Morning Ed: World {2016.09.27.T}

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Will Truman

Will Truman is the Editor-in-Chief of Ordinary Times. He is also on Twitter.

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49 Responses

  1. Avatar Brandon Berg says:

    This backs up much of what I’ve been saying about manufacturing in poor countries:

    1. They really are pretty good jobs relative to the other local opportunities.

    2. They drive up wages over time, often very quickly.

    3. Employers really are price sensitive. A lot of people here talk about labor regulation as if it had no downside for anyone but employers and maybe consumers in wealthy countries, but anything that makes it more expensive to employ workers in these countries makes employers less willing to invest and hire there.Report

    • Avatar Kim says:

      Brandon,
      When people choose child slavery over staying in American Detention camps, do we really want to say that they’re “pretty good jobs” over other local opportunities? These kids were desperate enough to trek through multiple countries to not need to avail themselves of local opportunities.

      When people have zilch for alternatives, prices don’t go up much, if at all.

      We should feel lucky that most employers aren’t willing to start wars in order to get cheaper labor, yes.Report

    • Avatar Oscar Gordon says:

      So it is a race to the bottom, and then the bottom starts to lift…Report

      • Avatar Brandon Berg says:

        Well, no. The bottom starts to lift while the race is still going on. And it’s not a race to the bottom at all. Theoretically one might predict a race to the middle, but in practice that hasn’t really happened, either. The bottom has come up, but the top hasn’t come down much if at all.Report

      • Avatar j r says:

        The “race to the bottom” is almost entirely a rhetorical point; there is little empirical evidence that it actually happens.

        When a small open economy trades with a larger economy, classical economics suggests that both will do more of the things in which they have a comparative advantage, which for less developed countries is low-skilled labor. If less developed countries are forced to compete on low skilled labor, the race to the bottom theory predicts that they will compete against each other by forcing down wages and labor standards.

        For the last 30 or so years, that classical thinking has been challenged by New Trade Theory (this is what Krugman won his Nobel for), which looks beyond comparative advantage dynamics and towards things like network effects and returns to scale.

        Think of it this way, when a big multinational firm based in a developed economy starts doing business in a less developed country, they want to get the cheapest product so they can make the highest profit when they sell. But they want to get products of a consistent quality, which means that they are bringing their manufacturing and supply chain technologies and that means skills transfer. They also want the best workers in that economy, so their wages tend to be higher than the wages outside of the export sector (for workers of a similar skill/education level); that pushes wages up and gives those workers increased purchasing power.Report

      • Avatar Oscar Gordon says:

        I laid out bait, but those weren’t the critters I was expecting to catch…Report

    • Avatar PD Shaw says:

      I think the important point is that “Western companies can bring those same customizable technologies back home, and eliminate their overseas factories altogether.” This will especially be the case if Western policies are modified to eliminate tax preferences for overseas production, to permit regulatory flexibility for dynamic processes, and to provide education paths for non-academic careers.Report

      • Avatar Nevermoor says:

        permit regulatory flexibility for dynamic processes

        That’s a great euphemism for “allow unlimited pollution without consequence and remove workplace safety requirements”Report

        • Avatar Joe Sal says:

          The way I read it, it didn’t sound like he was speaking of socialism.Report

        • Avatar Oscar Gordon says:

          @nevermoor

          Explain how, please?Report

          • Avatar nevermoor says:

            He wants to cut the EPA (or eliminate it, depending on his mood).

            He is also expected to stop OSHA enforcement and rulemaking.

            Despite the fact that some regulations are silly, many are good. And one of the reasons they are good is that they prevent the type of “dynamism” that permanently pollutes the country, kills workers, or otherwise externalizes costs in the service of profits.Report

            • Avatar Oscar Gordon says:

              So this is Trump specific?Report

              • Avatar nevermoor says:

                Only in the sense that he’s currently the leader of that party (eliminating the EPA has been a pretty consistent actual meaning of the anti-regulation group).

