Principles of Macroeconomics / Unit 17 MAC 1629 review, 2 to 3 minutes
Does Protection Save Jobs
The idea
Protection is almost always argued for as a way of saving jobs, and the honest answer is that it moves them and costs a great deal to do it. The protected industry does keep employment it would otherwise lose, and that is real and not to be dismissed. But the money to pay for it comes from somewhere, and it comes from two places. Consumers paying a higher price for the protected good have less to spend on everything else, so employment falls in the industries they would otherwise have bought from. And firms that use the protected good as an input now pay more for it than their foreign competitors do, so they lose sales, and their employment falls too. Neither of these shows up in the debate, because the jobs preserved are identifiable and concentrated while the jobs lost are scattered across industries that never knew they were in the argument.
In practice
Worked example, and it is the anchor's own case because nothing invented would be as clean. A domestic industry making flat-panel displays filed a dumping complaint, and a duty of sixty-three percent was imposed on imported displays. Displays were as much as half the cost of building a laptop computer. So the protection raised the cost of assembling laptops in that country by a large fraction. One computer maker moved its manufacturing abroad. A second shut its domestic laptop plant. A third cancelled a planned domestic plant and expanded overseas instead. The protection did not move production toward the country; it drove the assembly out, and the display production followed it. Every step of that follows from the second channel above.
Where people slip
Three cautions. First, the cost per job preserved, where it has been measured, runs far above the wage of the job, and the anchor's own gloss is that the workers could have been paid a full salary to stay at home for about half the cost — which is not a proposal but a measure of how much is being spent. Second, this argument is about employment totals and says nothing about the people in the protected industry, whose losses are real, concentrated, and a legitimate object of policy; what it says is that protection is an expensive and leaky instrument for helping them. Third, the whole of this entry rests on the anchor alone — the witness does not treat protection's employment effects at all — and the case above is a single documented episode, which is an illustration of a mechanism rather than proof of its general size.
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