Princeton Economist Blinder Wrongly Forecast Huge Offshoring of Jobs

(p. A1) A widely covered 2007 study by Alan S. Blinder, a Princeton economist and former Clinton administration official, estimated that a quarter or more of jobs were vulnerable within the next decade. But many companies discovered that labor savings were offset by other factors: time differences, language barriers, legal hurdles and the simple challenge of coordinating work half a world (p. A14) away. In some cases, companies decided they were better off moving jobs to less expensive parts of the United States rather than out of the country.

“Where in retrospect I missed the boat is in thinking that the gigantic gap in labor costs between here and India would push it to India rather than to South Dakota,” Mr. Blinder said in a recent interview. “There were other aspects of the costs to moving the activities that we weren’t thinking about very much back then when people were worrying about offshoring.”

. . .

In a follow-up paper released Friday [Sept. 27, 2019], another economist, Adam Ozimek, revisited Mr. Blinder’s analysis to see what had happened over the past decade. Some job categories that Mr. Blinder identified as vulnerable, like data-entry workers, have seen a decline in United States employment. But the ranks of others, like actuaries, have continued to grow.

Over all, of the 26 occupations that Mr. Blinder identified as “highly offshorable” and for which Mr. Ozimek had data, 15 have added jobs over the past decade and 11 have cut them. Altogether, those occupations have eliminated fewer than 200,000 jobs over 10 years, hardly the millions that many feared. A second tier of jobs — which Mr. Blinder labeled “offshorable” — has actually added more than 1.5 million jobs.

For the full story, see:

Ben Casselman. “White-Collar Jobs Were Supposed to Go Overseas. They Didn’t.” The New York Times (Monday, September 30, 2019): A1 & A14.

(Note: ellipsis, and bracketed year, added.)

(Note: the online version of the story has the same date as the print version, and has the title “The White-Collar Job Apocalypse That Didn’t Happen.”)

The Alan Blinder paper mentioned above, is:

Blinder, Alan. “How Many U.S. Jobs Might Be Offshorable?” Princeton University, Department of Economics, Center for Economic Policy Studies, Working Paper # 142, March 2007.

The “follow-up paper” mentioned above, is:

Ozimek, Adam. “Overboard on Offshore Fears.” 2019. https://www.upwork.com/press/economics/report-overboard-on-offshore-fears/

Sand from Greenland’s Global Warming Can Help World Make Concrete

(p. A8) A few miles up the Sermilik Fjord in southwestern Greenland, the water has abruptly turned milky, a sign that it is loaded with suspended silt, sand and other sediment.

It is this material — carried here in a constant plume of meltwater from the Sermeq glacier at the head of the fjord — that Mette Bendixen, a Danish scientist at the University of Colorado, has come to see. As their research boat moves farther into the murky water, she and several colleagues climb into a rubber dinghy to take samples.

Dr. Bendixen, a geomorphologist, is here to investigate an idea, one that she initially ran by colleagues to make sure it wasn’t crazy: Could this island, population 57,000, become a provider of sand to billions of people?

Sand for eroded beaches, potentially from the Rockaways to the Riviera. Sand to be used as bedding for pipes, cables and other underground infrastructure. Mostly, though, sand for concrete, to build the houses, highways and harbors of a growing world.

The world makes a lot of concrete, more than 10 billion tons a year, and is poised to make much more for a population that is forecast to grow by more than 25 percent by 2050. That makes sand, which is about 40 percent of concrete by weight, one of the most-used commodities in the world, and one that is becoming harder to come by in some regions.

But because of the erosive power of ice, there is a lot of sand in Greenland. And with climate change accelerating the melting of Greenland’s mile-thick ice sheet — a recent study found that melting has increased sixfold since the 1980s — there is going to be a lot more.

“It’s not rocket science,” Dr. Bendixen said. “One part of the world has something that other parts of the world are lacking.”

For the full story, see:

Henry Fountain. “Melting Greenland Is Awash in Sand.” The New York Times (Thursday, July 4, 2019): A8.

(Note: the online version of the story has the date July 1, 2019, and has the same title as the print version.)

With Tariffs, What Goes Around Comes Around

(p. A1) CLYDE, Ohio—After the Trump administration announced new tariffs on imported washing machines in January, Marc Bitzer, the chief executive of Whirlpool Corp., celebrated his win over South Korean competitors LG Electronics Inc. and Samsung Electronics Co.

“This is, without any doubt, a positive catalyst for Whirlpool,” he said on an investor conference call.

Nearly six months later, the company’s share price is down 15%. One factor is a separate set of tariffs on steel and aluminum, imposed by the U.S. in March and later expanded, that helped drive up Whirlpool’s raw-materials costs. Net income, even with the added benefit of a lower tax bill, was down $64 million in the first quarter compared with a year earlier.

. . .

(p. A10) Whirlpool had campaigned for protection from what it called unfair foreign competition. Things became more complicated as the trade conflict spread beyond its industry.

“Raw-material costs have risen substantially,” Mr. Bitzer said on the April investor call, primarily blaming steel and aluminum tariffs. Most of the 200-pound weight of a washing machine is in its steel and aluminum parts.

