Are trade deals good for America?
Both Bernie Sanders and Donald Trump are blaming free-trade deals for the decline of working-class jobs and incomes.聽Are they right?
Clearly, America has lost a significant number of factory jobs over the last three decades. In 1980,Americans worked in manufacturing. Now it鈥檚 .
Today Ohio has a manufacturing jobs than it had in 2000. Michigan is down .
Trade isn鈥檛 the only culprit. Technological change has also played a part.
When I visit one of America鈥檚 remaining factories, I rarely see assembly-line workers. I don鈥檛 see many workers at all. Instead, I find a handful of technicians sitting behind computer screens. They鈥檙e linked to fleets of robots and computerized machine tools who do the physical work.
There鈥檚 a lively debate among researchers as to whether trade or technology is more responsible for the decline in factory jobs. In reality the two can鈥檛 be separated.
Were it not for technological breakthroughs we wouldn鈥檛 have the huge cargo containers, massive container ports and cranes, and satellite and Internet communications systems that have created highly-efficiently worldwide manufacturing systems.
These systems have relocated factory jobs from the United States to Asia, especially to China. Researchers find the biggest losses in American manufacturing started in 2001 when China joined the World Trade Organization, requiring the U.S. to lower tariffs on Chinese goods.
MIT economist David Autor and two co-authorsthat between 2000 and 2007 the United States lost close to a million manufacturing jobs to China 鈥� about a of the total decline in those years. Robert Scott of the Economic Policy Institute puts the loss since then at about.
This doesn鈥檛 mean free trade has been entirely bad for Americans. It鈥檚 given us access to cheaper goods, saving the typical American thousands of dollars a year.
A recent study by economists at UCLA and Columbia University found that trade has increased the real incomes of the U.S. middle class by , and even more for those with lower incomes.
But trade has widened inequality and imposed a particular burden on America鈥檚 blue-collar workers.
If you鈥檙e well educated, free trade has given you better access worldwide markets for your skills and insights 鈥� resulting directly or indirectly in higher pay.
On the other hand, if you鈥檙e not well educated, the trade deals of the last quarter century have very likely taken away the factory job you (or your parents or grandparents) once relied on for steady work with good pay and generous benefits.
These jobs were the backbone of the old American middle class. Now they鈥檙e almost all gone, replaced by lower-paying service jobs in places like retail stores, restaurants, hotels, and hospitals.
The change has been a dramatic. A half century ago America鈥檚 largest private-sector employer was General Motors, whose full-time workers earned an average hourly income (including health and pension benefits) of around $50, in today鈥檚 dollars.
Today America鈥檚 largest employer is , whose typical employee earns just over $9 an hour. A third of Walmart鈥檚 employees work less than 28 hours per week and don鈥檛 even qualify for benefits.
The core problem isn鈥檛 really free trade, or even the loss of factory jobs per se. It鈥檚 the demise of an entire economic system in which people with only high-school degrees, or less, could count on good and secure jobs.
That old system included strong unions, CEOs with responsibilities to their employees and communities and not just to shareholders, and a financial sector that didn鈥檛 demand the highest possible returns every quarter.
Trade has contributed to the loss of this old system, but that doesn鈥檛 necessarily mean we should give up on free trade. We should create a new system, in which a greater share of Americans can be winners.
But will we? The underlying political question is whether the winners from America鈥檚 current economic system 鈥� people with college degrees, the right connections, and good jobs that put them on the winning side of the divide 鈥� will support new rules that widen the circle of prosperity to include those who have been on the losing side.
Those new rules might include, for example, a much larger Earned Income Tax Credit (effectively, a wage subsidy for lower-income workers), stronger unions in the service sector, world-class education for all (including free public higher education), a single-payer healthcare plan, more generous Social Security, and higher taxes on the wealthy to pay for all this.
If the winners refuse to budge, America could turn its back on free trade 鈥� and much else. Indeed, there鈥檚 no telling where the anger we鈥檝e seen this primary might lead.聽
This article first appeared at .
