The number of jobs is set by demand and the size of the workforce, not by the pattern of trade

The argument

Proponents of this position argue that the dispute between the other two rests on a shared mistake, namely treating the quantity of employment as something determined by which industries exist. Proponents hold that total employment is governed by how much spending there is in the economy, how many people are available and willing to work, and the policy settings that act on both. Trade changes what people are employed doing; it does not change how many of them there are. The mechanism is that the constraints operate at a different level from the one trade acts on. If spending supports a given volume of activity, labour released from one sector is drawn into whatever else that spending is directed at, and the adjustment shows up in the composition of employment rather than its level. Proponents argue this is why economies with very open trade and economies with very closed trade are found at similar levels of employment, and why employment within a single economy moves with the cycle and with policy rather than with changes in its trade exposure. Proponents add that the two rival positions are each describing one visible half of a reallocation and generalising from it. Those who see job creation are looking at expanding sectors; those who see destruction are looking at contracting ones. Both are real and they are the same process observed from different ends. Proponents argue that the serious questions about trade are therefore distributional rather than quantitative, concerning which people do which work, at what wages and in which places, and that framing the matter as a question about the number of jobs obscures the issues that actually turn on the policy.

Premises

Counter-arguments

Critics argue the account assumes the adjustment it needs to demonstrate. Labour released from a contracting sector is drawn elsewhere only if it is employable elsewhere, and where it is not the result is a lasting fall in participation that the framework records as a smaller workforce rather than as lost jobs. They add that trade affects the determinants themselves: it alters investment, the bargaining position of workers and which regions retain population, all of which feed back into demand and participation. Others object that holding policy constant is doing the work, since trade shocks often provoke the very policy responses the account treats as independent.

Rejecting the premises

[Rejecting P1] Critics argue the premise assumes away the question by defining employment in terms that trade cannot touch. Where displaced workers stop looking for work the framework records a smaller workforce rather than lost jobs, which conceals exactly the effect in dispute. [Rejecting P2] The independence claimed for the determinants is disputed. Trade alters investment, the bargaining position of workers and which regions keep their population, and each of those feeds back into both demand and participation. [Rejecting P3] Critics contest the comparison between economies. Openness is bound up with size, location, institutions and development, so similar employment levels across economies of different openness may reflect those other factors rather than the irrelevance of trade.