For the full story, see:

Andrew Tangel and Josh Zumbrun. “From Washer Tariffs to Trade Showdown.” The New York Times (Tuesday, July 17, 2018): A1 & A10.

(Note: ellipsis added.)

(Note: the online version of the story has the date July 16, 2018, and has the title “Whirlpool Wanted Washer Tariffs. It Wasn’t Ready for a Trade Showdown.”)

Roger Koppl Offers Advance Praise for Openness to Creative Destruction

Diamond shows us that entrepreneurial innovation is not just the best way to make a better world. It is the only way. If we care about our fellow humans, then we had better do what we can to enable entrepreneurial innovation. Diamond shows with an unusual depth and breadth of scholarship that the most important thing we can do to promote innovation is to let entrepreneurs test their impossible ideas in the free market. Diamond’s book is a gem. Grab it, read it, learn from it.

Roger Koppl, Professor of Finance, Syracuse University. Author of Expert Failure and other works.

Koppl’s advance praise is for:
Diamond, Arthur M., Jr. Openness to Creative Destruction: Sustaining Innovative Dynamism. New York: Oxford University Press, forthcoming June 2019.

“Protectionist Trade Policies Can Backfire” on Those They Are Intended to Protect

(p. B1) You may not have appreciated it at the time — golden eras have a habit of coming and going like that — but a five-year stretch that started in 2013 was a pretty great time to buy a washing machine.
Inflation for home laundry equipment, as measured by the Labor Department, fell steadily during that time, which meant you could buy the same washer your neighbor bought last year for less money. Or you could buy a better one at the same price. Great news for your clothes, though maybe bad news for your friendship, if your neighbor was the covetous type.
That stretch of laundry deflation ended last year, shortly after President Trump imposed tariffs, starting at 20 percent, on imported washers. The move was a response to a complaint filed by Whirlpool, a Michigan-based manufacturer.
. . .
A year after Mr. Trump announced the tariffs, washing machine prices were up, as many analysts had expected. But that has not been a boon to the makers of washers because fewer Ameri-(p. B4)cans are investing in new laundry equipment, exposing how protectionist trade policies can backfire on the very companies they are meant to safeguard.
Tariffs of two varieties have pushed prices up
The washer-specific tariffs raised costs for importers like LG and Samsung. But another tariff issued by Mr. Trump, on imported steel, raised costs for some domestic manufacturers like Whirlpool, which took those companies by surprise.
Many manufacturers passed those higher costs on to consumers. Once stores worked their way through models that had been imported before tariffs hit, deflation gave way to sharp price increases.
After years of steady growth, sales reversed in 2018
A basic rule of economics is that when the price of something goes up, people buy less of it. That’s just what happened to washing machines.

For the full story, see:
Jim Tankersley. “Tariffs Tossed a Market Right Into a Spin Cycle.” The New York Times (Saturday, Jan. 26, 2019): B1 & B4.
(Note: ellipsis added; bold and larger font in original.)
(Note: the online version of the story has the date Jan. 25, 2019, and has the title “‘How Tariffs Stained the Washing Machine Market.”)

Tariffs Evaded by Misclassification and Transshipment

(p. A1) One day in June [2018] , seven months after the U.S. imposed stiff tariffs on plywood from China, a wood importer in Oregon got a call from a supplier asking if he would like to get some Chinese plywood tariff-free.
How would that work, asked importer David Visse. The products carry an identification code that is checked by U.S. Customs agents.
“Don’t worry about it,” Mr. Visse says the supplier told him. The plywood would be stripped of its Chinese markings, and “we’ll ship it under some other code.”
Every product imported into the U.S. carries a 10-digit designation called an HTS code, of which there are 18,927 in all. Like a taxonomic version of Noah’s Ark, the code provides a common language to bridge disparate markets and identify products in all their variety.
In a world of increasing tariffs, the code has another function: evading those levies. The business of code-fudging is expanding in step with tariff increases, undermining U.S. efforts to shield American business from foreign competition, according to importers, customs officials, trade attorneys and shipping brokers.
As trade conflict grows between the two largest economies, these professionals say, code misclassification is starting to compete (p. A10) with transshipment–the rerouting of goods through third countries–as a way to duck tariffs.

For the full story, see:
Chuin-Wei Yap. “Trade Fight Spurs Tariff Dodges, With 18,927 Options.” The Wall Street Journal (Tuesday, Oct. 9, 2018): A1 & A10.
(Note: bracketed year added.)
(Note: the online version of the story has the date Oct. 8, 2018, and has the title “The U.S.-China Trade Battle Spawns a New Era of Tariff Dodges.”)

Benjamin Powell Offers Advance Praise for Openness to Creative Destruction

Productive entrepreneurship is not automatic. Art Diamond’s new book brilliantly illustrates how free markets allow entrepreneurs to innovate in ways that disrupt economy activity and, crucially and contrary to popular fears, ultimately reorganize production in ways that allow us to live longer, richer, and more flourishing lives.

Benjamin Powell, Professor of Business Economics, Texas Tech University. Author of Out of Poverty, and other works.

Powell’s advance praise is for:
Diamond, Arthur M., Jr. Openness to Creative Destruction: Sustaining Innovative Dynamism. New York: Oxford University Press, forthcoming June 2019.