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A billion dollars and 7000 jobs

February 10, 2010
by Patrick Love

Foreigners just can’t seem to get it right. When they’re not “coming over here and taking our jobs”, they’re staying over there and taking our jobs. Brian Keeley deals with the first prejudice in the Insights on International Migration, pointing out, among other things, that immigrants do work locals are unwilling to do, the so-called “3D jobs” – dirty, dangerous and difficult.

The second accusation is that outsourcing, offshoring and the other manifestations of globalisation and trade have a negative impact on employment in OECD countries.

That’s not the view of C. Fred Bergsten, director of the Peterson Institute for International Economics. Writing in the Washington Post, Bergsten argues that trade creates jobs. The $1.5 trillion worth of goods and services the US sells to the rest of the world each year creates about 10 million high-paying jobs, and “every $1 billion of additional exports would create about 7000 ‘very good jobs'”.

OECD analyses of trade and employment support Bergsten.

The crisis has caused both employment and trade to shrink, but the longer-term trend shows that the rise in trade over the past decade has generally been accompanied by increased prosperity and employment in countries that have liberalised. History also suggests that open economies end up better off than closed ones, as the two Koreas show.

Trade doesn’t seem to have damaged job stability either. The share of workers with less than one year of job tenure and average tenure, two commonly used indicators of labour turnover and job stability, did not change much in the decade before the crisis.

As for wages, a study of trade among 63 countries showed that a rise of one percentage point in the ratio of trade to GDP (for example when the share of trade in GDP rises from 10% to 11%) is associated with an increase in per-capita income of 0.5 to 2%.

Useful links

Bergsten provides a version of his article with links to supporting material here

The Insights on International Trade has a chapter on trade and employment

The OECD Trade Directorate discusses trade and employment here

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