Study: Trade Deficit With China Cost Florida 100,000 Jobs

The United States’ massive trade deficit with China cost Florida about 100,900 jobs between 2000 and 2007, with 17,000 lost last year, according to a new study.

The imbalance in trade between the two countries also suppressed workers’ wages by about $8,150 per worker, and $19.4 billion overall, according to the study by the Economic Policy Institute, a nonprofit think tank devoted to researching impacts of economic trends and policies.

“All manufacturing is facing a critical challenge, as we know, but what may surprise people is how hard workers in advanced technology are being affected,” said Scott Paul, Alliance for American Manufacturing executive director. “As China diversifies its export base — and it’s already expanding its electronic products, aircraft, auto parts and machinery — more American produces will be unfairly disadvantaged.”

Major findings of the study include:

  • Increased imports of computers and electronics account for nearly half of the $178 billion trade deficit between 2001 and 2007.
  • More than a quarter of last year’s $68 billion trade deficit came from advanced technology products. In comparison, the U.S. has a $15 billion trade surplus with the rest of the world in advanced technology products.
  • More than half of the jobs displaced by trade to China were in the top half of the country’s wage earners.

Paul said the skyrocketing trade deficit is caused by China’s manipulation of its currency and suppression of human rights to lower wages. The U.S. government should pressure China to honor its trade commitments, revalue its currency, eliminate questionable subsidies and enforce its labor and environmental laws, Paul said.

“We can strengthen jobs and manufacturing in America, but only if we take steps to stop China’s cheating,” he said. 

Source:  Jacksonville Business Journal

So, who is this “Economic Policy Institute”?  It’s a very leftist organization.  Twenty six percent of its financing comes from labor unions; 60% comes from unspecified “foundations”.  They are quite proud of having led the fight against privatizing social security (because the government can do a better job of spending the money supposedly being put aside for your retirement than you) and increasing minimum wage.

Where did they get these figures re job losses from?  Well, they compared employment in various sectors between 2001 and 2007.  They have this to say about the job losses:

The share of black workers displaced by China trade (10.0%, Table 8, column 3) was slightly less than their average share in the labor force (11.2%), and for Hispanic workers the share was only slightly more. At first glance, then, the racial impact may appear relatively benign, but this observation changes when one compares it to the lesser displacement among (non-Hispanic) whites. Moreover, the real losses for black workers and Hispanics can be assessed only through an examination of the absolute number of jobs lost and a closer look at what they mean for these workers.

Growing trade deficits displaced 230,065 black workers and 339,342 Hispanics. These jobs are even more important to African Americans and Hispanics than to other workers, for reasons illustrated in Table 9, which reports additional population statistics on education and wages by race for all workers. These data reflect the failure of the U.S. educational system to serve black and Hispanic minorities. Among black workers, 46.0% have a high school degree or less, 10 percentage points or 27.5% more than for white workers. For Hispanics, the situation is even worse, 65% having no more than a high school education, 29 percentage points or nearly double the rate of white workers.

The consequences of discrimination and lack of educational attainment for workers’ wages are illustrated in the bottom half of Table 9. Only 38.1% of black workers earn wages in the top 50%, as compared to 54.8% of white workers, and only 31.7% of Hispanics are in the top half of wage earners. The contrast is even starker in the top decile. Only 4.8% of all blacks earned more than $30.84 per hour in 2005-07, and only 3.9% of Hispanics. However, 11.5% of white workers were in this top-decile group, shares 140% larger than blacks and 192% larger than Hispanics.

The full implications of job losses for blacks and Hispanics can only be appreciated by comparing Tables 7 and 9. Table 7 showed that manufacturing (which absorbed more than two-thirds of job losses caused by growing trade deficits with China) provided nearly 25% more jobs for high-school-educated workers than did other sectors of the economy, and 13% more of those jobs were in the top half of the wage distribution. Thus, the manufacturing sector provides some of the best jobs available for black and Hispanic workers, who suffer from much lower levels of education and have much lower wages than white workers. Growing China trade deficits are a special tragedy for these workers, who lost more than half a million trade-related jobs between 2001 and 2007 alone.

What is not well understood is that even a job lost in apparel production can be a huge loss for a minority or immigrant worker. Such jobs are more likely to be unionized and to have benefits than alternative jobs outside of manufacturing. A job paying $9 or $10 per hour with benefits, and providing industrial experience, can be a lifeline and provide a ladder out of poverty for such workers. When this worker loses his or her job and the alternative is a near-minimum wage, non-union job, an important pathway out of poverty is washed away.18

The “other” workers shown in Tables 8 and 9 are largely Asians. They outperformed all other groups of workers in terms of education and wages, as shown in Table 9. However, they also lost a relatively large number of jobs (219,235 or 9.6% of all jobs lost), a share 53% greater than their share in the total labor force. These findings likely reflect the confluence of two factors: the very high share of Asian and other minorities with more than a college degree (42.1% of “other” workers, much higher than any other demographic group, as shown in Table 9) and the very large number of jobs lost in the high-tech computer and electronic products sector. Asian Americans and other minorities have been especially hard hit by growing China trade deficits.  (Read the entire study here.)

Oddly enough, in Florida the undereducated black and white workers have largely been displaced by illegal Hispanic workers.  I haven’t heard ANY complaints about that from this organization.

This organization likes to pretend that labor is the only or even the major factor in a company’s decision to locate overseas.  It isn’t.  The cost of manufacturing includes many things.  Cost of power to run the manufacturing business is a huge issue.  Getting a permit to build a new plant is another huge issue, particularly when expansion plans can be tied up in court for years because an environmentalist group decides that a butterfly species may be harmed by the construction process.  Meanwhile, politicians are busily and greedily deciding whether to implement a carbon tax or a carbon cap and trade system to “save the earth” (translation: Raise taxes). 

I suspect that when the carbon taxes/cap and trade systems become widespread, there won’t be any domestic industry left to tax.  Maybe we can all survive by doing each others’ nails at $25/hour. 

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