Trade and Growing Average Real Hourly Compensation

Daniel Griswold writes in the NY Post:

Like so many assumptions floating around about trade, the belief that more global competition has somehow lowered the living standards of the average worker and family is just a myth. In fact, trade has delivered lower prices, higher worker compensation and an upwardly mobile middle class.

Critics of trade repeat as a mantra that real wages have been stagnant since the 1970s. But the data on real wages exclude benefits - which have been rising as a share of worker compensation. Those data also rely on a cost-of-living index that has systematically overstated inflation and thus understated real income gains.

The U.S. Bureau of Labor Statistics reports that the average real hourly compensation earned by Americans has actually grown by 22 percent during the past decade - even as trade and other measures of globalization have grown rapidly.

Trade has brought us lower prices on a broad range of goods - from fruits and vegetables to consumer electronics and automobiles - stretching the paychecks of U.S. workers.

Household incomes have also been rising. When they point to a small decline in median household income compared to 2000, opponents of trade are cherry-picking their numbers. That year was the frothy peak of a decade-long expansion. Use 1996 - the comparable point in the previous business cycle - as the baseline, and you see a 6 percent rise in median income.

Convincing Americans that we are worse off than we were in years past has become a popular line of attack against globalization and trade expansion. But trade has played an important part in the positive story of long-term gains in hourly compensation, household income and net wealth.

To promote further progress for U.S. workers and their families, Congress and the administration should work together to pursue policies that expand the freedom of Americans to participate in global markets.

To read more:

http://www.nypost.com/seven/11072007/postopinion/opedcolumnists/the_truth_on_trade_424240.htm?page=0