April 30, 2015

WINNING THE WAR ON WAGES:

A Trade Deal With Help for U.S. Workers Baked In  (WILLIAM A. GALSTON, April 28, 2015, WSJ)

[A] recent Gallup survey found that 58% of Americans regard foreign trade as "an opportunity for economic growth through increased U.S. exports" rather than as a threat from foreign imports.

This figure is up 12 percentage points over the past three years, and it represents the highest level since Gallup began asking this question in 1993. Equally significant, 61% of Democrats now see trade as an opportunity, up from only 36% in 2008, when Mr. Obama was first elected president.

Support for trade among rank-and-file Democrats is now 10 points higher than among Republicans. Some of this gap represents Republican antipathy to the president, no doubt. Yet as white working-class voters shift their allegiance away from the Democratic Party, populist sentiment among Republicans has increased: witness high-pitched conservative denunciations of "crony capitalism" and Republican opposition to the Export-Import Bank. [...]

 In a 2013 study published in the American Economic Review, respected labor economists David Autor,David Dorn and Gordon Hanson found that competition from Chinese imports was responsible for one quarter of the decline in U.S. manufacturing employment between 1990 and 2007. This competition depressed wages, labor-force participation and household earnings while increasing expenses for state and federal transfer programs.

Two 2014 papers flesh out these conclusions. In the Review of Economics and Statistics, Avraham Ebenstein,Ann Harrison,Margaret McMillan and Shannon Phillips reported that between 1983 and 2002, globalization put downward pressure on wages by forcing American workers out of manufacturing into lower-paying jobs in other sectors, leading to real wage losses of 12% to 17%. In a second paper extending the analysis to 2008, these economists found that offshoring and the threat of offshoring independently reduce wages in the affected occupations.

Which is why it's deranged for the Fed to be considering interest rate hikes.  Rates are too high given the deflationary climate, the one area where man-made change is genuine.

Posted by at April 30, 2015 3:10 PM
  

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