Burgess COMMENTARY

Peter Burgess

Why Do Coal Mining Jobs Matter So Much More Than Jobs Lost to Trade?

A display of coal miners' helmets through the years at the Western Mining and Railroad Museum in Helper, Utah, Nov. 12, 2013. (Photo: Jim McAuley / The New York Times)

When President Obama announced plans to curtail the use of coal over the next fifteen years major news outlets like National Public Radio and The New York Times rushed to do pieces on the prospective loss of jobs in coal mining areas. There are a bit less than 80,000 workers directly employed in the coal industry. A large percentage of these jobs will be lost in the next fifteen years due to these regulations.

While it is good to see the media paying attention to this job loss and its implications for families and communities, this concern is a striking departure from normal practice. This was demonstrated clearly last week when the Commerce Department reported a large jump in the trade deficit for April. The report, and the implied job loss, received almost no attention from the media.

To remind folks who never suffered through an intro economics course or forgot their suffering, a trade deficit means that demand generated in the United States is going overseas. Money spent by businesses or consumers is going for goods and services produced in Europe, Mexico, and China rather than in United States.

If the economy were near full employment this would not necessarily be a problem, but with millions of people still unemployed or underemployed, this lost demand is a big issue. A larger trade deficit has the same implication for the economy as a sudden cutback in consumer spending or business investment. It means less demand and fewer jobs.

The Commerce Department report showed the trade deficit increased by $3 billion in April from its March level. (These data are seasonally adjusted to take account of regular patterns across the year.) Data from a single a month are erratic, but the average trade deficit over the three months from February to April was running at an $85 billion higher annual rate than the trade deficit over the prior three months. This means, other things equal, $85 billion more of the demand generated in the United States would be creating growth and jobs in other countries rather than in the United States.

This loss of demand would translate into roughly 700,000 jobs. This is the result of having consumers and businesses switch their spending from domestically produced items to goods and services that we get from other countries.

This implied job loss from this rise in the trade deficit over the prior three months is roughly ten times the number of jobs at risk in the coal industry over the next fifteen years. Yet there was not a story in any major media outlet that highlighted the jobs put in jeopardy by a growing trade deficit.

It is worth noting who benefits from the trade deficit. Major retailers like Walmart have worked for decades to develop low cost supply chains in the developing world. They make a point of buying products from China, Cambodia, Bangladesh, or anyone else who delivers goods at rock bottom prices. They would not be pleased by measures to reduce the trade deficit. Similarly, major manufacturers like General Electric and Boeing have all established operations in developing countries to take advantage of lower cost labor. These companies also would not be pleased with policies designed to reduce the size of the trade deficit.

In fact, as a practical matter there are probably many low-wage employers, like Walmart and McDonalds, that would not be especially happy to see the trade deficit sharply reduced. The millions of jobs that would result from more balanced trade would mean a tighter labor market. This would give their employees more bargaining power, likely forcing up wages and leading to better working conditions.

In short, there are many powerful interest groups that are not anxious see more jobs created through a reduction in the size of the trade deficit. And, we never see the issue discussed in public debate. This is unfortunate both since the route to a lower trade deficit is clear and it is almost impossible to envision the country getting back to full employment with its current trade deficit.

The trick to getting the trade deficit down is a lower valued dollar. This makes our exports cheaper to foreigners, meaning we export more. And it makes imports more expensive, so we buy domestically produced goods rather than imports.

The way to lower the dollar is simple, we negotiate it. President Reagan managed to pull this off in 1985 with the Plaza Accord. President Obama's team could do the same if it were prepared to buck the powerful businesses that benefit from large trade deficits.

On the second point, it is very hard to see how we make up $600 billion in annual demand lost to a trade deficit. Do we expect some unprecedented consumption or investment boom? Government deficits would do the trick, but our politicians don't like budget deficits.

We made up large demand gaps in the late 1990s with the stock bubble and in the last decade with the housing bubble, but bubbles don't seem like a really good economic strategy. Without bubble driven growth, we really don't have a way to make up the demand lost to the trade deficit.

So, I guess those unemployed people will just have to suck it up. The media don't want to give folks bad thoughts by calling attention to the jobs lost due to the trade deficit. Copyright, Truthout. May not be reprinted without permission.

DEAN BAKER Dean Baker is a macroeconomist and co-director of the Center for Economic and Policy Research in Washington, DC. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University. He is a regular Truthout columnist and a member of Truthout's Board of Advisers.