Feature Story

May 7, 2008

Is Globalization to Blame for U.S. Workers' Troubles?

From Economic Policy Institute:

On one shore are voters increasingly anxious about globalization and its effect on their jobs and communities.

On the other are economists, policy makers, and pundits who maintain that trade is good for the economy, that the wider public is simply misguided about its benefits, and that politicians who sympathize with those concerned about globalization are pandering to special interests at the expense of the wider economy.

This latter group relies heavily on the suggestion that "all economists believe" globalization is good for the vast majority of American workers.

This reliance is odd given that mainstream economics actually argues that there are plenty of reasons for concern about globalization's effect on the majority of American workers.

This primer highlights two issues in particular that should worry American workers about globalization: job losses stemming from growing trade deficits; and downward wage pressure for tens of millions of American workers.

First, trade creates new jobs in exporting industries and destroys jobs when imports replace the output of domestic firms.

Because trade deficits have risen over the past decade, more jobs have been displaced by imports than created by exports.

Rather, they are a conservative measure of the involuntary job displacement caused by these growing deficits and an indicator of imbalance in the U.S. labor market and wider economy.

Trade and wages While job-loss caused by rising trade deficits is the most visible effect of globalization, its impact on wages is a concern to an even much larger number of workers.

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