Is Wage Insurance the Answer?

September 6, 2001 7:00 AM

Is Wage Insurance the Answer? Central to the ongoing debate on globalization is whether free trade is a good thing or not because it pits capital against labor. Like a lot of policy issues (and politics :) trade helps some but hurts others, while polarizing and often making enemies of people on either side of the debate. Wage insurance might provide a middle ground where people can come together. (more inside!)
posted by kliuless (6 comments total)

i read about this in david wessel's capital column in the wall street journal (aug. 30). you need a subscription, but it's pretty much covered in the article linked above. i thought these were interesting passages though:

…efforts to aid American workers hurt by competition from imports have been feeble. Until recently that didn't threaten the post-World War II momentum towards ever-freer trade. Now it does. "We can no longer presume a domestic consensus on the benefits of openness," U.S. Trade Representative Robert Zoellick warns, with understatement.

…The concept is simple: Trade, while a benefit to the economy overall, hurts workers who make things or provide services susceptible to import competition. Compensating the losers makes more sense than trying to protect them by denying the benefits of trade to all.

btw, another good (and free) weekly read on public policy issues is michael prowse's "pause for thought" column on the backpage of the weekend financial times, generally offering fresh and reasoned perspective.
posted by kliuless at 7:03 AM on September 6, 2001

Hey, there’s a million different ways to help workers, but they all cut into profits. You know who’s in charge.

Another good economics column is in the New Yorker.
posted by raaka at 11:46 AM on September 6, 2001

yeah, but i think what's cool about this proposal is it gives companies a chance to make more profits (through free trade) that otherwise would be politically infeasible, while helping people adjust to "economic realities" -- like it costs less to make shoes in indonesia and tv's in mexico than it does in the states.

that way indonesia and mexico gain access to foreign exchange and development capital, the US benefits from cheaper goods and displaced workers don't get totally screwed over so that their senators feel safe enough to vote for whatever trade agreements bush will want to push through.
posted by kliuless at 12:56 PM on September 6, 2001

Hey I love this thing. I do see a problem getting anyone in power to accept it. They pitch it interestingly: “[F]ears of job loss account for surveys showing weak public commitment to further liberalization of barriers to foreign trade and investment.” Give workers a hint of job security and you can further liberalize capital mobility. Political compromise has a certain logic to it.

The writers want to ease “worker anxiety” but business leaders don’t want to do that. Greenspan called “growing worker insecurity” a factor in the expansion. Its true morale drops and engenders worker-managerial tension, but wages stay low and production high with a scared workforce.
posted by raaka at 2:13 PM on September 6, 2001

but that's the other cool thing about it, the bush administration is behind it! from the wsj article:

...That's why the Bush administration, generally allergic to new federal benefits, is eyeing something called "wage insurance."

and later on:

No matter what he offers, Mr. Bush won't get union support to pursue sweeping new trade agreements. Instead, Mr. Zoellick hopes to woo swing Democrats in Congress. Wage insurance offers a bargaining chip.

Unlike some other bargaining chips, this one is a good idea that would help vulnerable workers and improve the functioning of the U.S. economy at the same time.

as far as i know, zoellick is a bush appointee so he should pull some weight.

raaka, is that new yorker column online? i was looking for it, but couldn't find it.
posted by kliuless at 2:25 PM on September 6, 2001

The Financial Page

Somebody oughta tell Brookings about that big ass typo near the end.

If Bush pushes this and illegal worker amnesty, he’d be the most pro-labor President in the modern age. Which is shocking, since this proposal is incredibly timid. Only $10,000 paid over the course of two years, quarterly. That ain’t much — especially for workers with families.

But I bet he’ll brush it off (if he’s even giving it any thought), just like Clinton did in ‘97.

Brookings is the only conservative think tank pushing any pro-labor policy, the rest don’t want to admit their agendas are inherently unpopular.
posted by raaka at 8:56 PM on September 6, 2001