Trade is a hot topic on Capitol Hill this year. President Obama has asked members of Congress for “fast track” trade promotion authority in order to finalize proposed trade deals with Asia and Europe that set the stage for growing, trade-related job displacement.
[Reposted from the Economic Policy Institute blog | Robert Scott | February 11, 2015]
One of the president’s core, frequently repeated arguments for these trade and investment deals is that “our businesses export more than ever, and exporters tend to pay their workers higher wages.” But that’s less than half the story. Trade is a two-way street, and talking about exports without considering imports is like keeping score in a baseball game by counting only the runs scored by the home team. It might make you feel good, but it won’t tell you who’s winning the game. Sadly, when it comes to trade and wages, trade is driving down the average wages of American workers because the United States runs large trade deficits with the world as a whole, including many countries in Asia and Europe—the regions targeted in current trade negotiations.
A case in point is provided by U.S. trade with China, which was responsible for nearly half (46.5 percent) of our $736.8 billion goods trade deficit in 2014. Jobs in industries exporting to China did pay well in 2009-2011 (the last years for which we have complete wage data)—an average of $872.89 per week, or 10.3 percent more than workers making non-traded goods and services (who earned only $791.14 per week), as shown in the figure below. However, workers in import-competing industries were paid even better—an average of $1,021.66 per week, or 29.1 percent more than workers in non-traded industries.
Although export jobs pay somewhat better than non-traded jobs, China trade supported relatively few export jobs in the United States. Only 538,000 U.S. jobs were supported by the growth of exports to China between 2001 and 2011, as shown in the next figure. On the other hand, the growth of U.S. imports from China in this period displaced nearly 3.3 million U.S. jobs, or more than six times as many jobs as were supported by growing U.S. exports to China.
Even if every worker displaced by imports from China found another job either making exports to China or in a non-traded industry, those workers still would have suffered massive losses—over $148 per week ($7,736 per year) if they were lucky enough to find a job in an export industry, and over $230 per week ($11,987 per year) when moving from import-competing to non-traded goods. When it comes to trade, everything is relative to the wage you made in your last job.
Overall, 2.7 million U.S. workers were displaced by the growing U.S.-China trade deficit between 2001 and 2011. If rehired, these “net-displaced’ workers were pushed into jobs in non-traded industries, as shown in the figure above. All workers displaced by growing imports from China suffered total wage losses of $37 billion in 2011 alone.
And jobs and wages directly displaced by trade with China and other low wage countries are, unfortunately, just the tip of the iceberg when it comes to trade and wages. My colleague Josh Bivens has shown that competition with low-wage workers has reduced the wages of all workers without a 4-year college degree by an average of $1,800 per year for a full-time full-year worker. More than 100 million such workers (more than two-thirds of the entire labor force) have experienced such losses, which will repeat or grow in the future as trade with low-wage countries expands.
Examined in isolation, jobs in industries supported by exports to China look good (at least when they are compared to jobs in non-trade industries). But those jobs come at a huge price to workers displaced by imports, and to all workers forced to compete with the growing surge of imports from low-wage countries. When it comes to trade, a little information can be a very dangerous thing.