unger and Hazlitt and VD

Unger put a link in the comments section of an earlier post, which leads to his rebuttle of Vox Day’s silly attempt to show how Henry Hazlitt was wrong in his defense of free trade.

One point I would like to reiterate from unger’s post is this: “VD totally ignores all returns to capital owners (who, let us note, invest or otherwise spend those gains, and thereby bid up labor in other sectors), and thus he is claiming a net loss of employment where really there is (or at any rate need be, and in an unhampered market, must be) only restructuring. (It is true that said bid-up labor need not be American, but the objection to point 3 applies to this problem as well.)
worth noting, also, that offshoring bids up foreign labor – process cannot proceed to infinity.” (emphasis mine). 

If enough “jobs move overseas”, then foreign workers will be able to bid up the price for their labor, thus making the price for American labor more attractive, and that is just what we’re seeing in the real world:

“It’s a familiar story: A manufacturing company finds its wages too high, looks for ways to cut costs and ends up moving production overseas where the pastures are greener. It happened when some American jobs were outsourced to China. Now it’s happening again –with Chinese jobs fleeing to America.

This trend, known as “reshoring,” has created some 10,000 positions in the United States in the past two years. It’s driven partly — believe it or not — by the rising cost of Chinese labor. And it’s only going to expand.”

The price of labor is not solely the nominal wages of workers; it is the value an employer gets, based on worker productivity.  It can be much, much cheaper to hire an American earning $50 an hour than a worker from another nation who makes $3 a day, but is less productive.


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