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Trade With China Destroys American Jobs, Drags Down American Wages: Study

China Trade

The Huffington Post   First Posted: 09/27/11 07:47 PM ET Updated: 11/27/11 05:12 AM ET

The explosion in Chinese exports in recent years has resulted in a flood of inexpensive goods for American consumers. It may have also come at a large cost to American jobs and wages.

The U.S. has lost nearly 2.8 million jobs in the past decade as manufacturing in China has become cheap and plentiful, according to a recent report from the Economic Policy Institute. The job losses have affected all 50 states and the District of Columbia, with California, Texas, New York and Illinois being especially hard hit.

With Chinese exports to the U.S. far outpacing American exports to China, U.S. manufacturing has suffered particularly, with 1.9 million jobs in that sector evaporating since 2001 as a result of the trade gap.

More than a third of the workers who lost manufacturing jobs ended up dropping out of the labor force, the EPI notes, while those who managed to find new jobs saw their average wages reduced by more than 10 percent.

The job losses of the past decade, though, are only the most recent chapter in a much longer story. Since 1990, rising unemployment, falling wages and declining labor-force participation rates for individual counties all appear to be correlated with how much those counties are exposed to competition from China.

This information comes from a recently published study conducted by three economists, who compared trade data for local U.S. markets on a county-by-county basis and found some alarming results.

Not only does trade with China push down wages and drive up unemployment, the study authors found, but it also takes a bite out of U.S. government revenue in the form of unemployment insurance and social-services assistance to laid-off workers.

These losses offset what has historically been seen as the major economic advantage from the U.S.-China trade relationship -- cheap goods for American consumers. Even that is not as sure a prospect as it once was, since rising wages for Chinese workers may eventually drive the price of exports up,

Critics argue that China has pulled so far ahead of the U.S. in the exports game because it has taken steps to keep the value of its currency artificially low, thus making its own exports to the U.S. extremely cheap.

China's low-valued currency is also believed to have played a role in creating the housing bubble that eventually triggered the financial crisis and Great Recession, and today it's seen as a factor keeping the global economy from recovering more quickly.

Even though China's trade boom has had ancillary benefits for some other countries -- notably Germany, which sells China the equipment it needs for manufacturing -- its harmful effects on the U.S. labor market have been greater than previously realized, according to the authors of the study on trade exposure.

President Obama has come under criticism from the right and the left alike for not doing more to confront China on the alleged devaluation of its currency. Next week, the Senate will consider a bill that proposes to forbid exports into the U.S. from any country found to be manipulating the value of its currency -- a measure that seems pointed at Chinese policymakers.

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