International trade, tariffs and domestic manufacturing topped news stories last week. Bradley Setzler, Strumpf Early Career Professor of Economics at Penn State, discussed in the following Q&A the recent history of U.S.-China economic relations and the impact on American workers.
International trade, tariffs and domestic manufacturing topped news stories last week. Bradley Setzler, Strumpf Early Career Professor of Economics at Penn State, discussed in the following Q&A the recent history of U.S.-China economic relations and the impact on American workers.
China was admitted into the World Trade Organization in 2001, and within a decade, China emerged as a global superpower in the export of manufactured goods. Initially, Chinese manufacturers focused on products like textiles, furniture, toys, some electronics equipment, apparel, and shoes and leather goods.
They quickly exported these products in large numbers, and the American workers who had been producing these goods at the time suddenly found it difficult to compete with the low prices of Chinese producers. An implication for American workers employed in industries like textiles, furniture and apparel was the number of jobs available in these sectors declined fairly quickly over the two decades after China’s rise.
My colleagues and I found that being in a region that received an above average amount of exposure to this import competition from China resulted in a loss of one in seven local manufacturing jobs relative to less exposed regions. If a region experienced a high degree of exposure—say your region was very specialized in producing furniture or textiles—it could be twice that or even three times that relative to other regions. So, you could lose two out of seven jobs, or even three out of seven jobs in local manufacturing.
A lot of different regions. It wasn’t overly concentrated in just one area. Different pockets of the U.S. were specialized in different types of manufacturing, and many small towns were built around one particular type of manufacturing. As a result, the rise of these Chinese imports could hit some towns but then not hit the town down the road.
So, the shock was sort of picking off different towns and leaving others alone based on where the manufacturing happened to be, and which goods they happened to manufacture, whether or not they were the types of goods that China began producing.
Manufacturing at that time was the perfect example of a skilled job you could do for a high wage, even without a college degree. We found a big loss in high-paying jobs for workers who entered the manufacturing workforce directly after high school.
