Alex Tabarrok at Marginal Revolution points us to an incredible yet thoroughly unsurprising story. The U.S. imposed import tariffs on wire hangers from China after several American producers accused Chinese producers of dumping. Brandon Fuller at the Aplia Econ Blog calculated how much it's costing us to protect the jobs in the U.S. wire hanger manufacturing business, and the numbers are astounding:
According to the NPR story, there are roughly 30,000 dry cleaners in the U.S., and on average, each pays an additional $4,000 per year due to the hanger tariff. This indicates an average annual cost of 30,000 firms x $4,000 per firm = $120 million. According to the U.S. International Trade Commission's report, U.S. employment in wire hanger manufacturing was 564 workers in 2004 and fell to 236 workers by 2006. Let's assume that employment in this sector would have fallen to zero in the absence of the tariff, and that with the tariff, employment will recover to 2004 levels. In other words, assume the tariff "saves" 564 jobs. Dividing the cost of the tariff to U.S. dry cleaners ($120 million year) by the number of jobs saved (564 jobs) indicates that each job saved costs about $212,765 per year. Keep in mind that the typical full-time worker in this sector earns about $30,000 per year. Even if we assume that industry employment doubles, the cost of the tariff is still roughly $120,000 per job.That's right, we're paying $212,765 per year to save $30,000 per year jobs. Incredible. But what may be even more incredible is that an industry with only 236 workers was able to wield enough influence to secure such an expensive tariff. I know public choice theory is particularly applicable when it comes to the U.S. tariff schedule, but jeebus! 236 workers!