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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.

Holt's Cat
10-15-2007, 07:19 AM
Why don't you tell us, Carlos?

Nbadan
10-15-2007, 04:53 PM
1.) The consumer price index, which purports to measure price increases in the cost of living, does not incorporate housing prices, which have been climbing steadily over the last few years. Instead, the CPI uses "owner-equivalent rent", which is the amount of rent that a home owner would pay themselves if they rented their own home to themselves. Because of the liquidity being funneled into the housing money by Fannie, Freddie and private lenders for the last few years, demand for housing has continued shifting from rental to ownership, thus weakening the rental market. Tightening credit standards could mean more competition for rentals, however, the sub-prime problems and regional over-building have forced some rentals to lease below costs... With home prices rising rapidly, the housing component of the CPI contributes to measured inflation remaining low. As long as the bond market believes that there is no inflation, long-term interest rates remain low, which also helps feed to continue the housing bubble....

Nbadan
10-15-2007, 05:09 PM
...Census data show median household income fell 3.8 percent or $1,700, from 1999 to 2004, according to economist Jared Bernstein of the Economic Policy Institute. This drop occurred during a period when average productivity rose three percent per year.

Moreover, the reality is worse because prices of commodities that make us middle class are rising much faster than inflation generally: housing, college education, health care, and also child care. These very rapid price increases are offset by falling costs of consumer electronics, basic food, and clothing, creating misleadingly low inflation measures.

It's great that shirts are cheaper than a decade ago, and that we all have cell phones. But that doesn't exactly substitute for a house, an affordable college education, or health care.

According to economist Bernstein, whose study covers the years 1991-2002, households in the middle fifth of the economy increased their incomes (not adjusted for inflation) by 41 percent. Inflation during that period, as measured by the government's Consumer Price Index, went up 33 percent. That implies real living standards rose by a not very impressive 8 percent during more than a decade.

But hold on. During the same period, housing, healthcare, education, and child care went up 46 percent, or more than incomes. We cannot afford the big things we need and comfort ourselves with gadgets. The cheaper laptop, plasma TV, and GPS screen in your car make it appear statistically that living standards are not falling as much as they are.

The emblem of the new economy might be a 35-year-old, listening to an iPod, living in a house much smaller than the one he grew up in. Plenty of nifty, ever cheaper electronic stuff -- and ever more costly housing, education, health-care. An iPod is swell, but it doesn't exactly make you middle class....

Nbadan
10-15-2007, 06:33 PM
If protectionist policies costs American jobs, what does out-sourcing American jobs do?

Bush: Protectionism will cost U.S. jobs
By JENNIFER LOVEN, Associated Press Writer 22 minutes ago


WASHINGTON - Alarmed by slipping support for free trade even among Republicans, President Bush is arguing that protectionism will cut Americans out of chances for more — and better — jobs.

Bush has launched a blitz on behalf of pending free trade pacts with four nations. He continued the push Saturday in his weekly radio address.

"More exports support better and higher-paying jobs," the president said. "And to keep our economy expanding, we need to keep expanding trade."

His radio address followed a speech on trade he delivered Friday in Miami. Bush also granted interviews this week to business-oriented news organizations.

Yahoooo (http://news.yahoo.com/s/ap/20071013/ap_on_go_pr_wh/bush)