Trade Deficit Wiped Out U.S. Factories,
Displacing 2.1 Million Workers, EPI Reports
By Ben Penn
Oct. 1 — The widening U.S. trade deficit with China has removed 2.7 million jobs from the U.S. economy between 2001 and 2011, more than 2.1 million of which were in manufacturing, the Economic Policy Institute estimated Sept. 30.
In the report, “Trading Away the Manufacturing Advantage,” EPI economist Robert E. Scott found that the growing trade deficit with China caused the displaced workers to earn significantly less per year while receiving fewer benefits, and that minorities—described in the report as black, Hispanic, Asian and “other”—and those with less education have disproportionately suffered at the hands of this policy.
“At a time when we are still digging our way out of the recession and good jobs with fair wages are hard to find, policymakers should eliminate China's currency manipulation and other unfair trade practices, which will greatly reduce the trade deficit and will support creation of millions of good jobs in the United States,” Scott recommended Sept. 30 in an accompanying statement.
Accounting for about three in four of the eliminated jobs, the manufacturing industry, EPI pointed out, is an excellent source of economic mobility for low-wage Americans. About 48 percent of manufacturing workers have not advanced beyond a high school education, yet the average factory worker still earns 16.1 percent more than the average American worker, according to Scott's analysis of government data.
Displaced Workers Earn $13,505 Less in 2011
The number of trade deficit induced displaced workers—derived from estimating the number of workers needed to produce the volume of U.S. exports and subtracting the total jobs in China required to produce imported goods, which otherwise would have existed in the U.S.—has soared steadily since 2001, EPI said.
As the trade deficit with China rose to $301.6 billion in 2011 from $84.1 billion in 2001, the number of displaced workers increased to 2.7 million from about 970,000.
“The displacement of manufacturing and trade-related jobs has been extremely costly for the economy, hitting America's working families especially hard,” Scott said. “Allowing the U.S.-China trade deficit to continue growing would eliminate many more jobs in manufacturing—a bedrock of the U.S. economy—and further erode the wages of U.S. workers.”
Upon making the conservative assumption that all workers displaced by the trade deficit with China have since been re-employed, each worker lost an average of $13,505 in 2011 compared with the worker's previous salary, EPI reported.
This is explained by a shift in “U.S. jobs from better-paid traded-goods industries into jobs in nontraded sectors where wages are significantly lower on average,” Scott wrote.
And with a majority of displaced workers comprised of former manufacturing employees moving to non-manufacturing sectors, the trade deficit also hurt workers' ability to collect benefits. For instance, 68 percent of manufacturing workers receive employer-sponsored health insurance, compared with 52 percent of the overall private sector workforce, the study found.
EPI Updates 2010 Study by Adding Demographics
The report updated a 2010 EPI study, also by Scott, that held the trade deficit responsible for 2.4 million eliminated U.S. jobs between 2001 and 2008, 1.6 million of which were in manufacturing (24 LRW 523, 4/1/10).
But in his follow-up research, Scott examined the impact on individual racial and educational groups, finding for instance that minorities accounted for 35.0 percent of total displaced workers between 2001 and 2011, 2.8 percentage points higher than the minority workforce's share of all nontraded sectors of the economy. By contrast, white workers comprised 65.0 percent of displaced workers, 2.9 percentage points less than their share of nontraded jobs.
“This contributed to the growing gulf between wages earned by white workers and minority workers, and the general rise in income inequality in the United States,” Scott noted.
The educational breakdown showed the trade deficit had a disproportionately negative effect on both workers at the bottom and top of the achievement ladder. There were 997,000 displaced workers with less than a college education, or 36.4 percent of all displaced workers—0.5 percentage point more than the share of workers with less than a college education in nontraded positions.
Displaced workers with a bachelor's degree or more (1.1 million) accounted for 38.5 percent of jobs displaced, but represented 43.2 percent of nontraded jobs.