International Trade and American Wages in the 1980s: Giant Sucking Sound or Small Hiccup?
Author(s)
Lawrence, Robert Z.; Slaughter, Matthew J.
Abstract
In the 1980s, average wages in the U.S. (as conventionally measured) stopped growing and actually declined, while earnings inequalities related to skills and education increased dramatically. At the same time, the volume of international trade was expanding rapidly. It is scarcely surprising that many observers blamed wage stagnation and inequality on trade; in Ross Perot’s memorable phrase, under the North American Free Trade Agreement we would expect to hear “a giant sucking sound” of wages and jobs being siphoned off to Mexico. This study analyzes the data on the effects of international trade on American wages, finding that trade played only a relatively small role in the changes of the 1980s. More important, the authors find, were the slowdown of productivity growth in services and the patterns of technological change.
