<< Chapter < Page Chapter >> Page >

Moreover, the costs of saving jobs through protectionism can be very high. A number of different studies have attempted to estimate the cost to consumers in higher prices per job saved through protectionism. [link] shows a sample of results, compiled by economists at the Federal Reserve Bank of Dallas. Saving a job through protectionism typically costs much more than the actual worker’s salary. For example, a study published in 2002 compiled evidence that using protectionism to save an average job in the textile and apparel industry would cost $199,000 per job saved. In other words, those workers could have been paid $100,000 per year to be unemployed and the cost would only be half of what it is to keep them working in the textile and apparel industry. This result is not unique to textiles and apparel.

(Source: Federal Reserve Bank of Dallas)
Cost to u.s. consumers of saving a job through protectionism
Industry Protected with Import Tariffs or Quotas Annual Cost per Job Saved
Sugar $826,000
Polyethylene resins $812,000
Dairy products $685,000
Frozen concentrated orange juice $635,000
Ball bearings $603,000
Machine tools $479,000
Women’s handbags $263,000
Glassware $247,000
Apparel and textiles $199,000
Rubber footwear $168,000
Women’s nonathletic footwear $139,000

Why does it cost so much to save jobs through protectionism? The basic reason is that not all of the extra money paid by consumers because of tariffs or quotas goes to save jobs. For example, if tariffs are imposed on steel imports so that buyers of steel pay a higher price, U.S. steel companies earn greater profits, buy more equipment, pay bigger bonuses to managers, give pay raises to existing employees—and also avoid firing some additional workers. Only part of the higher price of protected steel goes toward saving jobs. Also, when an industry is protected, the economy as a whole loses the benefits of playing to its comparative advantage—in other words, producing what it is best at. So, part of the higher price that consumers pay for protected goods is lost economic efficiency, which can be measured as another deadweight loss, like that discussed in Labor and Financial Markets .

There’s a bumper sticker that speaks to the threat some U.S. workers feel from imported products: “Buy American—Save U.S. Jobs.” If the car were being driven by an economist, the sticker might declare: “Block Imports—Save Jobs for Some Americans, Lose Jobs for Other Americans, and Also Pay High Prices.”

Trade and wages

Even if trade does not reduce the number of jobs, it could affect wages. Here, it is important to separate issues about the average level of wages from issues about whether the wages of certain workers may be helped or hurt by trade.

Because trade raises the amount that an economy can produce by letting firms and workers play to their comparative advantage, trade will also cause the average level of wages in an economy to rise. Workers who can produce more will be more desirable to employers, which will shift the demand for their labor out to the right, and increase wages in the labor market. By contrast, barriers to trade will reduce the average level of wages in an economy.

Questions & Answers

what is the law of diminishing marginal utility
Samuel Reply
what is demand
Isatu Reply
other things can be equal an certain amount paid for the goods by consumer in the market called demand.
Dhanishhwar
demand is the amount of a commodity a consumer is willing and able buy at a given price at a particular point in time
Samuel
what is economics
Owusu Reply
meaning of economics
Agyei Reply
what is a columnist
Owusu
what are the four basic assumptions of perfect competition
Liyanda Reply
There is a well known maximum by economic that states that the birthd of money is the deaths of batter system discuss the statement
PHILIP Reply
how does price elasticity increase
Anuoluwapo Reply
What is real GDP
Klaudia Reply
Real GDP is a way of adjusting our output calculations for inflation so that we can see group interms of physical production quantity
Minalu
Real gross domestic product is a macroeconomic measure of the value of economic output adjusted for price changes. This adjustment transforms the money-value measure, nominal GDP, into an index for quantity of total output
amisha
what is economics
Preet Reply
Economics is the study of human behavior between scarcity and want.
Vincent
yesss thats it
Tendai
economics is the study of man and his behaviors
toheeb
yh all is correct
Paul
ECONOMICS IS THE STUDY OF,HOW HUMAN BEINGS MADE DECISIONS IN THE TIME OF SCARCITY.
Bakshi
According to Professor Lionel Robbins" Economics is a science which study human behaviour as a relationship between ends and scarce means which have alternative uses".
Paul
According to Adam Smith, "Economics is a science which inquired into the nature and cause of wealth of nations. "
Tannu
economics is a science that studies human behaviour as a relationship between ends and scarce means which have alternative uses
Efua
everyone is correct
Ruth
More questions
Paul
what is elasticity
RELEBOHILE Reply
a consumer has income of$3,000 wine is price at$3 a glass and cheese is price at$6 a kilo.draw the consumer's budget constraint . what is the slope of this budget constraint
Mohammed Reply
h
Thulani
by scientific method we mean
Lethu Reply
Inductive and deductive method
Bethuel
when  are producers willing to supply more goods and services in the market?
Ivan Reply
think about the essential goods that you need "on daily basis" .Are they really all essentials ..Could you live without some of them?
Ivan
what is scarcity
Azolingo Reply
Economics is a science which studies human behaviour as a relationship between ends and scarce which have alternative uses
Tannu
thanks
Rabiu
Whn demand of resources and more then it's availability or supply.
Abhishek
when there's less resources
Maybrien
scarcity is a situation where resources are not enough to satisfy all wants
Efua
types and characteristics of inflation in South Africa
Okuhle Reply

Get Jobilize Job Search Mobile App in your pocket Now!

Get it on Google Play Download on the App Store Now




Source:  OpenStax, Principles of economics. OpenStax CNX. Sep 19, 2014 Download for free at http://legacy.cnx.org/content/col11613/1.11
Google Play and the Google Play logo are trademarks of Google Inc.

Notification Switch

Would you like to follow the 'Principles of economics' conversation and receive update notifications?

Ask