                Unless I’m supposed to read the comment as an attack on hairdresser licensing requirements.Report

              • Avatar Oscar Gordon says:

                Taken by itself, this:

                permit regulatory flexibility for dynamic processes

                Is something that could be a good thing without exposing the public to uncompensated externalities.

                In the larger context of Trumps rhetoric, I can see your point.Report

              • Avatar nevermoor says:

                Fair enough. I’ll happily agree that #notallregulations are good, and there is room for improvement.

                I’d also submit that one could honestly say that a desire for “law and order” could be a good thing in certain circumstances, but what it usually means in fact is what Trump meant by it last night (which, to be clear, is not a good thing at all).

                Moreover, I think it’s dangerous for the next six weeks to let pleasant sounding platitudes dominate our thinking because the could mean something we like, because that’s the only thing Trump has to offer to the non-racists among his supporters.Report

      • Avatar J_A says:

        Companies have been bringing back manufacturing for quite some time. GE and Apple are well known examples

        http://www.theatlantic.com/magazine/archive/2012/12/the-insourcing-boom/309166/

        What it’s not coming is the jobs that used to be associated with manufacturing. Those jobs no longer exist. The sooner we all acknowledge that, the sooner we open the floor for a discussion of what to do now to replace/mitigate the lost jobs.Report

        • Avatar Chip Daniels says:

          Right.
          Because right now what we always seem to hear is a variation of “If you just agreed to work for less/ lower taxes/ less regulation, there would be plenty of jobs”.

          None of which seem to be working. Jobs just aren’t materializing.Report

          • Avatar Brandon Berg says:

            http://data.bls.gov/timeseries/LNS14000000

            And to preëmpt the “they don’t publish the REAL unemployment rate” canard:

            http://www.bls.gov/news.release/empsit.t15.htmReport

            • Avatar Chip Daniels says:

              No, I wish it were as simple as pointing to the unemployment rate.

              Its also wages, and benefits, compared to the cost of living.

              The bargaining position of the average worker is much weaker now than it used to be, and that doesn’t appear to be changing anytime soon.Report

              • Avatar KenB says:

                The bargaining position of the average worker is much weaker now than it used to be

                How do you measure this or compute an average? What prior time period do you have in mind for “used to be”?Report

              • Avatar Jaybird says:

                The number of people willing to cross the border into the US indicates that these particular people think that their worker bargaining power is greater here in the US than back wherever they happened to emigrate from.

                The fact that they’re willing to put up with as much as they are in order to come here indicates that their measurement of their own bargaining power here is that it’ll be much stronger than it used to be.Report

              • Avatar J_A says:

                There’s a difference between bargaining power and salary floor.

                I understand than in libertarian parlance the salary floor is zero, and that every cent above zero reflects relative bargaining power, but I will posit that in real life the only thing those crossing the AZ desert of foot to become your yard mower need to agree is to rwork for one cent less than the native born.

                In libertarian terms, what you have is a relative difference of bargaining power, vis-a-vis the employer, between the AZ desert crosser, and the native born, with the AZ desert crosser having the advantageReport

              • All you people who thought that Mexico was the Worker’s Paradise, take that!Report

              • Avatar Chip Daniels says:

                How do you measure this or compute an average?

                I’m not an economist so I won’t try to answer that way.
                What makes me assert this is these observations:

                Waning of the power of unions, the declining wages, the vanishing of defined benefits, the decline of steady long term employment to gig jobs, the prevalence of erratic hours and schedules, the ever-increasing productivity that makes labor an increasingly irrelevant surplus commodity;

                These all point to a pattern of increasing risk and uncertainty by those who labor.

                Meanwhile capital, the financial industry, is seeing a dizzying spiral upwards of wealth increases. The resulting imbalance of power makes the holders of capital vastly stronger relative to the holders of labor.Report

            • Avatar Kim says:

              Deutschbank? Do I hear a Deutschbank?Report

            • Avatar nevermoor says:

              But none of those are 42% so they in fact DON’T publish the real rate.

