want? Every person for themselves, giving up without a fight?

What I saw on the picket lines was amazing. In just four days, thousands of people from different backgrounds joined together as one family. They were unified, their unity was powerful, and it worked. AT&T came back to the negotiating table ready to make a deal, one that recognized workers had earned the right to share in the success of the company through family-supporting wages and benefits and job security.

Don't just rely on high-minded letters

The Business Roundtable executives want a pat on the back for stating what most Americans already thought was true — companies have a responsibility to customers, employees, and the communities they work in. By negotiating a fair contract, one grounded in the respect and loyalty we deserve, AT&T has taken a first step toward backing up its talk with action. But it took 20,000 workers walking off the job to get us here.

American corporations like AT&T have spent decades putting higher shareholder value above all other goals for their companies. The consequences have been devastating for working families. The Business Roundtable executives say they are reassessing their priorities and considering the well-being of all stakeholders, including workers, not just shareholders.

Well, AT&T now faces another chance to back that talk with action: The corporate raider Elliott Management announced plans this week to extract profits from AT&T by eliminating jobs and sending work to low-wage contractors. If AT&T's board of directors stands by the Business Roundtable letter, it should reject Elliott Management's proposals.

Time will tell whether the Business Roundtable pledge holds up, but for the foreseeable future workers won't expect executives to do us any favors. AT&T employees, like GM workers and working people across the country, know the accountability we see in corporate America is the result of workers' long and hard fights for fair pay and standards in the workplace.

What the AT&T strike made clear is that America's corporations won't be held accountable unless workers are willing to put up a fight.

Richard Honeycutt is the vice president for District 3 of the Communications Workers of America.

NOW WATCH: Nxivm leader Keith Raniere has been convicted. Here's what happened inside his sex-slave ring that recruited actresses and two billionaire heiresses.

See Also:

• Trump is starting to undermine health coverage, but the real danger is on the horizon
• Trump's plan to revoke California's power to set its own automotive-emissions standards isn't about cars or California — it's about Obama
• The US should amend the Constitution to put an end to gerrymandering and protect our democracy

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