International Trade and the Performance of U.S. Labor Markets
Author(s)
Belman, Dale; Lee, Thea M.
Abstract
Since the 1970s, average real wages in the United States have stagnated or fallen, and there has been a widening gap between the earnings of college-educated workers and those with high school degrees or less. During the same time period, the U.S. economy has become progressively more open to international trade. Is there a connection between these two trends? And to what degree can increased trade be held responsible for declining wages and rising inequality? This article reviews the theoretical and empirical debates on the subject, finding that “…the preponderance of evidence indicates that increased trade has had a negative effect on wages in manufacturing and has accelerated the decline in employment in this sector. The consequent movement of jobs out of manufacturing and into lower-wage service sectors has also contributed to the declining average real wage in the U.S. economy as a whole. By eliminating high-quality jobs for non-college-educated workers, this process has also exacerbated wage inequality between the most and least educated workers..”
