Nbadan
10-15-2007, 04:44 AM
Can anyone spot the flaws in Moron's argument?
Comment: More jobs, higher pay in years after NAFTA
Cyril Morong
Twice in two weeks, Metro columnist Carlos Guerra raised the issue of how free trade agreements such as NAFTA and CAFTA affect wages and employment for American workers.
On Sept. 22, he said, in relation to NAFTA, "and though U.S. workers' productivity has doubled since the 1970s, average hourly wages have risen only a nickel" ("Free trade agreements not free of problems for workers, farmers").
Then, on Oct. 6, he said there has been "a 40-year campaign to selectively dismantle trade barriers to boost corporate profits — but that also wound up costing us millions of high-wage U.S. manufacturing jobs" ("CAFTA faces obstacles as U.S., foreign citizens see downsides") .
Certainly no government policy, trade or otherwise, should hurt wages and employment. But what has happened since NAFTA went into effect in January 1994?
Using Bureau of Labor Statistics data, hourly wages from 1994-2006 rose 47.8 percent while the Consumer Price Index went up 36 percent. That amounts to a 98 cent increase, adjusted for inflation.
What about the 12 years before NAFTA? Wages rose 44 percent while prices roses 54 percent. That means in the 12 years before NAFTA went into effect, real wages fell, while they rose afterward.
What about jobs? The unemployment rate was 6.9 percent in 1993 and 6.1 percent in 1994. It fell steadily until reaching 4 percent in the year 2000. Even in 2003, two years after we had a recession, the rate was 6 percent, lower than the year NAFTA began. Now it's 4.7 percent. From 1981 to 1993, it averaged 7.1 percent a year. From 1994-2006, 5.1 percent.
What about the millions of lost high-wage, manufacturing jobs? We had 17 million in 1994, but that rose to 17.5 million in 1998. It is true that we only have 14.2 million now, but the number was still 17.3 million in 2000, and it did not fall until the recession of 2001. Maybe NAFTA is not at fault.
Even if we go back more than 40 years, before the free trade campaign began, the percentage of jobs in manufacturing was already falling. In 1957, they were about 35 percent of all private sector jobs. But by 1967, that figure was down to 33 percent. So the share of jobs in manufacturing was declining before 1967.
More important, manufacturing jobs are not the highest-paying hourly jobs. In 2006, the average hourly wage in manufacturing was $16.80. But in construction, it was $20. Since 1994, 2.6 million construction jobs have been added.
None of this proves that NAFTA caused the improvement in wages and employment. That could have happened because of the growing economy, a result of good macroeconomic policies.
Our macropolicy goals include low unemployment. So the jobs issue is best handled in its appropriate arena of macropolicy, not the trade arena. Trade benefits nations since it allows them to concentrate more on what they do most efficiently. Everyone can share in this increased efficiency with a growing economy that creates jobs.
Even if jobs are lost because of low price imports, we have the macropolicy tools and knowledge to increase demand in the economy to get back to full employment. This point was made by Princeton economist Paul Krugman in his book "Pop Internationalism" and Cornell economist Douglas Irwin in "Free Trade Under Fire."
If the unemployment rate goes up, the appropriate monetary and fiscal policies can create jobs and raise wages in the process. No job or wage loss need occur when we enter into free trade agreements.
To block free trade agreements that enhance efficiency and, therefore, our standard of living for fear of losing jobs would be a mistake when jobs and wages can be increased with other policy tools. This makes even more sense when we see how well workers have done since NAFTA went into effect.
Cyril Morong, Ph.D., is an associate professor of economics at San Antonio College.
Comment: More jobs, higher pay in years after NAFTA
Cyril Morong
Twice in two weeks, Metro columnist Carlos Guerra raised the issue of how free trade agreements such as NAFTA and CAFTA affect wages and employment for American workers.
On Sept. 22, he said, in relation to NAFTA, "and though U.S. workers' productivity has doubled since the 1970s, average hourly wages have risen only a nickel" ("Free trade agreements not free of problems for workers, farmers").
Then, on Oct. 6, he said there has been "a 40-year campaign to selectively dismantle trade barriers to boost corporate profits — but that also wound up costing us millions of high-wage U.S. manufacturing jobs" ("CAFTA faces obstacles as U.S., foreign citizens see downsides") .
Certainly no government policy, trade or otherwise, should hurt wages and employment. But what has happened since NAFTA went into effect in January 1994?
Using Bureau of Labor Statistics data, hourly wages from 1994-2006 rose 47.8 percent while the Consumer Price Index went up 36 percent. That amounts to a 98 cent increase, adjusted for inflation.
What about the 12 years before NAFTA? Wages rose 44 percent while prices roses 54 percent. That means in the 12 years before NAFTA went into effect, real wages fell, while they rose afterward.
What about jobs? The unemployment rate was 6.9 percent in 1993 and 6.1 percent in 1994. It fell steadily until reaching 4 percent in the year 2000. Even in 2003, two years after we had a recession, the rate was 6 percent, lower than the year NAFTA began. Now it's 4.7 percent. From 1981 to 1993, it averaged 7.1 percent a year. From 1994-2006, 5.1 percent.
What about the millions of lost high-wage, manufacturing jobs? We had 17 million in 1994, but that rose to 17.5 million in 1998. It is true that we only have 14.2 million now, but the number was still 17.3 million in 2000, and it did not fall until the recession of 2001. Maybe NAFTA is not at fault.
Even if we go back more than 40 years, before the free trade campaign began, the percentage of jobs in manufacturing was already falling. In 1957, they were about 35 percent of all private sector jobs. But by 1967, that figure was down to 33 percent. So the share of jobs in manufacturing was declining before 1967.
More important, manufacturing jobs are not the highest-paying hourly jobs. In 2006, the average hourly wage in manufacturing was $16.80. But in construction, it was $20. Since 1994, 2.6 million construction jobs have been added.
None of this proves that NAFTA caused the improvement in wages and employment. That could have happened because of the growing economy, a result of good macroeconomic policies.
Our macropolicy goals include low unemployment. So the jobs issue is best handled in its appropriate arena of macropolicy, not the trade arena. Trade benefits nations since it allows them to concentrate more on what they do most efficiently. Everyone can share in this increased efficiency with a growing economy that creates jobs.
Even if jobs are lost because of low price imports, we have the macropolicy tools and knowledge to increase demand in the economy to get back to full employment. This point was made by Princeton economist Paul Krugman in his book "Pop Internationalism" and Cornell economist Douglas Irwin in "Free Trade Under Fire."
If the unemployment rate goes up, the appropriate monetary and fiscal policies can create jobs and raise wages in the process. No job or wage loss need occur when we enter into free trade agreements.
To block free trade agreements that enhance efficiency and, therefore, our standard of living for fear of losing jobs would be a mistake when jobs and wages can be increased with other policy tools. This makes even more sense when we see how well workers have done since NAFTA went into effect.
Cyril Morong, Ph.D., is an associate professor of economics at San Antonio College.