Setting the Record Straight: Unfair Trade Practices — Not High Wages — Have Hurt U.S. Manufacturing

Tags Trade

Washington, D.C. – High wages are NOT to blame for the loss of 5.4 million U.S. manufacturing jobs since 1997, according to a new report by the Economic Policy Institute (EPI). Currency manipulation and unfair trade practices are responsible for the decline in manufacturing jobs and closing of over 82,100 factories between 1997 and 2013.

“American factory workers are the solution, not the problem,” said Alliance for American Manufacturing President Scott Paul. “Instead of scapegoats, America needs a manufacturing strategy. That strategy should be built on balancing trade, investing in our infrastructure, enhancing our training programs, and rebuilding our innovation base.”

Ending unfair trade practices will help rebuild U.S. manufacturing without cutting wages in the sector, EPI Director of Trade and Manufacturing Research Robert E. Scott argues in Exchange rate policies, not high wages, are why U.S. lags China and Germany in export performance.

“The idea that high wages in the manufacturing industry are causing job losses is common, but incorrect,” Scott said. “Pushing manufacturing jobs into the low-wage, non-union south is a race-to-the-bottom strategy that should be rejected. Instead, we need to fight currency manipulation by countries like China and take a page from Germany and Europe to rebuild American manufacturing.”

Thanks to policies that benefit and support the manufacturing sector, Germany has sustained high wages and a stable share of world exports of manufactured goods, despite China’s currency manipulation and growth.

In 2013, hourly compensation in Germany was $48.98, more than one-third higher than in the United States ($36.34). If high wages alone were sending production to China, then German exports would have declined, instead of holding steady between 1997 and 2013.

High wages should not be the target of policies aimed at rebuilding U.S. manufacturing. The United States should fight currency manipulation and unfair trade practices, as well as take a page from countries like Germany by adopting policies that support manufacturing.

Read the full report