Tuesday, September 2, 2014

What Happens To The Furniture Workers In North Carolina?

Joe Nocera reviews a book about a small company town in North Carolina where a furniture factory employed most of the town's population.  The jobs went away when they were exported to China where furniture could be manufactured at lower cost.  That is what happened in Michigan when furniture manufacturing moved from a state with more expensive labor, and more government regulation, to a more "business friendly" Southern state.  The same thing will happen to China.  The furniture jobs will move to a location that is more "business friendly" than China.

One of the characters in the book is an economist who argues that this is exactly what should happen in the global economy.  The workers in North Carolina who lost their jobs should be retrained so that they can take high skilled jobs that pay more than the jobs that were lost.  After all, that is what happened in the US when  most of the jobs were in agriculture.  They were replaced by higher skilled jobs in manufacturing that paid higher wages.

The economist who proclaimed the good news for the workers in North Carolina, who would be able to move up to higher skilled jobs after they were retrained, was simply restating conventional economic theory.  That is how free trade is supposed to work.  One of the problems with this theory is that 5 million factory jobs were lost over the last 20 years.  Where are the 5 million higher skilled jobs that have replaced the lost manufacturing jobs?  The sector with the fastest job growth has been the low wage service sector.  Furthermore, we have done a poor job of retraining workers who have lost their manufacturing jobs.  There is a wide gap between economic theory and the reality of the labor market.

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