Has trade weighed down wages?
It pays to go to college. And more and more, it will cost you down the road to skip it.
That's the gist of a report, released last week by the Economic Policy Institute (EPI), that studied the effect international trade has had on the wages of American workers.
It's findings hew to the results you'd expect: As countries trade, they develop specialties. The United States is making more and more products that require a lot of skill to produce, while the developing nations, with which it does business, dominate the low end of the market. The result? Wages for high-skilled workers in the U.S. have climbed, while wages for low-skilled workers -- those who don't have much schooling past a high school diploma -- have fallen off.
The report's author, Josh Bivens, found that trade with less-developed countries lowered wages in 2011 by roughly $1,800 for a full-time, full-year worker earning the average wage for employees without a four-year college degree.
That's a lot of macaroons per worker.
But that's not all. Bivens also points out that when Congress and the president talk about trade, they rarely acknowledge trade's effect on rising wage inequality here in the States. Sending all of our low-skilled work overseas via trade deals, Bivens argues, is even more costly for American workers than a policy that would permanently extend the Bush-era tax cuts by cutting funding for Social Security, Medicare, Medicaid, and unemployment insurance. Check out the following table from Bivens' report:
Benchmarking globalization’s impact on non-college-educated U.S. workers and households
* Annual income loss for a full-time worker earning average hourly wage for non-college-educated workers in 2011
** Annual income loss for a household of two workers supplying 3,500 hours of work per year while earning average hourly wage for non-college-educated workers in 2011
*** "Transfers" refers to programs such as Social Security, Medicare, Medicaid, unemployment insurance, and food stamps.Source: Author's analysis of Krugman (1995), Bivens (2008), Mishel et al. (2012), Furman (2007), Social Security Administration (2012), and CBO (2012). See the appendix for methodology.
To be clear, no one is expecting DC to make the Bush-era tax cuts permanent by cutting all of the aforementioned services, but Bivens has written up that hypotehtical situation to make a point.
"Increased trade with less-developed countries has resulted in much larger losses than would occur under this rather drastic policy shift," he writes on EPI's website. "This highlights the degree to which growing trade has harmed the living standards of noncollege workers."
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