Comments and Dicussion

Frank Levy: About the time I received this paper, my wife and I had to drive our daughter to college. Because her room needed a floor lamp, we ended up at IKEA. The reader can already see where this story is heading. The floor lamp was nice, functional if not high style, and adjustable in height up to about six feet. It was made in China and cost $9.95. I informally sampled other IKEA items and found many had similarly low prices.

I appreciate the distinction between anecdotes and data, but having just seen these extremely low prices, I found this paper by Martin Baily and Robert Lawrence quite timely. The paper draws four principal conclusions:

• mdash The substantial loss of manufacturing jobs since 2000 was primarily a function of weak aggregate domestic demand, not due to a flood of imports.

• mdash To the extent that trade did cause manufacturing job losses, it did so through a sharp decline in exports. This decline can be largely explained by the rise in the dollar, which undercut U.S. competitiveness.

• mdash The outsourcing of service jobs was not particularly large in scale, either in information technology services or in clerical back office work.

• mdash If, however, the Forrester Research predictions of future outsourcing were to come true, the resulting job losses would be substantial. These job losses would not pose a threat to full employment, but, under a variety of assumptions, they would shift the composition of national income away from wages and toward capital.

In this comment I will discuss first the jobs data and then the paper's analysis of the data. I will end by summarizing what the reader should take away from the paper.

To explain the loss of jobs since 2000, it would be helpful first to get a better understanding of exactly what jobs have been lost. This is at issue because the well-known disagreements between the Current Population Survey and the Employment Survey extend below the level of aggregate employment to specific occupations. The two surveys agree, however, on one central point: the loss of production jobs. The authors use the BLS's Occupational Employment Statistics (OES), which indicate that, between the fourth quarter of 2000 and the second quarter of 2003, production employment declined by 1.9 million. Similarly, Current Population Survey figures taken from the BLS website indicate that, between December 2000 and March 2003, production employment declined by about 1.9 million. In other areas there is less agreement.

One potential disagreement, noted by the authors, is with respect to managerial employment. The OES reports that, again over 2000:4-2003:2, employment in "Management Occupations" fell by 1.1 million, or about 14 percent. This is a stunning figure for so short a time. The sum of employment losses in this and a second category, business and financial operations occupations, is about 824,000, or about 7 percent of the aggregated total. The CPS does not report data for managerial employment separately but rather reports data for the combined category "Management, Business and Financial Operations Occupations," and for the same period it shows a gain of 458,000 jobs, or about 2 percent.

It is unclear what to make of this discrepancy, but it is worth noting that employment in the CPS combined category is far larger than employment in the two corresponding categories in the OES: roughly 19.6 million workers versus 12.4 million, respectively, in 2000. As the authors note, some of this difference in levels reflects the well-known bias in the household survey due to respondents' tendency to inflate their occupational titles. It is not clear, however, why self-reporting should bias the change in these levels, turning a loss into a gain.

A second discrepancy arises in clerical employment (office and administrative support). Here the difference, however, is one of magnitude rather than sign: the OES shows a decline of about 250,000 workers from a base of about 23 million, whereas the CPS shows a decline of about 1 million from a base of about 20.5 million. Although in...