Keeping jobs at home

Senator Obama’s acceptance speech last night was certainly very good, and I would assume that it improves his chances of winning the election. But like all politicians, he is quite likely promising more than anyone can possibly deliver.

For example, his promise to keep more jobs at home plays well with working people who have seen their jobs outsourced overseas, but ignores the economics that drives that outsourcing. Companies outsource overseas because they can produce products more cheaply overseas. They need to produce cheaper products because if they don’t they will be priced out of the market and be out of business. The reason rust belt steel plants all closed was because they were priced out of the market by overseas steel plants that were able to produce steel at less cost. We could, of course, have put up trade barriers and kept that steel out of the USA to save the US steel plants, but then (a) things we made with domestic steel would be too high-priced to sell on the export market, and (b) we would be paying far more for our own automobiles and appliances and other things made of steel. The same logic applies for all kinds of other products. People complain about WalMart buying overseas, but they flock to WalMart stores precisely because those overseas products are more affordable than domestic products. You can’t have it both ways at once!

Realistically what is happening on the world market is that lower-skill, lower-paying jobs are moving to countries with lower wages, leaving the higher-skill, higher-paying jobs in the developed world. This has two effects, both good in the long-term:

(1) in the less developed world, the inflow of capital and jobs and factories over a period of years raises the skill level and the wages of those workforces, which helps them move out of poverty and into the developed world. In fact, it is by far the most effective foreign aid we can give, and a number of once-poor Pacific-rim nations now have highly-skilled workforces, and the jobs they bring, precisely because of this effect.

(2) the higher-skill jobs that stay in the developed world pay better, better supporting the expanded lifestyle that people in the developed world expect. In addition, the higher-skill jobs tend to leverage capital better. That is, they are more efficient at converting work-hours to income and profit.

The catch-22, of course, is that domestic workers need to be willing and able to acquire the higher level of skills needed to compete for the higher-paying jobs that remain in the developed world. Engineers and scientists and computer programmers and technicians of various sorts all make better money than assembly line workers and hamburger flippers, but they had to be willing and able to acquire better skills first. Which is why the exceptionally poor quality of our public educational system is a real long-term threat to our nation’s economy.

So I understand the Democratic Party’s need to promise to keep more jobs at home, because it speaks to their political base, and because it bespeaks a humane outlook. But in reality it is the wrong focus – the right focus would be to do what is required to better train and retrain our workers so that they can get the higher-paying, higher-skill jobs that remain here.

Of course, there always remains a pool of people who, for one reason or another, simply can’t acquire the higher level of skills needed to do well in our society. They may lack the mental ability, or the work discipline, or the cultural drive, or the social skills needed to master more difficult jobs. In a simpler world there were almost always less skilled jobs available for them. In our more complex, more technological world there aren’t many of those jobs left. Even a ditch-digger these days has a skilled job operating a complex, $250,000 piece of machinery. How a technological society like ours should deal with those unable to master the technology is one of the critical unsolved social problems of our day.