Does International Trade Lower Wages in the 1st World?

[Nathan Newman <newman@xxxxxxxxxxxxxxxxxxx>]

The January 15th ECONOMIST had an interesting article that argued that
international trade with the third world has had little or no role in
lowering wages in the US for unskilled workers.

The prima facie evidence for this fact is the argument that if unskilled
work had been migrating to third world countries because of lower wages,
the relative prices of low-skill goods should have fallen.  THE ECONOMIST
cites studies that asset that this has not occurred.

Instead, these studies argue that the culprit behind lower wages for
unskilled work is purely technological.  New technologies have decreased
the demand for lower-skilled labor, so wages have fallen.

Another interesting point was that US trade with low-wage countries (in
this case defined as countries with wages less than half the US's) has
only risen a small amount since 1960, from 2.0% of GDP in 1960 to 2.8% of
GDP today.  Of course, much of that lower-wage trade in 1960 was with
Japan and poorer countries in Europe.

So, if these studies are correct, is all the left-wing anguish over NAFTA
misplaced?  Should we instead be putting our efforts into a much sharper
critique and organizing support for challenging automation when it does
not go hand-in-hand with social justice?

Or is the ECONOMIST wrong or just looking in the wrong place to see the
damage multinationals are inflicting through the run-away shop into the
third world?

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         *    Nathan Newman:  newman@xxxxxxxxxxxxxxxxxxx  *
         *                 UC-Berkeley			  *