http://www.aei.org/publication/some-possible-mythbusting-on-wages-jobs-and-trade/Some possible mythbusting on wages, jobs, and tradeJames Pethokoukis
May 25, 2016
Sometimes you hear economic wisdom from politicians — they are so sure! — but their “facts” may not reflect reality. A few examples just from today:
1) Better trade deals can bring jobs home? Maybe not. From the BBC:
Apple and Samsung supplier Foxconn has reportedly replaced 60,000 factory workers with robots. One factory has “reduced employee strength from 110,000 to 50,000 thanks to the introduction of robots”, a government official told the South China Morning Post.
Xu Yulian, head of publicity for the Kunshan region, added: “More companies are likely to follow suit.”
China is investing heavily in a robot workforce. In a statement to the BBC, Foxconn Technology Group confirmed that it was automating “many of the manufacturing tasks associated with our operations” but denied that it meant long-term job losses.
“We are applying robotics engineering and other innovative manufacturing technologies to replace repetitive tasks previously done by employees, and through training, also enable our employees to focus on higher value-added elements in the manufacturing process, such as research and development, process control and quality control. “We will continue to harness automation and manpower in our manufacturing operations, and we expect to maintain our significant workforce in China.”
2) Free trade is driving manufacturing job losses? Maybe not. From the Financial Times:
If rightwing populism is to be defeated, one must offer alternatives. In a forthcoming article Dartmouth College’s Douglas Irwin notes that protectionism is quack medicine. Productivity growth accounted for more than 85 per cent of the job losses in manufacturing between 2000 and 2010. — “How to defeat right-wing populism” (Financial Times.)
3) Worker wages are stagnant? Maybe not. From the Washington Post:
It’s conventional wisdom that wage stagnation has contributed to the sluggish recovery and the downcast attitudes of millions. But what if it’s not true?
A new study from the Federal Reserve Bank of San Francisco suggests just that. It concludes that widely cited figures showing stagnation are mostly a statistical fluke. Workers continuously employed in full-time jobs received wage increases higher than inflation from 2002 to 2015. Last year, the gain was a 3.5 percent increase after inflation, up from 1.2 percent in 2010.
Typically, the median wage — the wage exactly in the middle of all wages — is cited as evidence of stagnation. Indeed, the Fed study confirms this. Median wage increases have fluctuated around 2 percent, unadjusted for inflation. But the median wage is misleading, the report argues, because it’s heavily driven by demographic changes: an influx of young and part-time workers whose relatively low wages drag down the median; and the retirement of baby-boom workers whose relatively higher pay no longer lifts up the median.
“Exiting workers with higher wage levels are [being] replaced by entrants to full-time employment who earn less than the median wage,” says the study, which was done by economists Mary Daly and Benjamin Pyle of the San Francisco Fed and Bart Hobijn of Arizona State University. The result is that all workers, as judged by the median wage, seem to be treading water when many workers are actually receiving modest increases.
