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News from EPI Growing trade deficit with China cost the U.S. economy $37.0 billion in lost wages in 2011

The trade deficit with China cost the U.S. economy $37.0 billion in lost wages in 2011, a new Economic Policy Institute report finds. Annual wage losses will increase if the U.S. trade deficit with China increases, as it did in 2012. In Trading Away the Manufacturing Advantage: China Trade Drives Down U.S. Wages and Benefits and Eliminates Good Jobs for U.S. Workers, EPI Director of Trade and Manufacturing Policy Research Robert E. Scott shows that even when reemployed in non-trade industries, the 2.7 million workers displaced by the U.S. trade deficit with China lost $13,505 per worker in 2011, for a wage loss total of $37.0 billion. Minorities, in particular, suffered large trade-related wage losses, with net wage losses totaling $10.1 billion.

“The displacement of manufacturing and trade-related jobs has been extremely costly for the economy, hitting America’s working families especially hard,” said Scott. “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.”

Minority workers were particularly hard hit, suffering trade-related wage losses of $10,485 per worker in 2011.  For all 958,800 minority workers displaced by growing China trade deficits, net wage losses totaled $10.1 billion per year.

Average wages in manufacturing are 16.1 percent higher than average wages in the economy, and 18.4 percent higher than average wages in all other industries. The displacement of these jobs has been particularly hard on workers with a high school degree or less education. Nearly half (47.7 percent) of manufacturing workers have a high school degree or less education.

Access to employer-sponsored health insurance has also declined. More than two-thirds of manufacturing workers (67.8 percent) have employer-sponsored health insurance,15.5 percentage points more than the average “strongly attached” private-sector worker  in the total workforce (only 52.3 percent of such workers have employer-sponsored health benefits).

In addition, the U.S.-China trade deficit displaced nearly 1.1 million jobs in computer and electronic equipment between 2001 and 2011, including a large number of high-wage jobs for college educated workers. 52.5 percent of workers in computer and electronics had a bachelor’s degree or more education (compared with 33.8 percent of workers in non-traded goods industries), and nearly three-fourths (74.3 percent) of the workers in this industry earned wages in the top half of the income distribution. Some of the best minority job opportunities in the country were displaced by growing trade deficits with China in the computers and electronic equipment industry between 2001 and 2011. The loss of more than 1 million jobs in computers and electronic equipment between 2001 and 2011 eliminated a net 369,000 good minority jobs (34.7 percent of the jobs displaced in this industry). This was 2.5 percentage points more than the minority share of total U.S. employment (32.2%).

Scott said, “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.”