The mantra for creating a fairer and more prosperous world is to promote productivity and protect people, rather than protect jobs, urges Pankaj Ghemawat in ‘World 3.0: Global prosperity and how to achieve it’ (www.hbr.org).
As for protecting people, his suggestions are to start with investment in education so as to make workers more flexible, and to cushion the blow when job losses come. “In terms of innovation, experiments with ‘wage insurance’ show some promise. Such programmes supplement workers’ income when they move into new jobs that pay lower wages, reversing the incentive to wait longer for a higher-paying job, which can be associated with long-term unemployment.”
Importantly, the author warns that raising tariffs can serve as a particularly regressive form of tax. He points out that in the US staple consumer products, especially the low-priced ones, draw among the country’s highest tariffs, thus putting the cost of protectionism squarely on the lower-income people in the US, as well as on people in poorer countries where most of these goods are produced.
“Tariffs on raw material inputs and intermediate goods can be even worse.” An example mentioned in the book is about how the high US sugar tariffs drove the production of Life Savers candy to Canada, costing the US six hundred jobs.
An imperative read.