Academic journal article ABA Banking Journal

Globalization and Its Malcontents

Academic journal article ABA Banking Journal

Globalization and Its Malcontents

Article excerpt

ARE JOBS BEING "EXPORTED" to foreign countries as businesses struggle to cut costs? Are high-wage industries succumbing to import competition? Are workers displaced from "good" jobs taking pay cuts just to stay employed? You bet. It happens every day. But to say globalization puts Americans in some kind of race-to-the-bottom is going too far. Popular perceptions to the contrary, the benefits of globalization far outweigh its costs, and the record shows wages rising during the most recent period of expanding trade and investment.

To test the job degradation hypothesis we examined the payroll performance of 373 industries comprising all non-governmental activities in the United States between 1989 and 2000. If high-wage industries accounted for disproportionate job losses, and vice versa, one would expect to find an inverse relationship. But such was decidedly not the case. In fact, to the extent there was any relationship between wages and jobs at all, it was positive, though just barely.

To be sure, one can identify some high-wage industries, like steel mills, that were job losers. But other industries famously suffering from import competition--footwear and textiles--paid relatively low wages. Meanwhile, it must be recognized that other industries, such as financial services and software, experienced large job gains and paid high wages.

But what about the past few years, when the recession, jobless recovery, and widening trade deficits drew increased attention? Detailed information isn't yet available for this period, but other resources suggest the job degradation hypothesis is still off base. Real wages have risen consistently since 2000, in the aggregate. …

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