Globalization and Jobs
The most thought-provoking article of the year (at least so far):
Nobel Prize winning economist Michael Spence addresses issues related to Globalization and Unemployment in the forthcoming issue of Foreign Affairs.
(Un-gated version can be accessed from his website. See link below:
I don’t necessarily agree with several of his conclusions (for instance, Mike Spence appears to ignore studies by international trade experts that found that technology driven productivity improvements play a bigger role in the elimination of jobs than globalization), but the article is certainly worth a very careful read.
The following from Spence's article sounds almost like a call for an industrial policy:
“In the meantime, even though public and private interests are not perfectly aligned today, they are not perfectly opposed either. Relatively modest shifts at the margin could bring them back in sync. Given the enormous size of the global labor force, the dial would not need to be moved very much to restore employment growth in the tradable sector of the U.S. economy. Specifically, the right combination of productivity-enhancing technology and competitive wage levels could keep some manufacturing industries, or at least some value-added pieces of their production chains, in the United States and other advanced countries. But accomplishing this will require more than a decision from the market; it must also involve labor, business, and governments. Germany, for one, has managed to retain its advanced manufacturing activities in industrial machinery by removing rigidities in the labor market and making a conscious effort to privilege employment over rapid rises in incomes. Wages may have increased only modestly in Germany over the past decade, but income inequality is markedly flatter there than in the United States, where it is higher than in most other industrial countries and rising steadily.”
The New Republic’s Kevin Carey has a wonderful piece on the value of a college degree:
Given the ongoing debate regarding the economic value of going to college, it is a very timely and informative article.
The article’s punchline:
“For going on four decades, the press has been raising alarms that college degrees may no longer be a sound investment. Two things about these stories have remained constant: They always feature an over-educated bartender, and they are always wrong.”
A somewhat related issue is the preference for capital over labor as technological developments yield machines and equipment capable of performing most routine tasks with ease. See this brief article on the current preferences of business owners (capital appears less expensive - after taxes, subsidies and regulatory costs are accounted for - than labor in many instances):
It is possible that greater emphasis on capital investment may imply even greater high-skills premium.
On the college education debate, I personally think the bigger issue is the poor choice of majors in recent years by college students rather than the value of actually going to college. Far too many students choose easy majors (you know which ones I am referring to) rather than pursuing challenging and rigorous coursework that improves analytical, quantitative and critical thinking skills. There is absolutely no certainty regarding the fields that will be dominant ten years from now but learning to think (and figuring out effective ways to continuously learn) and problem solve are valuable skills regardless of what type of world we live in now or in the future.