Wednesday, January 16, 2008

It's So Much Fun to Be Contrarian, But....

In the New York Times, Steven Landsburg takes on Romney and McCain for offering retraining for displaced workers:
All economists know that when American jobs are outsourced, Americans as a group are net winners. What we lose through lower wages is more than offset by what we gain through lower prices. In other words, the winners can more than afford to compensate the losers. Does that mean they ought to? Does it create a moral mandate for the taxpayer-subsidized retraining programs proposed by Mr. McCain and Mr. Romney?

Um, no. Even if you’ve just lost your job, there’s something fundamentally churlish about blaming the very phenomenon that’s elevated you above the subsistence level since the day you were born. If the world owes you compensation for enduring the downside of trade, what do you owe the world for enjoying the upside?
Isn't there more to this than "morality"? Is it economically sensible for the nation to let workers free fall from their middle class jobs, because they lack sufficient skills to get jobs at comparable wages? Do we as a society benefit when a factory worker ends up in a service industry job at a fraction of his former salary, in foreclosure, in bankruptcy, or on public assistance?

This is not to overlook the costs of retraining programs, the difficulties of retraining career factory workers for well-paying jobs, or the difficulty of identifying a future job market that will need their (new) skills. Even with retraining many will never achieve the same salaries they previously enjoyed. But the costs of successful retraining (with a reasonably designed program) should be less than the cost of losing a worker's productivity, financial fallout from their job loss, and possible cost of public assistance. Also, as compared to job skills training directed at nonproductive segments of our society, it seems to me that there is likely to be a greater return on the investment if you retrain somebody who wants to work. Thus, to me, it makes economic sense to help displaced workers find jobs within their skill set, and failing that to help them update or upgrade their skills such that they can qualify for available jobs.

As for what you "owe the world" for enjoying the upside of trade? It's not so much what you owe the world, but what you owe the government. Taxes. Landsburg may perceive the provision of "taxpayer-subsidized retraining programs" as purely a moral question, and may see a worker's demand for some return on decades of tax payments as being selfish, but can he truly see no economic benefit to the state in getting a formerly productive citizen back into a decent job?

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