EPI Research Summary: Trade Policy's impact on jobs and wages in Ohio…

EPI Research Summary:
Trade Policy's impact on jobs and wages in Ohio and nationally
Robert Scott
February 29, 2008


   ·   After NAFTA took effect in 1994, growing U.S. trade deficits with Mexico and
       Canada through 2004 eliminated a net total of more than 1 million jobs in the
       United States, and most of those jobs were in the manufacturing sector (65%,
       659,000 jobs). Source: NAFTA Revisited by Robert Scott.

   ·   The United States' trade deficit with Mexico in autos and auto parts increased
       from $2 billion in 1993 to $31 billion in 2007 (in constant 2007 dollars). The
       growth in the deficit in this industry alone has eliminated almost 366,000 jobs in
       the U.S. in this period. Source: Ohio Voters and Candidates Take a Dim View of
       NAFTA by Ross Eisenbrey.

   ·   Manufacturing and other trade-related jobs offer better pay and benefits than jobs
       in non-traded industries. The jobs displaced by NAFTA would have paid, on
       average more than $800 per week, while the average job in the rest of the
       economy paid only $683 per week. Thus, the displacement of 1 million jobs
       from traded to non-traded goods industries reduced wage payment to U.S.
       workers by $7.6 billion in 2004 alone. Source: NAFTA Revisited.

   ·   In 2006, the impact of trade flows increased the inequality of earnings by roughly
       7%, with the resulting loss to a representative household (two earners making the
       median wage and working the average amount of (household) hours each year)
       reaching more than $2,000. This amount rivals the entire annual federal income
       tax bill paid by this household. Source: Globalization and American Wages by
       Josh Bivens.

   ·   In Ohio, increased trade deficits after NAFTA was enacted displaced about
       50,000 jobs between 1993 and 2004, the fifth highest job loss total among the
       U.S. states, in terms of the number of jobs lost, and as a share of state
       employment. Ohio is one of only two states that have suffered a net loss in total
       jobs since March, 1998 (Michigan is the other), and one of only four states that
       have failed to experience a recovery in employment since the 2001 recession
       (Massachusetts, Illinois and Michigan are the others). Source: NAFTA Revisited
       and The Importance of Manufacturing by Rob Scott

   ·   Between 1993 and 2002, the U.S. Department of Labor certified that 75 plants in
       Ohio, employing more than 12,000 workers were closed due to shifts in
       production to Mexico and/or Canada. Source: Public Citizen's NAFTA-TAA
       (U.S. Dept. of Labor certified plant closings) database.
·   Professor Susan Helper of Case Western Reserve University in Cleveland reports
    that last week another manufacturer announced a plant closing in the state of
    Ohio, the 82nd in the last twelve months. This time it was Johnson Rubber, a 113-
    year old maker of floor mats and rubber boots for steering columns. Source:
    Helper op-ed, forthcoming. WARN database.

·   Job loss due to increased trade deficits after NAFTA's enactment reduced wage
    payments to Ohio workers by at least $370 million in 2004 alone (Ohio's share of
    the $7.6 billion in total U.S. losses in wage payments). Source: NAFTA
    Revisited.

·   Between 2001 and 2006, Ohio ranked 48th and 34th, respectively, out of the 50
    states in total and per capita GDP growth. Source: Bureau of Economic
    Analysis, Gross Domestic Product by State.

·   NAFTA has harmed workers in Mexico and Canada as well, as workers have
    been forced into a "race-to-the-bottom" in wages. Real hourly wages for
    manufacturing workers in Mexico fell 12% between 1993 and 2006, and a million
    jobs were lost in Mexican corn production in the 1990s. Source: Bureau of Labor
    Statistics and International Monetary Fund, International Financial Statistics, and
    NAFTA Revisited.

·   NAFTA became the prototype for hundreds of corporate-backed trade deals
    negotiated by the Clinton and Bush administrations, including the formation of
    the WTO in 1994 and China's WTO accession in 2001. Job losses from China
    have now overwhelmed those from NAFTA--the $230 billion U.S. trade deficit
    with China in 2006 displaced 2.7 million U.S. jobs. Source: Costly Trade with
    China by Robert Scott

·   The growth in U.S. trade deficits since 1998 is responsible for a large share of the
    loss of 3.7 million U.S. manufacturing jobs, plus hundreds of thousands of
    supporting, trade-related jobs in other, high-wage industries such as software,
    legal, engineering and accounting services. Job losses in manufacturing have not
    occurred because of any acceleration in productivity growth in recent years.
    Source: Manufacturing Job Loss: Productivity is not the Culprit by Robert Scott.
    Growing trade deficits explained at least a third (roughly a million) of the loss of
    manufacturing jobs through 2004. Source: Trade Deficits and Job-Loss in
    Manufacturing: Correlation and Causality by Josh Bivens.

·   Reversing the damage done by globalization and NAFTA-type trade deals to
    workers in the United States and other countries demands a comprehensive
    strategy that is of sufficient scale and scope to respond to the global challenge,
    including:
        o Trade strategies that put working people first.
       o Increasing investment in people (e.g. Danish model of active labor market
           policies, with public expenditures of 2-5% of GDP, equivalent to $300-
           $700 billion in the U.S. economy).
       o Increasing investment in people, infrastructure, and new technologies to
           enhance competitiveness, including clean energy technologies.
       o Restoring the lost bargaining position of workers (e.g. card check and the
           Employee Free Choice Act, and recognition of ILO core labor standards).
       o Building the foundation for a global social contract to ensure health care,
           pensions and universal unemployment insurance for all workers.
    Source: Globalization that Works for Working Americans by Jeff Faux.

·   We should begin by reforming NAFTA. Incorporation of enforceable labor and
    environmental standards is an essential starting point, but much more is required
    to ensure rising living standards for workers in all three countries. We can begin
    by examining NAFTA's impacts on Mexico, where imports of highly subsidized
    U.S. grains undercut Mexico's rural economy and drove 2 million family farmers
    off the land. With lack of enforceable labor standards, falling wages and no jobs
    in the cities, they swelled the migrant stream north, so that after NAFTA, illegal
    immigration doubled. The Mexican government predicts that out-migration to the
    U.S. will continue at 500,000 per year for the next 15 years. The U.S. and Canada
    should back a development fund to generate job growth in Mexico which will
    support an increase in education and other social spending, and investments in
    schools, the environment and other critically needed, job-generating infrastructure
    projects. Source: Overhauling NAFTA by Jeff Faux.

·   If the U.S. seeks to re-negotiate NAFTA, Mexico and Canada will also have a list
    of reforms that they would like to achieve. Immigration Reform will be high on
    the list for both the U.S. and Mexico, and should be included in a new NAFTA.
    Immigration reform should find ways to authorize the flows and make
    immigration an integral component of economic and social policies. Effective
    immigration policy must contain a comprehensive mix of measures, including: a)
    stronger border controls and internal enforcement processes; b) a secure work
    authorization system with strong penalties against employer and immigrant
    violators; c) a means to adjust the status of people who have lived and worked
    satisfactorily in the United States for some years, accompanied by a credible
    signal that there are unlikely to be future status adjustments; d) an immigration
    standard that gives greater weight to the country's labor requirements. Source:
    Getting Immigration Reform Right by Ray Marshall.