Trade Affects Wages More Than Jobs

The NYT reported on the likely passage of a new trade deal (wrongly described as "free-trade") with Peru. The article reports on President Bush's claim that increased trade has created jobs noting opponents' assertion that trade has cost jobs. While some number of workers will lose their jobs due to trade and others will be employed in export sectors, the main effect of trade on workers comes through their impact on wages. The effect of recent trade deals has been to put the 70 percent of the workforce without college degrees in direct competition with low-paid workers in the developing world. More highly educated workers, like doctors, lawyers, economists, and reporters are still largely protected from this sort of competition. The predicted effect of this pattern of trade is to lower the relative wages of less educated workers, a pattern that has been widely documented over the last quarter century. It would have been useful to include this fact in the article.

--Dean Baker