12.12.03

SHIPPING THE BAD JOBS OUT. Professor Drezner recommends a research paper on the effects of open trade on employment in the information technology industries. Key points. One worth looking at is toward the end.
Not all job categories are projected to expand. Jobs for bank tellers, switchboard operators (including answering services), and telephone operators are all projected to shrink by 20,000 to 60,000 jobs each. But this contraction is as much due to automated teller machines and voice-answering technologies as due to jobs going offshore. Jobs for insurance claims clerks, word processors, and secretaries also are projected to drop; these could be candidates for offshore job creation, replacing jobs at home. What is notable about all these jobs is that they are at the low-wage, low-skill end of the job spectrum that currently demands IT skills.
Any questions about why the use of the university to certify entry-level file clerks is such a crime?

Among the points in the executive summary of the paper we read,
Globalization of software and services, enhanced IT use and transformation of activities in new sectors, and job creation are mutually dependent. Breaking the links, by limiting globalization of software and services or by restricting IT investment and transformation of activities or by having insufficient skilled workers at home, puts robust and sustainable US economic performance at risk.
The paper suggests that the transformation of information technology industries will lead to productivity growth.

What, then, about those Pakistani living standards? Not relevant. Return to the parable of Wilmette and Waukegan. Suppose that Wilmette outsources some of the manufacturing activity it used to undertake on its own. Now that activity is being done in Waukegan, which implies an increase in the living standards in Waukegan. Consider next the Wilmette artisan, who used to do manufacturing in Wilmette. Perhaps he becomes a gardener instead. Compared to the income he used to get as a Wilmette manufacturer, he is poorer, but compared to a Waukegan manufacturer he is richer (otherwise he would accept the new price for his work.) And a new service, gardening, is available to Wilmette residents, where it was previously unavailable. If outsourcing to Waukegan is not permitted, or the Wilmette manufacturer is incapable of learning gardening, Wilmette does not outsource and does not see an improvement in its living standards. Neither does Waukegan.

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