Consequences of Internal Free Trade

Dietrich Vollrath writes,

The scale of the relative job changes, though, indicates that more of the losses have to do with free trade within the US than free trade outside of the US. The areas with relative decline lost 13 million jobs compared to the 1990 distribution of jobs. In total the US shed 6 million manufacturing jobs from 1990 to 2015 (18 million to 12 million, roughly). So this relative decline cannot possibly be a function only of manufacturing and international trade in manufactured goods. There is just too much relative movement out of the declining counties to attribute to this. This is a sloppy way of thinking about how this would work counter-factually (I’m ignoring spillovers entirely), but if you magically added 6 million extra jobs to those counties in relative decline, they would still be in relative decline compared to the Sunbelt in terms of jobs. They’d have 84.4 million jobs (as opposed to 78.4 million), but you’d expect them to have 95.6 million based on the 1990 distribution, so they would still be 11.2 million jobs off the pace.

Pointer from Mark Thoma. I recommend the entire post, which is rich in data analysis. One thought that occurred to me in looking at some of the information is that job losses have tended to occur in large metro areas long controlled by Democrats, and job gains seem to be in locations that are a bit more fluid politically.

6 thoughts on “Consequences of Internal Free Trade

  1. The references to “manufacturing” jobs may be overly broad and indefinite, such that it takes thinking about the classifications of employments down wrong paths and to some dead ends.

    Even the uses of “skilled, semi-skilled and unskilled” can be indefinite. However, they come closer to indicating what have become the requirements for advances (or even changes) in production and distribution (especially the latter).

    Perhaps a way may be found to categorize work in terms of what the functions of particular processes of production and distribution require and to what degree those requirements determine the categories.

    We might then look at the possibilities for the development of “category mobility,” which used to be thought of as “transferable talent.”

    That may seem at odds with the idea of “specialization of labor,” which would be optimum use of some, out of a set of, talents; but, it does not rule out developing sets of talents rather than “A” specialized talent.

  2. The decline of manufacturing is as much jobs that aren’t created as those destroyed. The shift in terms of trade shift production away from tradeables and towards nontradeables, and away from manufacturing and towards services and transport. The population has shifted southwest, but how much is pull and how much push, how much local and how much migratory, how much long term and how much recently? A multiplier of two might not be too unrealistic for those highly paid union jobs that the right loves to destroy.

  3. Sadly, Vollrath doesn’t compare jobs with population. One presumes that the absolute job loser counties are also absolute population losers, but I guess it would be good to check.

    I think a real issue is that “manufacturing job” is often politician speak for “stable jobs that pay well which don’t require elaborate preparation” sometimes with an undertone of “often held by union members who will vote for me.”

    Vollrath’s article makes one wonder what other kinds of data can be extracted on the county level. For example, could we see on a county by county basis what percentage of the job holders were full time? What fraction earned more than national median wage? What fraction that earned more than median wage did NOT require a college degree? (And so forth…)

  4. A couple years ago, I listened to Edward Glaeser and Paul Romer discuss cities. During the discussion, Glaeser mentioned that manufacturing now took twice as much square footage per employee than other types of businesses. As such, manufacturing was not viable in high real estate priced cities and would continue to migrate out of the urban areas. And plants age and need upgrading, there is savings in moving the operation to a lower land cost area, without the urban traffic delays, etc.

    Couple this with the fact that many small manufacturing/shop operations are sole operator operations with an aging founder, possibly 2nd gen operator. If the offspring find other opportunities, similar to the children of farmers a few decades ago, those businesses close, or get sold to consolidators. The new owners if they further invest, may consider the customer base valuable, but the aging plant replaceable in a better location.

    Not to mention, gentrification brings an entire activist group working to force small operators out of the area, and one you gotta move, you can move out to the burbs, or out to suburban Sunbelt just as easy. Away from the blood-sucking local pols with their pension deficit problems.

    That’s all before we get to the labor pool, unions or regulatory environment.

  5. The way I would roughly define the types of jobs we’d want to encourage, if we could do such, would be those with high customer to employee ratios, obviously not at the expense of the others. But anything we are doing to artificially hinder capital formation should be looked into very closely.

Comments are closed.