Sunday, October 23, 2011

Shipping Jobs Overseas?

One of the members of our local Belegarth group, John Degraffenreid, is running for Congress as an independent candidate. One of the planks of his platform (direct link won't work; click on "Platform" then "Trade") is that it is "time to hold corporations accountable for moving jobs overseas" and that American corporations should be required to pay overseas workers a "fair wage" to protect other countries from being "taken advantage of" and to eliminate the advantage of "moving jobs overseas."

Of course, most economists would say that most "moving jobs overseas" is actually a net benefit because each country can specialize in what it produces best, thus improving overall output - i.e., if a company saves money by "moving jobs overseas" and importing products rather than producing them in the U.S., that just creates jobs for the people in the U.S. that produce exports to exchange for the imports, and this analysis is not affected by whether the reduced costs are caused by the overseas workers being "taken advantage of". Of course, this argument has been discussed to death, and I don't really have anything new or interesting to say about it.

What I find more interesting is the implied moral claim that there is something blameworthy about a corporation "moving jobs overseas", such that the corporation needs to be held "accountable" for it. (Of course, I'm not picking on Degraffenreid here; lots of the public and politicians seem to have similar view, which is part of why I find this interesting.) Consider the following two cases:

A. Acme Corporation currently employs 100 American workers. It has an opportunity to expand into a new market and hire 50 more American workers, but instead decides to stay its current size.

B. Acme Corporation currently employs 100 American workers. It has an opportunity to expand into a new market and hire 50 more American workers, but instead it builds a factory in Pakistan and hires 200 Pakistani workers instead because it is cheaper.

I doubt very many people would say that in case (A) Acme Corporation did anything blameworthy, but in case (B) they would say that Acme Corporation was "shipping jobs overseas." But in either case, the change in number of American workers was exactly the same - zero. What principle could justify the difference? You can't just say that corporations have a responsibility to hire as many American workers as possible, because that would make (A) as blameworthy as (B). One possibility is to say that corporations have a responsibility NOT to hire foreign workers, but that seems hard to justify. Why is giving an American worker a job good but giving a Pakistani worker a job bad? I can understand why Americans value other Americans more than they do Pakistanis, but I don't understand why people would put a negative value on Pakistani jobs.

One possibility is that people think that Pakistani workers aren't actually being helped by the new jobs. But that doesn't make sense, because if the new jobs were really inferior to whatever they would be doing in the absence of the new jobs, then why would anyone take the new jobs? Another possibility is that people think that corporations have a responsibility to hire foreign workers AND pay them well, so that their lot would be improved by even more than before. But that doesn't explain attitudes like Degraffenreid's, since he says (probably correctly) that making American firms pay foreign workers more will induce them to hire fewer foreign workers. (Unless the idea is that it is better to help a few foreign workers a lot than to help a lot of foreign workers a little each.)

Possibly a better explanation might be to go back to the principle that "American companies have an obligation to hire as many American workers as possible", and explain the reluctance of people to assign blame in case (A) a different way. One possible explanation would be that my premise (that people don't assign blame in cases like A) is false. After all, people do sometimes consider companies blameworthy when they lay off workers, and Barack Obama did exhort companies to start investing and spending more if they had the money to do it. Another explanation might be that people think that (A) is theoretically blameworthy, it's just that "not expanding as much as you can" is much less visible than "opening up factories in foreign countries".

Here is another question: let's say that reforms designed to "bring jobs home" were implemented, and because of that, corporations pulled their investments out of Pakistan and brought them "back home" to the United States. In that situation, would Pakistanis be right to complain that the corporations are "sending jobs overseas" back to the United States? If so, then why does a corporation that operates in both the U.S. and Pakistan have greater obligations to American workers than to Pakistani workers? If not, then what is the relevant distinction?

Finally, consider the following third case:

(C) Acme Corporation currently employs 100 American workers. It sees room to expand and hire 50 more American workers. Instead, it buys more machinery to make each worker more productive, so that it doesn't need to hire any new workers.

I think most people would think there's nothing wrong with (C); or at least much less wrong with (C) than with (B). Sometimes people do lament the fact that technology puts people out of work, but certainly I have never heard any politician saying that we have to slow down progress on labor-saving technology in order to preserve jobs. But in both cases (B) and (C) you are choosing an option that allows you to hire fewer American workers in order to reduce costs. So a general principle that "it's wrong to hire fewer workers just so you can reduce costs" is not the driving force here.

A possibility is that there is some sort of (implicit) cost-benefit analysis going on. That is, people think that reducing costs is a legitimate benefit, but that it has to be balanced against the (perceived) costs of putting people out of work. With labor-saving technology, it's really obvious that the benefits are enormous: if we had never developed any labor-saving technology whatsoever, we would still be hunter-gatherers living in caves. But with international trade, the benefits are a lot less obvious, so it is easier for people to think that the costs exceed the benefits.

Of course, a lot of this is just speculation, and I don't know what the right answer is. I found an interesting web site called "Experimental Philosophy" that discusses research where they do surveys to ask people these types of questions in order to understand how people actually form judgements about these questions (like what makes someone morally responsible for something, or when it makes sense to say that someone "intended" for something to happen.) Reading that web site is part of what gave me the idea to think about this issue in this way, although I don't see any posts on that web site that discuss political/economic questions like this one. Also see here for a related discussion about "moving overseas" and moral responsibility (although I think that discusses a slightly different issue).

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