Wednesday, October 5, 2016

Is trade the real culprit for job losses, and what country is the greater "culprit"?

According to a reports by CNN Money and Bloomberg, in 1960 25 percent of all American workers were employed in manufacturing jobs. In 1980, it was still at 20 percent. But today, only one-in-twelve Americans are employed in manufacturing jobs, and the majority of those are low-wage, low-skill positions. While the “average” wage for a manufacturing job is $20-an-hour, that figure is skewed upward by older workers who have been employed for most of their lives, probably under union stipulations that mandated yearly wage increases. But younger workers new in the workforce do not have such advantages, and often start at near minimum wage—and stay there for years.

What happened since 1980 should only shock those who wish to remain  purposefully within the dark corners of their mind. One reason is automation, which has increased production-per-worker many fold, leading to a sharp decline in required labor. Another reason is the decrease in consumer spending for manufactured goods; economists claim that this is a “natural” expectation, except that they base their “facts” on compiled data that has little relevance in the daily lives of most people. Low-middle-to-low-income households can barely keep up payments to keep a roof over their heads and transportation to get them to their jobs; they simply cannot afford to purchase “new” cars or new refrigerators or new washing machines every five or ten years. This while you have upper-level managers in large corporations pay themselves seven, eight and even nine digit salaries. 

Which brings us to the factor that Donald Trump claims is the principle reason for job losses in the U.S.: Trade, and specifically, the North American Free Trade Agreement. Now, economists have the audacity to claim that trade has actually increased “real” income for many Americans, even as much as by 62 percent for low-income people. They base this claim on the supposition that imported goods are much cheaper than the domestic variety, so low-income people “benefit” abnormally from cheap goods. The problem with this is that everything is relative. Relative to what? When I was in high school, a local sheet-metal cutting job paid $6.25 for an entry level position. A pack of Hostess Twinkies cost 40 cents. Today, an entry level job like that might pay $10-an-hour where I reside; a pack of Twinkies that are 1/3 the size of the original costs $1.69 at minimum at your local 7-Eleven. Wage and price comparisons are fairly consistent with this across the spectrum of consumer goods. Yes, foreign made goods are cheaper, but it is clearly a false assumption to say that low-income are “better off” today than “low-income” were several decades ago, because prices on most goods ate-up a  much lower percentage of one’s income. 

But if trade is the real “culprit” in job losses, what countries are principally to blame? During his recent debate with Clinton, Trump brought-up NAFTA like it was a racial slur. Canada is also part of the agreement, but people tend to forget that; the dollar value of Canadian exports to the U.S. far outweighs its imports from the U.S., mainly because of its oil exports. But the real “enemy” is of course Mexico because Mexicans just happen to be the hate flavor of the past decade or so.  Bloomberg, however, tells us that “Their Exhibit A has been the North American Free Trade Agreement, which they say caused the exodus of hundreds of thousands of U.S. factory jobs to Mexico. But government statistics show that U.S. manufacturing employment actually rose during the five years after NAFTA took effect in 1994, temporarily reversing the long-term decline.”  Furthermore, “a study by the nonpartisan Congressional Research Service concluded that NAFTA ‘did not cause the huge job losses feared by the critics.’”

Like Canada, Mexico imports about two-thirds the dollar value of what it exports to the U.S. But there is a much more significant disparity with the country that people just don’t get as worked up over: China. The U.S. imports 10 times the dollar value of its exports to China. According to Bloomberg, 

“Economists Justin Pierce of the Federal Reserve and Peter Schott of Yale University found that the biggest U.S. manufacturing employment declines and largest surges in imports were in products for which China permanently locked in the greatest reductions in tariffs as part of its entry to the WTO. Industries such as apparel, leather goods, plastic plumbing fixtures and surgical and medical equipment sustained substantial hits, they concluded. ‘Something big happens’ around the time China entered the WTO, Schott said. ‘In fact, in the industries that were more affected, that’s where you see the job loss occurring.’” It is estimated that since the entry of China into the World Trade Organization, ostensibly to keep them in line with international regulations, one million manufacturing jobs in the U.S. have been lost to China. This may be an underestimation (or doesn’t take into account trade with other Pacific Rim countries) since an estimated 5 million manufacturing jobs have been lost total since 2000.

Nevertheless, economist point to the “benefits” to consumers, by way of cheaper goods, and the fact that unemployment remains fairly low since service oriented job have replaced manufacturing jobs. Of course, most of these jobs are lower-paying that the manufacturing jobs that were lost, but there are other “factors” and trade should not be the principle villain.

But don’t tell that to Trump supporters, who see those dark little demons behind every problem, and NAFTA is now being used as a racist code word. But I dare anyone to go into a retail store and find a “Made in Mexico” label. They probably won’t find a single one; more likely, the will find a lot “Made in China,” with maybe one or two Vietnams or Pakistans or Macaus—and hardly anything “Made in the USA." 

But because China is synonymous with “cheap,” few people seem willing to acknowledge its effect on U.S. jobs. China is the next “superpower,” and the U.S. thinks nothing of becoming its economic pawn, because they don’t want to close the valve on cheap goods (and not always merely by price), in order for wages to remain low for most people, and the “surplus” used to pay CEOs. It is much easier to express hatred toward something you have no clue of what you are talking about.

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