Comment by runako
10 days ago
> If paying domestic workers more raises the price of domestic goods, and if people are willing to pay that price for whatever reason, you will start to see growth in manufacturing.
We ran this experiment for decades. It turns out that Americans are not willing to pay the higher prices, which led to our manufacturing consolidating around higher-value items.
This notion that we should move Americans from high-productivity jobs to lower-productivity jobs, and that such move will somehow enhance our prosperity is nutty. Lower-productivity jobs mean less income for workers, means less income in the system, means lower prosperity for all Americans. Moving tens of millions Americans to higher-productivity jobs while maintaining relatively low unemployment has to be seen as one of the economic success stories of the modern age.
Separately, Americans do not feel like this happened. That's a different discussion, about allocation of wealth. Our poorest states have higher GDPs per capita than many "rich" western EU countries. Mississippi has a higher GDP per capita than the UK. The difference is that the US has designed a system where every citizen lives a precarious existence, potentially a few months from destitution while other rich countries have not done that. We are allowed to make different choices in the US if we don't like this outcome.
> We ran this experiment for decades. It turns out that Americans are not willing to pay the higher prices, which led to our manufacturing consolidating around higher-value items.
But did we run that experiment while foreign alternatives were nearly or equally expensive? That's the real test, and whether foolish or not that's what they are trying to do with tariffs.
> Lower-productivity jobs mean less income for workers
Are you suggesting former factory workers all became scientists and engineers? If that's true then fantastic. But I'd like to see evidence that what they are doing now is somehow more productive.
> Our poorest states have higher GDPs per capita than many "rich" western EU countries.
Is the result of that a higher median income, or is it a reflection of a higher wealth inequality?
> But did we run that experiment while foreign alternatives were nearly or equally expensive?
Tariffs will have to go a lot higher than 145% for this to be a relevant question. US labor (and now due to tariffs, raw materials) costs are so much higher that frequently even doubling the import price would not make US cost-competitive.
> Are you suggesting former factory workers all became scientists and engineers?
No, I am suggesting that those people currently work in jobs that support higher productivity of the overall labor force, and that higher productivity creates the conditions necessary for increased prosperity for Americans.
Let's take QA for example as something that is often thought of as lower-skilled (but which is not) job that a hypothetical former factory worker could retrain to do. A person could QA a T-shirt or QA the Netflix app. The Netflix QA impacts more flow of money than a T-shirt QA, and so supports higher income for everyone working at Netflix than those working in a T-shirt factory. It is not possible for a person to manually QA enough shirts to have a similar economic impact as QAing the Netflix app.
Or compare the typical factory worker to a profession that is often denigrated in the US: retail. A factory worker making cutlery or light bulbs will generate less money for the economy than the average Costco employee[1].
Or look at a company that moves these goods around, like UPS. $360k revenue per employee @ 21% gross margin.
> Is the result of that a higher median income, or is it a reflection of a higher wealth inequality?
This is the continued choice of the US polity to not use our wealth to improve our common good. We instead choose to allocate it in ways that are markedly different from other rich and developing nations. So a high-productivity state with a higher GDP per capita than the UK is "poor" because our chosen combination of labor laws, tax laws, etc. are designed to produce that outcome. There used to be robust debate about the best way to make our economy less anxiety-inducing for individuals, but that discourse ended and everybody pretty much accepts that this is how it has to be. Nonetheless, we are allowed to choose differently.
1 - Costco produces close to $100k of gross profit per employee. This is multiples of the prevailing wage even in rich countries in Western Europe, much less countries like China.
> A factory worker making cutlery or light bulbs will generate less money for the economy than the average Costco employee.
The good news is that we don't need to calculate the value of an employee, because the market itself makes it loud and clear: wages. The higher the wages, the higher the value. In any sane company, the less valuable an individual is to the bottom line, the less they get paid.
So then, if the wages of a factory job start to eclipse that of other fields, that's all the evidence we need of higher productivity/value/whatever-you-want-to-call-it.
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> A person could QA a T-shirt or QA the Netflix app
Netflix famously fired all their QA people and requires their devs to do test automation.
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> > Our poorest states have higher GDPs per capita than many "rich" western EU countries.
Not the OP, but poor as used here seems to refer to average quality of life , quality of infrastructure, etc.
> Is the result of that a higher median income, or is it a reflection of a higher wealth inequality?
Higher wealth inequality leading to stretched public services and infrastructure, which lead to lower quality of life , despite higher nominal GDP per capita.
You are probably much better off being a poor person in Spain (33k GDP/capita) vs Mississippi (40k GDP per capita), because at least you don't need to worry about the cost of healthcare.
You're more likely (but still very unlikely) to get extremely rich in the US though, although probably not in Mississippi.
Spot on. I would extend your analysis to include the median middle-class person is probably better off in Spain vs most/all US states. This, even though the Spaniard personally earns less income. Largely as a result of the economically precarious nature of living in the US.
Healthcare, childcare, education, retirement are all big expensive things the US does incredibly poorly.
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This is spot on. To add, it won’t even matter the outcome of upending our entire society and economy this way (tariffs) if the wealth distribution remains unequal. Nor will these types of jobs equalize wealth distribution (which is never mentioned because that probably sounds like communism) Look at the poor factory workers in china! You want to bring that here? Insanity.