One of my neighbors is a fundraiser for UNC. As such, he runs into a lot of embittered textile factory owners, all of whom, as one might imagine, oppose CAFTA with all their being.
Since it is part of his job, after all, to raise money from embittered Tar Heel textile factory owners, he therefore opposes CAFTA as well, hitting on the supposed loss of U.S. manufacturing jobs whenever we get around to discussing the world trade situation.
Oddly enough, such discussions only seem to arise after we’ve indulged in a greater or lesser amount of his homebrew, so they are typically characterized by digressions into the relative historical importance of Lynyrd Skynyrd, the exact species classification of the bugs eating his yucca plant, and what to name the homebrew once we start to market it–(Skeeter Brew)–but mostly it falls along these lines.
Call: Manufacturing jobs!
And Response: Invisible hand!
C: China!
R: Demographics!
C: Deficit!
R: Percentage of GNP!
C: Manufacturing jobs!
R: Rising tide!
C: China!
And so on, until the beer runs out or someone plays the bladder card. It’s quite fun, if almost as ritualized as a Kabuki dance, and not nearly as literate as, say…these two guys. We haven’t gotten to the point where we question sources, given that Google searches on one’s laptop and session beers do not, frankly, mix, but it doesn’t stop us from stocking up beforehand.
So, in anticipation of our next……fraternal discussion, some arrows for my quiver.
Nafta and Job Losses
…Did NAFTA cause the U.S. to lose so many jobs, especially high-paying manufacturing jobs? Probably not. I say probably, since causality, in any social science (economics included), is difficult to prove since so many factors change so quickly in the real world. But if many high-paying manufacturing jobs were lost, it took many years until after NAFTA went into effect before they were.
Let?s start with jobs in general. The U.S. unemployment rate was 6.9% in 1993, the year NAFTA was agreed to. It was 6.1% in 1994. The rate fell steadily until reaching 4.0% in the year 2000. Even in 2002, the year after we had a recession, the rate was 5.8%, lower than the year NAFTA went into effect.
But what about manufacturing jobs? We had just about 17 million in 1994. It actually rose to 17.56 million in 1998 and was at 17.26 in 2000 (still higher than in 1994 the year NAFTA went into effect). Then we had a recession in 2001 and since then the number of manufacturing jobs has fallen quite a bit, down to 14.3 million. So that is a loss of nearly 3 million since 2000, which might be due to the recession. If it were due to NAFTA, then why did it take so long for the loss to happen?
But what about wages? Ms. Collins mentioned that we had lost many high-paying jobs. But real hourly wages have risen since 1994 for all workers. For all workers, hourly wages rose 38.4% while the Consumer Price Index (CPI) just rose 27.1%, hence the real gain. For manufacturing jobs, hourly wages also rose more than prices, with a 34.1% gain. But a pre-NAFTA comparison is in order. From 1984-1994, hourly wages for all workers rose 33.5%, while the CPI rose 42.2%, indicating a fall in real wages. The same happened for manufacturing jobs with hourly wages rising only 33%, well under the rise in prices. So it looks like workers did better in the years after NAFTA went into effect than before.
Economists generally like trade since it allows each nation to specialize in the goods it can produce most efficiently. The increased output can be traded to other nations for their increased output. In that case, jobs move from one industry to another. For example, although we lost manufacturing jobs, we gained about 2 million construction jobs from 1994-2004, which paid well. In 2004, the average hourly wage for construction workers was $19.23. Construction wages also showed real gains from 1994-2004 while showing losses in the 1984-94 pre-NAFTA period.
And the relative GDP of agriculture-based, manufacturing-based, and services-based national economies.
Africa: Tanzania-agriculture-$523. Niger-industry-$746. Kenya-services-$1022.
Central Am.: Nicaragua-industry-$2366. El Salvador-services-$4497.
East. Europe: Ukraine-agriculture-$3816. Macedonia-industry-$5086. Poland-services-$9051.
