Trade Deals

by Elaine Schwartz    •    May 21, 2011    •    545 Views

What if Mr. Jones, an assembly line worker, lost his job because of low cost imports? And, what if Mrs. Smith, a travel agent, also is unemployed but the reason is online firms like Expedia? 

Princeton economist Uwe Reinhardt asks us why Congress is likely to express more concern for Mr. Jones than Mrs. Smith. Instead, he suggests that whether the reason is global or domestic job disruption, perhaps all who gain should compensate those who have lost.

Dr. Reinhardt’s perspective takes us to the current debate in Congress and the size of our safety net. Should a yes vote for free trade agreements with Panama, South Korea, and Colombia include more assistance to people who, as a result, lose their jobs? The NY Times tells us that a group of Democrats say, “Yes” while a group of Republicans say, “No.”

The Economic Lesson

The 4 basic causes of unemployment are 1) structural (technological change), 2) cyclical (recession) 3) seasonal 4) frictional (everyday reasons like quitting and moving).

An Economic Question: If government provides a safety net of retraining and payments to the unemployed, what are the tradeoffs? ( Here and here, you can access facts about government aid to workers who lost jobs because of trade agreements.)


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