Trade Gap Costing U.S. Jobs Billions in Wages

The article I choose to read, Trade Gap With China Costs the US $37 Billion in Wages, discusses how the growing trade deficit between China and the US are costing the US $37 billion in wages, according to a study by the Economic Policy Institute. This study states that 2.7 million jobs have been lost in the US since 2001, when China entered the World Trade Organization. The bulk of these jobs came from the manufacturing sector. The displaced employees were re-employed in non-trade-related industries, they lost an average of $13,504 per worker making around $37 billion in wage losses over the year. According to Robert Scot, the EPI director of trade, "Allowing the US - China trade deficit to continue growing would eliminate many more jobs in manufacturing and further erode the wages of US workers". The study shows that minority workers in the US have been particularly hard hit by the worsening trade relations with China. This article thinks that the trade deficit is a main problem with middle class jobs being lost.


In class we have discussed wages in free trade. We have also learned about how wages are determined. In class we discussed wages in free trade by using a "Home" and "Foreign" country. We also used two sectors in the countries do see how wages would be determined. In our example we used Wine and Cloth.

These equations show how the wages in each sector can be found. In the case of this article the main issue is just one sector, manufacturing. Because the manufacturing jobs are going to China, workers are getting pushed into different sectors because the US must start to specialize in other areas. In this case the new sectors have lower wages than those of a manufacturing job. The article discusses how allowing the trade deficit to continue growing will make US wages decrease more. This is somewhat similar to one of the questions on the first test. The main factor to wages is the productivity. If China is more productive in the manufacturing sector the jobs will go to China and have an increasing effect on their wages. I do not fully agree with what the article is trying to say. I do not necessarily think it is the trade deficit that is hurting our wages. China is simply becoming more productive in certain manufacturing areas. Because of this the jobs are going to China. Thus in turn manufacturing jobs in the US are being "lost". Those workers are then being moved to other sectors where they are unable to make higher wages. I feel that instead of putting the blame onto China, the US could focus on increasing productivity.