Trade vs. technology, in terms of their labor market effects

by on April 9, 2013 at 1:23 pm in Economics | Permalink

Here is the new paper by David Autor, David Dorn, and Gordon Hanson, “Untangling Trade and Technology: Evidence from Local Labor Markets”:

We analyze in a common framework the differential effects of trade and technology on employment patterns in U.S. local labor markets between 1990 and 2007. Labor markets whose initial industry composition exposes them to rising import competition from China have experienced significant employment reductions particularly in the manufacturing sector and among non-college-educated workers. These employment losses are not limited to manual production jobs but also affect clerical and managerial occupations. Labor markets that are susceptible to computerization due to specialization in routine task-intensive activities have neither experienced an overall decline in employment, nor a differential change in manufacturing employment. However, the occupational structure of employment of these labor markets has polarized within each sector, as employment shifted from routine clerical and production occupations to more highly skilled managerial or professional occupations, as well as to lower skilled manual and service occupations. While the effect of trade competition is growing over time due to accelerating import growth, the effect of technology seems to have shifted from automation of production activities in the manufacturing sector towards computerization of information-processing tasks in the service sector.

RmDeep April 9, 2013 at 1:49 pm

Let’s translate.

Labor markets whose initial industry composition exposes them to rising import competition from China have experienced significant employment reductions particularly in the manufacturing sector and among non-college-educated workers.

So, third-world competition hurts the low-g workers the most.

Labor markets that are susceptible to computerization due to specialization in routine task-intensive activities have neither experienced an overall decline in employment, nor a differential change in manufacturing employment. However, the occupational structure of employment of these labor markets has polarized within each sector, as employment shifted from routine clerical and production occupations to more highly skilled managerial or professional occupations, as well as to lower skilled manual and service occupations.

In industries that are most susceptible to automation, the low-g workers may still have jobs, but they’re now jobs that don’t require any skill, and pay a fraction of what the a production-line job used to pay.

While the effect of trade competition is growing over time due to accelerating import growth, the effect of technology seems to have shifted from automation of production activities in the manufacturing sector towards computerization of information-processing tasks in the service sector.

And it’s moving up the IQ food chain.

Are there any good discussions, blogs, articles, books, etc. out there about the long-run effects of a guaranteed minimum stipend (probably ~poverty levels) for just living? I think that the first-world countries are going to have to start thinking about it pretty soon.

Hell, the U.S. already does it. See: 14 million people on Social Security Disability, most of whom aren’t really too disabled to work, but a kindly doctor doesn’t want to see this 55-year-old laid-off assembly-line worker have to go apply for a job at McDonalds, so he helps the guy play up his back pain.

Can it only work if we lie about what we’re doing?

JWatts April 9, 2013 at 3:40 pm

Can you spend a few minutes to do the math first? Then get back to us when you can shoe-horn the results into the current Federal Budget.

Steve Sailer April 9, 2013 at 5:52 pm

Thank goodness we brought in all those 90 IQ illegal aliens and their children to provide more wage competition for American citizens with 90 IQs.

lark April 9, 2013 at 2:33 pm

This study angers. me. How many years after the horse has left the barn do we need an economic study to announce that the horse has left the barn.

This shows how ready economists are to step up to the plate to provide rationales, cover stories, and ideological spin. Before the horse left the barn, the effect on jobs of “free trade” was surrounded with controversy. There was a shortage of economists who were willing to stand up to corporations and their political sycophants and state that there could be real consequences for working America from these “free trade” policies. From China joining the WTO.

Now that we have hammered our own people into a bloody pulp (with the help of the Chinese) somebody from academe deigns to notice the blood on the floor.

derek April 9, 2013 at 3:34 pm

What is your counterfactual? Serious question. Without free trade, I’d suggest that the situation wouldn’t be much different except that those working would have to pay much more for the things they buy. Plus you would have a substantially more complex, dangerous and violent world security situation.

The Anti-Gnostic April 9, 2013 at 4:20 pm

It’s looking like there are lots of trade-offs that have to be navigated. There really is no such thing as “cheap” labor or “free” trade.

Either you provide the proles with some level of anti-competitive protections, like we do for doctors, lawyers, Federal Reserve banks, tenured libertarian economists, etc., or you pay more welfare, disability, comp and tort verdicts.

asdf April 10, 2013 at 12:53 am

I don’t know if its good or sad that Tyler admitting he was wrong still puts him ahead of the 95% of economists who just pretend the data doesn’t exist or try to rationalize it away in increasingly silly ways.

kebko April 9, 2013 at 10:39 pm

I presume the other commenters will also post angry retorts against McCormicks reaper.

joan April 10, 2013 at 12:12 am

When McCormicks reapers and other technology replaced labor we cut working hours not wages.

ladling April 9, 2013 at 11:56 pm

ają właściwie plugawej bestii także ladling z zapałem przykryją
poprzednio królewskim gniewem przeciętnego, kto
miasto od czasu niej uwolni. Przynajmniej fryc deputowany zarzekał się,
iż owe prawda, oraz
jakiejkolwiek wprzódy ustalone, jacyś.

Tom Shillock April 10, 2013 at 4:28 pm

David Autor has the wrong Gestalt, but the attention he receives for it will secure him tenure. Why Alan Blinder’s work is never mentioned is curious since he has provided more insight beginning with his original Foreign Affairs article. Before him Max Boisot provided several relevant insights in his book, Knowledge Assets; securing competitive advantage in the information economy, 1998).

The central pivot is not routine versus non-routine work / tasks but which tasks or part of tasks can be digitized or computerized. Alan Blinder explained this beginning with his Foreign Affairs article years ago. The routine / non-routine dichotomy is simple minded and makes little sense anyway. Just ask yourself how ‘routine’ is measured (since ‘routine’ wears the pants, as it were)?

Economists use years of formal education as a proxy or skill because it’s simple, precise and lends the air of intellectual rigor. The result is confusion about an interesting concept, viz., skill, and its economic relationships, if any. The fact is management jobs / work / tasks are less skilled except perhaps in Machiavellian ways that are impediments to firm productivity. Anyone who as worked in the real world knows this. Autor’s work looks like undergraduate level pro-management propaganda, belabored versions of Barrons and WSJ editorials.

Joseph Ward April 11, 2013 at 11:40 am

If David Autor doesn’t have tenure… I imagine that he doesn’t need it. He teaches at the best economics school in the entire world. Also, your last paragraph only indicates that you do not understand management or firms at all.

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