Monday, August 8, 2016

American Middle Class Workers Shouldn’t Be the Fall Guy for Everyone Else’s Prosperity

The impact of trade agreements is becoming central to this year’s presidential campaign.  A New York Times editorial “Rage Against Trade” (August 7) says that the rage is misplaced because although trade has cost some jobs through cheap imports, the main factor in the loss of factory jobs has been automation.

While the point about automation is well-taken, the editorial makes no mention of the loss of jobs caused by shipping American jobs overseas, which has been made possible to a large extent by these trade agreements, as well as improved technology such as container ships which have reduced transportation costs.  It’s not the cheap imports from Asia, as such, that has hurt the American worker, it is the loss of jobs caused by American firms replacing American workers with Asian workers; the imports are the products of American companies made overseas.

The companies are doing well, only American workers are suffering.  According to a 2012 Wall Street Journal analysis, “Thirty-five big U.S.-based multinational companies added jobs much faster than other U.S. employers in the past two years, but nearly three-fourths of those jobs were overseas.”  For a more detailed analysis, see the excellent article by Robert E. Scott, “Offshore Production Has Really Hurt U.S. Manufacturing” in The New York Times, online, March 17, 2016.

And this competition for their jobs from overseas workers has enabled American corporations to not provide only token raises to middle class American workers for decades.  These workers have not just been hit by a loss of jobs.  Those that still have jobs have seen their wages stagnate since the mid-70s.

I am not an economist.  There is no question that trade agreements benefit consumers through the availability of cheaper products which also keep the inflation (and interest) rates down.  And they certainly benefit producers and their shareholders.  

The only group left holding the bag is the middle class, mostly blue-collar, American worker.  Their plight is huge, and not just financially but socially/psychologically.  Beyond their personal plight, the negative drag of their loss of income on the overall economy is not insubstantial.  And as we’re seeing this year, the political ramifications are substantial as well.

I don’t know what the alternative is at the stage of the game.  I do know that we cannot, as Trump suggests, just rip up these trade agreements and walk away from the concept of global trade.  That would certainly bring our economy down, which would be bad for everyone including the aggrieved white, non-college-educated, American middle class worker.

I do know that this major group of American workers … and their families … cannot continue to be the fall guy for corporations getting richer and consumers benefiting from cheaper goods.