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.
Study: "Trade" Deal Would Mean a Pay Cut for 90% of U.S. Workers
The verdict is in: most U.S. workers would see wage losses as a result of the Trans-Pacific Partnership (TPP), a sweeping U.S. "free trade" deal under negotiation with 11 Pacific Rim countries. That's the conclusion of a report just released by the non-partisan Center for Economic and Policy Research (CEPR).
TPP's corporate proponents have tried to sell the NAFTA-style deal to the U.S. public and policymakers by claiming that it will result in gains for the U.S. economy. They often cite a study from the Peterson Institute for International Economics that used sweeping assumptions to project a tiny benefit from the TPP. We brought that study down to size back in January, showing that, even if one accepts the pro-TPP authors' litany of optimistic assumptions, the much-touted "benefit" from the TPP would amount to an extra quarter per person per day.
As this week's CEPR report points out, the pro-TPP study projected a meager 0.13 percent increase to U.S. gross domestic product (GDP) by 2025 if the controversial TPP would be signed, passed, and implemented. By comparison, economists have estimated that Apple's iPhone 5 contributed a 0.25 - 0.5 percent increase to U.S. GDP.
That is, the TPP's total contribution to the U.S. economy is expected, by TPP proponents, to be about one half to one fourth of the contribution of the latest iPhone version.
But what would such a paltry GDP rise mean for your pocket? Answering that requires taking into account the increase in income inequality that typically results from such "free trade" deals. The author of the CEPR report, economist David Rosnick, explains, "There are winners and losers from trade, and research has shown that trade contributes to inequality. In fact, it would take only a very small contribution to inequality due to trade to wipe out all of the gains that most workers would get from this agreement." Rosnick then uses the empirical evidence on the trade-inequality relationship and shows that even taking the most conservative estimate of trade's contribution to inequality (that trade is responsible for just 10% of the rise in inequality), the losses from projected TPP-produced inequality indeed would "wipe out" the tiny projected gains for the median U.S. worker.
That is, as a result of the TPP, the median U.S. income would fall. It would not just fall in comparison to the incomes of the wealthy (which would rise). It would fall in absolute terms, forcing middle-class U.S. workers to take home less in 2025 than they earn today.
Such wage losses would afflict most U.S. workers. Rosnick shows that if we assume that trade has contributed just 15% of the recent rise in inequality (a still conservative estimate), then the TPP would mean wage losses for all but the richest 10% of U.S. workers. So if you're making less than $87,000 per year (the current 90th percentile wage), the TPP would mean a pay cut. And if you're making more than $87,000 per year, you may still be a tad concerned about how the deal could jeopardize the safety of your food, threaten clean water protections, roll back Wall Street reforms, etc.
Prior to today, not only were non-participants at the Capitol warned of possible arrest, but in some cases they were actually arrested.
Here's video of Dominic Salvia, a complete non-participant (purely media), being arrested while reporting the protest for his radio show.
Dominic sent me the link and wrote me "Here is a third party link recording of arrests. At 10.43 minutes, I can be seen entering the camera shot from lower right. This video proves at no point was I a participating member of the protest, and was simply taking pictures, notes and engaging in brief conversations as media would do. My arrest begins at 14.00 minute mark."
Dominic Salvia is wearing a white shirt, has longish dark hair, and has glasses perched on his head.
Here's a statement the ACLU released about his arrest:
##### ACLU Statement on Arrest of Media Covering Capitol Protests
FOR IMMEDIATE RELEASE: July 31, 2013 CONTACT: Sarah Karon, ACLU of Wisconsin, (608) 469-5540; firstname.lastname@example.org
MADISON – In the past week Capitol Police have arrested and cited dozens of protestors, some as old as 85, who have participated in peaceful demonstrations inside the Capitol rotunda.
On Wednesday, July 24, Capitol Police arrested Dominic Salvia, the host of “The Devil’s Advocates Radio,” a talk show on Madison’s 92.1 FM The Mic. Salvia was covering a protest inside the rotunda as a member of the media.
Today the ACLU of Wisconsin issued the following statement regarding Salvia’s arrest:
“The arrest of a member of the media illustrates the vagueness of the Capitol permit rules, which allow police to prosecute not only ‘participants’ in an event that is declared unlawful, but also ‘spectators.’ If spectators can include media, these rules are overly broad.”