Government to the Rescue again...

Our Federal Government, at the request of a small hanger manufacturer, has imposed a tariff on wire hangers. These are the same wire hangers that dry cleaners use all over the country. Here is the story from NPR.

The Marginal Revolution Blog has this commentary...

Advocates of trade restrictions often argue that protection will save jobs. Since we can observe price and cost increases associated with trade restrictions, we can estimate how much it costs to save each job in a protected industry. 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.

I would assume that most of the employees at M&B Hangers (the company in AL that wanted the tariff) does not pay many of their employees $212,765 per year. Let's assume they make $50K per year with benefits. So where does the other $162,765 go? My guess the owner of M&B Hanger is having a very good year at the cost of all those people that have their clothes dry cleaned. Another classic example of concentrated benefits and dispersed citizen cost.