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Shocks to manufacturing intensify inequality in US workforce

January 26, 2023
By: Jonathan Dillon

Last fall, the United States International Trade Commission (USITC) issued its report on the distributional effects of trade and trade policy on under-represented and under-served communities. The report, which had been requested in 2021 by the U.S. Trade Representative Ambassador Katherine Tai, found a disparity in wage and employment among manufacturing workers by race and gender resulting from changes in trade policy. Distributional Effects of Trade and Trade Policy on U.S. Workers, released in October of 2022, was compiled from a series of roundtable discussions between March 1 and April 1, 2022, an academic symposium on April 5-6, 2022, and a public hearing on April 19, 2022. Tai had called for the investigation to better identify and measure the potential distributional effects of U.S. trade and trade policy on U.S. workers, by skill, wage and salary level, gender, race/ethnicity, age, and income level, especially as they affect under-represented and under-served communities.

Findings from the panels highlighted how manufacturing facilities offer opportunities for building wealth without requiring a college degree in many instances. One academic noted that competition from Chinese imports in industries, such as furniture and textiles, disproportionately took a toll on manufacturing in southeastern states including North Carolina, South Carolina, and Virginia, particularly in areas where Black workers live. These manufacturing jobs offered Black families a route to the middle class, especially among Black workers without a college degree. Without these manufacturing positions, minority workers were less likely to find new jobs offering equivalent wages following the loss of work from manufacturing facilities compared to their white counterparts, according to the data presented in the report.

There were also uneven effects on gender resulting from other trade policies, like import competition for instance. Based on data presented at the roundtable discussions, import competition leads to an intersectoral reallocation of workers, negatively affecting men. As women workers exit the manufacturing sector, they tend to relocate into the service sector and take high-wage jobs in industries such as finance and professional business services. When men exit the manufacturing industry, they tend to take low-wage service jobs in wholesale and retailing services. The participants in the panel indicated that female workers face significantly higher costs in switching into manufacturing jobs relative to men, whereas male workers face higher costs in switching out of manufacturing.

Panelists indicated that women also face higher costs through lack of support for family leave, as many manufacturing jobs do not provide the flexibility needed for caregiver duties. Bureau of Labor Statistics data shows that childcare is a primary reason that women are not entering the labor force. Childcare is stated to be one of the biggest barriers to employment for women both when they are looking for work and again while they are trying to maintain a job. Immigrant women especially face discrimination in their work environments and don’t often feel comfortable reporting discrimination because they come from different cultural backgrounds or do not feel that they can afford to make objections (depending on their legal status).

Additionally, some testimonies indicated that when there was wage growth, female workers experienced these benefits to a lesser extent than male workers. Literature on the impact of trade on wages by gender suggested that the gender wage gap does decline in the presence of import competition, but this result is generally not due to increases in wages for women but rather declines in wages for men who switch out of import-competing sectors.

Representatives at the roundtable discussions suggested policy centered around community colleges playing a role in providing individuals with the skills and education needed for success in the workforce. They emphasized that community colleges are particularly good at combining technical skills and higher education, allowing workers to learn a skilled trade quickly while also working toward a degree, which could be very beneficial for Americans displaced by trade shocks in the manufacturing industry. They suggested training and certification programs, job placement services, and connecting with employers that offer mentorships.

One participant emphasized the importance of minority-serving educational institutions in preparing workers for the economy of the future and called for much more investment from Congress and from the states in these institutions, stressing that without such support, existing inequities would continue. The report indicated that the inequities also stemmed from a lack of historical data on employment by industry, occupation, and race, inhibiting the research necessary to introduce comprehensive policies.

Panelists stressed the importance of access to information and data for small or newer businesses to be competitive and compliant with laws and regulations, giving them better chances to compete and fix inequities.  In contrast to publicly available data, which are provided freely to any data user seeking access, restricted-use data are only available to select researchers who are granted conditional access by the data provider. These data, which are collected by federal and state government agencies, include information on workers’ socio-demographic characteristics, income, and employment, and link workers and their employers over several years. Access to other information like restricted, non-public data sources could help assuage the representation issues common to publicly available datasets.

A final recommendation was the introduction of more unionized positions. Participants noted that in the 1950s and 1960s, unionized manufacturing jobs provided a better path to economic mobility for Black workers — particularly those without four-year college degrees — enabling them to amass wealth and buy homes. The same policy would prove beneficial for manufacturing workers today.

As more data on the topic is published and more policies are introduced, The USITC will use that data to mitigate the uneven distribution of effects from trade shocks and imports on the manufacturing industry more frequently. U.S. Trade Representative Katherine Tai intended that this report be the first step of a two-part process at the Commission expanding research and analysis capabilities to improve advice on probable economic effects of trade policy on U.S. workers in the future. The Biden administration has also expressed its commitment to explore how trade policy can promote an equitable economic recovery to factor in race and gender, which is outlined in the President’s Trade Agenda.

trade, manufacturing