Wednesday, April 18, 2012

What Export-Oriented America Means - Tyler Cowen

From American Interest:

The more the world relies on smart machines, the more domestic wage rates become irrelevant for export prowess. That will help the wealthier countries, most of all America. This logic works on both sides. America is using less labor in manufacturing, but China is too, even as its manufacturing output is rising. The fact that Chinese manufacturing employment is falling along with ours means that both our higher wages and their lower wages are becoming less relevant for the location of manufacturing decisions. The less manufacturing has to do with labor costs and relative wage levels, the greater the comparative advantage of the United States.

And now for the bad news: The new export-based prosperity may not translate into higher wages for everyone, or even most people, in the United States. Skilled laborers who work with smart machines or even hold advanced managerial jobs will continue to make big gains, as the numbers have been showing for some time. Capital will do well too, especially if it is geared toward export success. The class of elite labor will grow, and protest against the “one percent” will seem anachronistic. Expect something more like, “We are the ninety percent.” That will still fall well short of the median, so significant segments of the American workforce are likely to continue suffering falling real wages, even in a time of rising export prowess.

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