$826,000

$812,000

$685,000

$635,000

$603,000

$479,000

$263,000

$247,000

$199,000

$168,000

$139,000

TABLE 20.2 Cost to U.S. Consumers of Saving a Job through Protectionism

(Source: Federal Reserve Bank of Dallas)

Why does it cost so much to save jobs through protectionism? The basic reason is that not all of the extra

money that consumers pay because of tariffs or quotas goes to save jobs. For example, if the government

imposes tariffs on steel imports so that steel buyers pay a higher price, U.S. steel companies earn greater

profits, buy more equipment, pay bigger bonuses to managers, give pay raises to existing employees—and also

avoid firing some additional workers. Only part of the higher price of protected steel goes toward saving jobs.

Also, when an industry is protected, the economy as a whole loses the benefits of playing to its comparative

advantage—in other words, producing what it is best at. Therefore, part of the higher price that consumers pay
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