Experts Urge Strong Education Rather Than Big Tariffs

As the job market gropes for a recovery from the recession, some of those looking to place blame have settled on the nation’s imports and exports. Consumers are importing too many goods and services, the argument goes, while companies are exporting too many jobs. But while these activities may indeed be slowing the recovery in the short term, in the long term they are likely to be essential to raising standards of living.

By DANIEL ALTMAN NY Times

Last week, an article in The New York Times described a conference call of executives at I.B.M. who said the company needed to move more white-collar positions to India and elsewhere overseas. A union leader interviewed in the article said he worried that letting the jobs leave the country would pull down wages in the United States.

In the meantime, several economic analysts have been bemoaning the fact that the trade deficit has expanded since the start of the recession. Had exports held up and the increased imports been replaced by spending on goods produced at home, they said, the recovery would have been strong rather than weak.

These assertions about wages and output might be true in the near term. If thousands of jobs suddenly disappeared, the demand for labor would be dropping with no change in supply. Then wages — the price of labor — would also fall. And if imports had not risen and exports had not fallen, the economy might be in slightly better shape. (Of course, the trade deficit ballooned during the boom of the 1990’s, too.)

Should the trends be stopped, assuming they could be? Although the Bush administration has experimented with protection for steel and crops, a more widespread protectionist policy would probably bring outrage from consumers and from the many businesses that depend on cheaper raw materials from abroad.

On the other hand, politicians might have a hard time opposing policies intended to keep jobs from leaving their constituencies. But to economists, such job-guarding policies are just another type of self-defeating protectionism.

"By outsourcing some of these jobs overseas, you maintain profitability of the activities you’re still doing in the U.S., and in fact you enhance their profitability," said Robert C. Feenstra, a professor of economics at the University of California at Davis. "It’s the only way that your firms and industries are going to stay competitive. It’s just got to be done."

Instead, Professor Feenstra said, the nation should work to improve the quality of the labor force freed up as jobs move overseas. That way, Americans will be able to exploit what economists call their "comparative advantage" in producing high-technology and high-value goods and services.

At the moment, the Labor and Commerce Departments have so-called trade adjustment programs intended to help workers and companies that lose jobs or business because of foreign trade. But these initiatives have remained relatively small — budgeted this year at only $10.5 million in the Commerce Department and about $933 million in the Labor Department — because of past controversies.

Professor Feenstra recalled, for example, that in the early 1980’s many manufacturing workers received trade adjustment benefits when their jobs disappeared after two brief recessions. When the economy picked up, however, many of them went back to work at their factories, leading Congress to conclude the program amounted to little more than corporate welfare.

"It was never an effective retraining tool," Professor Feenstra said. "It was just a handout. It was shortly after that that the funding was cut."

Time to try another solution? Funny you should ask. A pilot program just created as part of the Trade Act of 2002 offers a sort of insurance for workers who lose their jobs and take new ones at lower wages. For eligible workers, especially older ones and those with skills not easily transferred between industries, the government will pay half the difference in wages for up to two years.

The program does not have an explicit component of retraining, but economists have reviewed it favorably nonetheless.

"It’s the natural counterpart to unemployment insurance, and we’ve never had it before," said J. David Richardson, a professor of economics and international relations at Syracuse University. "Government training and government-subsidized training doesn’t pay off much. It’s far better to give cash by which the worker can retrain."

Most successful training takes place on the job, Professor Richardson explained, so giving workers an incentive to find new jobs quickly is crucial. But he added that ad hoc programs to help particular groups of workers or companies could not by themselves prepare the nation for open markets. An even more important factor, he said, is education.

"More educated workers find new jobs faster and recover more of their earnings," Professor Richardson said. "It’s overwhelming. It’s amazing."

The biggest differences in job mobility, he noted, are between high school dropouts and workers with high school diplomas and some college education.

"There’s a clear message there, which is we’ve really got to help our workers in all kinds of adjustment by just strengthening basic high school education," Professor Richardson said. "It helps cope with change."

Still, to fill the jobs that will stay and proliferate in the United States, in fields like global coordination, sophisticated design, customization and consulting, Professor Richardson said, the skill level of the labor force will have to deepen.

"We’re constantly racing up a skills ladder, and workers who have to climb the ladder often do have to attain some new and higher skills," he said. "It’s true that it’s a new class of workers who are threatened. But it’s also true that those who manage to climb to the next higher rung are having more satisfying and more stable positions."