              #trumpReport

        • Avatar PD Shaw says:

          If your point is that completely unskilled manufacturing jobs are disappearing or are already gone, I agree. When I worked on an assembly line 25 years ago, my job required me to watch a heat knife cut the top off of what would become a plastic bottle. About once an hour or two, the plastic would stick to the knife and I was supposed to clear it to allow bottles to continue down the line to be finished and labeled by other workers. That company still exists, but its hard to imagine the job still exists, nor likely the jobs immediately up and down the line from me. But I do work for a number of growing manufacturing companies today, and they are smaller (family-owned), rely more on work-stations than conveyor belts, and employ people with vocational math skills, who I would consider semi-skilled.

          My points: (1) While these changes were taking place, No Child Left Behind was directing resources away from high school vocational programs that provided an entry point for these jobs. (2) If workplace/environmental standards are not flexible enough to allow for the benefits of customized manufacturing, these jobs will move to Canada or wherever the regulatory system is less puritanical. (3) If other countries have tax advantages that make up for the added transportation costs (particularly NAFTA countries), the employers will locate elsewhere.Report

          • Avatar J_A says:

            @pd-shaw ; @oscar-gordon

            I’m fairly familiar with the German model, and I’d be happy for it to be implemented in the USA

            But there are several other elements to the model that would not be very popular here, such as test based the cut-off at the end of the equivalent to Middle School between those that will move to Gymnasium and the College route, and those that would move towards the vocational and technical route.

            Once in the latter, the route towards College is esntially closedReport

            • Avatar InMD says:

              I spent a bit of time studying in Germany and while there are a lot of appealing things about their education-to-job system I’ve concluded that it wouldn’t be possible here for numerous cultural and political reasons. We don’t have the robust welfare state, lower levels of inequality, and political consensus on certain issues that underlie the success of the system. If we tried to impose it on now existing American society I could actually see it perpetuating all kinds of race and class inequities.Report

              • Avatar Oscar Gordon says:

                Did you guys read the link? I said taking a page, not cribbing the whole damn book.Report

              • Avatar J_A says:

                Yes and no, @oscar-gordon

                You are an engineer. You know that systems work because all the pieces match. The German system works because it’s a complete book. Mcopying just one page might help, but probably won’t do much.

                Ir would be like putting a Pelton turbine in a car. It will improve mileage while driving in heavy rain, but just copying a page of hydro powerful mechanics won’t help much to solve auto mechanics challenges.Report

              • Avatar Oscar Gordon says:

                I also know that different systems can produce similar outcomes with different inputs & processes.

                However, in this case, I believe it is less an attempt to get the same outcome as the Germans, and more of a glaring market signal that the long time push for traditional baccalaureate education and the neglect of vocational education has left companies starving. I’m glad companies are taking it upon themselves to train new workers, and I hope they are serious about recognizing the value in giving those workers strong positive incentives to stay[1].

                I know the days of graduating high school and carving out a middle class life at the factory are gone and not coming back (at least, not unless we seriously rework the high school curriculum). But there is still a lot of work done in the states, work that needs more than a diploma, but less than a Bachelors.

                Anyway, if the US education system won’t support producing skilled tradesmen, I’m glad companies will.

                [1] I’ve long felt that companies were the first to toss employer/employee loyalty aside, so I’ve had zero sympathy for corporations that complain about workers who skip from job to job. I work for the Big German S now, and (at least for their professional employees) they seem committed to having pay & benefits & workplaces that incentivize staying (there is even talk about paid paternity leave being offered in a few years).Report

              • Avatar InMD says:

                Don’t get me wrong, if American companies will do it then I think that’s a good thing. I’d certainly be willing to entertain tax breaks or other policies that would encourage them to do so. All I meant was that I don’t think it’s workable through our education system without overhauling a whole lot of other systems as well.Report

              • Avatar Oscar Gordon says:

                Depends on which part of the education system we are talking about. Adult education can be extremely flexible, especially if government grants & loans could be used for things like apprenticeship programs, instead of just more formal education programs (how that would work is a good question…).

