Jewish World Review Sept. 9, 2004 / 23 Elul, 5764

Thomas Sowell

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Jobs and snow jobs

http://www.NewsAndOpinion.com | Jobs have become a big issue in this election year — which means that it is optimistic to expect a rational discussion.


Nothing is discussed more irrationally than "outsourcing." It is obviously completely misleading to discuss how many jobs American companies are sending to other countries without even mentioning how many jobs foreign countries are outsourcing to Americans.


Yet those who are making the most noise about outsourcing seldom say a word about the in-sourcing of jobs from other countries. But it is the net balance that matters.


Maybe those statistics are hard to get. But you certainly won't get them if you are not even looking for them and avoid even mentioning them.


Official statistics published last March in the Survey of Current Business showed an increase of 2.8 million jobs outsourced by American-owned multinational corporations during a quarter of a century ending in 2001. Over that same span of time, there was an increase of 4.7 million jobs outsourced to Americans by foreign-owned multinational corporations.


These numbers go back and forth over time. But they don't even exist in the rhetoric of those denouncing outsourcing.


Any laws passed to stop the outsourcing of American jobs to other countries are almost certain to bring laws in other countries to stop the outsourcing of jobs to Americans.


We had something like that during the Great Depression of the 1930s, when international trade restrictions were imposed in order to save jobs during a period of record unemployment. Countries around the world did the same thing, with the net result of a sharp reduction of international trade and a needless prolonging of the depression.


Many policies designed to "save jobs" have effects that are the opposite of their intentions. Germany has some of the strongest job protection laws in the world — and double-digit unemployment rates are common in Germany.

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Job protection laws add to the cost of labor. These laws may save the jobs of those who already have jobs but the passage of time brings new young job applicants into the labor market and the high cost of labor means that employers have incentives to get their work done by substituting machines for workers or by shifting to producing products that require less labor.


Countries in the European Union as a whole have stronger job protection laws than the United States — and higher unemployment rates because their rate of job creation is much slower.


On the other end of the spectrum, there has probably never been any place with a more unrestricted labor market than Hong Kong when it was a British colony. Unemployment rates of one or two percent were common in Hong Kong then. After China took over Hong Kong, it created various new benefits for workers — and unemployment rates hit 7 percent, not high by European standards, but a multiple of what it had been for years.


What all this says, in various ways, is that there is no free lunch — not even during election years.


Senator John Kerry says that he would create 10 million jobs if he were President. But Presidents don't create jobs.


The most a President can do is have policies that allow private employers to create jobs. Foolish policies can destroy jobs and prolong a recession or depression but Presidents cannot "grow the economy," no matter what political rhetoric says.


Of course the government can hire more people or favor a particular industry in one way or another, and thereby cause employment to be greater in that particular industry. But the government has no money of its own, and the money that it takes from the private economy to increase its own hiring or to promote hiring in some favored industry reduces the money available to hire people elsewhere in the economy.


President Bush's tariffs on imported steel may have saved some jobs in the steel industry but estimates are that the higher price of steel that resulted cost several times as many jobs in industries that use steel.


With jobs, as with anything else, it is the net result that counts — and there is no free lunch, not even in election years.

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JWR contributor Thomas Sowell, a fellow at the Hoover Institution, is author of several books, including his latest, "Applied Economics: Thinking Beyond Stage One." (Click HERE to purchase. Sales help fund JWR.) To comment please click here.

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