Today’s Policy Agenda, August 26: Study Says Globalization Is Harming U.S. Employment

by Andrew Smith

Work itself is crucial for happiness.

For Arthur Brooks’ new site The Pursuit of Happiness, Andy Quinn examines the literature on unemployment and happiness:

Cristobal Young, a Stanford sociologist, has studied the non-pecuniary effects — that is, effects that aren’t purely financial — that unemployment insurance has on the lives of recipients. Specifically, Young tracked the self-reported happiness (“subjective well-being”) of different groups of people caught up in different economic circumstances. What he found is seriously surprising.

In this graph, Young has calculated the happiness of impacts of losing your job and receiving no unemployment insurance (on the left) and losing your job but receiving the benefit (on the right):

The similarity is remarkable. To hear progressive commentators tell it, job loss in the absence of unemployment insurance is like stepping straight into Hell, and the benefits do a tremendous amount to lift up hard-luck Americans. But here, we see a different story: Unemployment benefits merely take a little bit of the edge off the happiness downdraft from being laid off. To be sure, the financial help cuts back on some stress at the margins. But just as clearly, involuntary idleness brings a massive psychological cost that mere money can hardly touch.

The policy implications of this study stretch far beyond the recent debate over extending emergency unemployment insurance. After all, even if one is convinced by this study of the overwhelming importance of employment, it’s possible that by keeping recipients actively working for jobs, the emergency UI benefits were helping, not hindering, the return to work.

The broader lesson from the study is that orienting social policy towards employment – through work requirements, wage subsidies, and the litany of proposals circulating the Right in recent months – is far from cold-hearted. In fact, given the well-documented benefits of employment ranging from staying healthy to building strong relationships, a push towards work if protected by a safety net, is in the best interests of Americans.

Study: Globalization does slow American employment growth.

Several economists, including David Autor, have a new NBER working paper out investigating the relationship between imports from China and employment:

BL Even before the Great Recession, U.S. employment growth was unimpressive. Between 2000 and 2007, the economy gave back the considerable gains in employment rates it had achieved during the 1990s, with major contractions in manufacturing employment being a prime contributor to the slump. The U.S. employment “sag” of the 2000s is widely recognized but poorly understood. . . . We find that the increase in U.S. imports from China, which accelerated after 2000, was a major force behind recent reductions in U.S. manufacturing employment and that, through input-output linkages and other general equilibrium effects, it appears to have significantly suppressed overall U.S. job growth. BL

While globalization and capitalism have radically reduced global inequality and made the world much better off as a whole, not everyone in the United States benefits uniformly from such transactions. This study suggests that workers in the tradable sector – jobs that can be moved around the world — face job losses and likely wage cuts or stagnation in the new economy. This is not to say that we need to restrict trade or engage in protectionism to insulate these workers from new economic realities — too many lives are being radically improved across the globe. It’s just important to remember that absent any intervention, a sizable portion of the American population (particularly in, say, North Carolina,
Michigan, and Alabama
) are going to struggle in this new reality, and we ought to bear it in mind policy-wise.

For the Storyline, Howard Schneider explains this trend from a personal point of view.

Is immigration why Scott Brown now has a race on his hands?

With a new poll from the University of New Hampshire showing Scott Brown pulling into a statistical tie after trailing significantly most of the race, could it be that the elevation of immigration in the national conversation has helped him?

From TV ads to op-eds, Brown has driven home his opposition to “comprehensive immigration reform.” We’ve talked recently about how elite consensus on that issue isn’t really in line with public opinion, and the fact that Brown is getting traction in a northeastern swing state by taking a strong stance on the against it is certainly interesting.

In a recent issue of National Review, Reihan and Yuval Levin outlined an alternative to the big-business driven proposals that have been circulating of late — they argue their alternative is superior on the political and policy merits.