                Middle & High School education, on the other hand, would be tricky. I could see large urban areas being able to offer VoTech schools like @pd-shaw mentions, in a vein similar to science or other magnet schools. Or, alternatively, this is something Charter schools could address (got a kid struggling in an academic setting, try a VoTech charter school). If we were smart, we would look at shop math & science as fulfilling math & science requirements, etc.Report

              • Avatar PD Shaw says:

                I’ve no particular opinions on the German model; I would at least like the American vocational model maintained. I attended one of the largest high schools in my state, in a working class community, and they had one of the largest vocational centers, which neighboring schools would also send students to. Nobody was forced into a program, so people could try classes, many of which employers had a hand in crafting.

                NCLB directed funding away from those types of programs. And the rhetoric emphasis on college-education as the only path available to a career was harmful to those who are not going to be well-served by college. Community colleges and tech schools don’t have great records as substitutes, and are not as accessible to the disadvantaged.Report

              • Avatar J_A says:

                Agreed almost in full

                I just wanted to add that two-year tech schools SHOULD play a much bigger role in our education landscape.

                Automation has killed many unskilled jobs, but it has opened a significant number (albeit much lower) of well paid jobs operating, maintaining, and programming the industrial systems that run modern factories, power plants, refineries, and industrial facilities.

                Most of those jobs require more than high school; for instance: understanding of control theory and feedback loops, basic electronics, basic thermodynamics and fluid mechanics, forces and tension, electrical circuits, etc. But the level required is much lower than a full four year STEM program.

                Employers today face a conundrum. High school graduates don’t have the basic knowledge for these jobs. College graduates are overqualified, in-house training is expensive because there’s no certitude that (a) the person you are training will succeed in the training and become qualified; or (b) once trained, they won’t move their skills to a new job.

                Tech schools could, and should, prepare high school graduates for these jobs, reducing cost and risk to employers, and the societal cost of people going through a four year program that vastly exceeds the jobs requirements.Report

  2. Avatar Kolohe says:

    There was something recently about American immigration law where there’s a loophole/gap that makes a bunch of children adopted before 1980 (iirc) from overseas not officially citizens.Report

  3. Avatar Damon says:

    America: There’s a whole hell of a lot more than just “Violence, alcoholism, and obesity” in deterring the “best” country.

    MSF: Yeah, that wasn’t good to not pass along the message, but otherwise, it wasn’t their business. And who the hell is that foolish? Jeebus.Report

  4. Avatar Pillsy says:

    The article on Brexit is a great demonstration of why government by referendum is dumb.Report

  5. Avatar Jaybird says:

    Ban the DEA.

    The DEA should not be in charge of scheduling drugs. It should be in charge of law enforcement and going after the drugs according to whichever schedule they’re on.Report

    • And the fact that being Schedule 1 forbids research is idiocy. “We declare that this drug has no medical use, and we’re going to make 100% sure that stays true.”Report

      • Avatar Oscar Gordon says:

        Well, when the presence of banned substances ensures your budget and the power it conveys, you make damn sure you have a solid supply of banned substances.Report

    • Avatar Oscar Gordon says:

      You have the same issue with the BATFE.

      The regulatory body should never be in charge of ground level enforcement of the regulation, i.e. a regulator should not carry a badge or gun. If they are in a situation where a badge or gun is prudent, they can contact the FBI or local LEOs.Report

    • Avatar dragonfrog says:

      The article linked is mistaken on why it’s banned in Thailand.

      The article states “Kratom has been illegal since 1943 in Thailand, where it is believed to be addictive.”

      In fact it was banned Thailand because the Thai government was at the time largely funding itself through taxes on opium, and kratom was a threat because it was enabling too many opium addicts to get clean.Report