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The subject of this article is to review the impact of low wage import competition on less skilled American workers. This follows a decline in the number of Americans workers in the manufacturing sector from 30% in the 1960’s to less than 9% in 2013. The authors further note that, the manufacturing sector had led to the emergence of a large middle class in the country in the mid-twentieth century but which has continued to shrink as wage inequalities increase. In particular, the authors compare the rise in US imports from low wage economies such as China. Following these trends, researchers and public intellectuals called for more empirical evidence on the impact of trade and wages on the country’s wages, job loss as well as general welfare.
In exploring the link between job loss and low wage import competition, Kemeny, Rigby and Cooke (2015) utilizes secondary data from the transaction-level census estimates of the country’s exports and imports from 1992 to 2007. The authors sought to relate the changes in import competition and job loss basing the figures on the individual establishment level characteristics and demographics. This study compared how low and high skill workers suffered wage declines as the economy reorients towards a comparative advantage.[“Write my essay for me?” Get help here.]
By employing ordinary least squares and binomial logistic regression, the study found a positive correlation between low wage import competition and less skilled workers. Additionally, the study notes that investment in computers is negatively related to job loss for low skilled workers. On the other hand, the study did not find strong correlation between import competition and high skilled workers.[Click Essay Writer to order your essay]
The outcomes of this research were found to be true of previous studies that attributed loss of jobs for low skilled workers as a result of increase in low wage imports. The authors argue that competitive advantages have forced companies to either shut down operations or shedding low skilled labor in order to pave way for high-sophistication varieties. In this case therefore, low skill workers who hold less than a high school education are likely to lose their job if they work in industries that have a higher level of low wage import competition. On the other hand, this study noted that low wage imports did not impact on the job loss of employees who have completed at least a bachelor’s degree over the same period. Although changes the high demand for imports from countries such as China, were attributed to technological changes, this study did not find a skilled-biased relationship between job loss and technology. This research noted that investments in computer equipment led to job retention for both low skilled and high skilled labor. This contrasts previous studies that attributes substitution of less skilled workforce to computer investments within the manufacturing industries. In this view, the authors’ advocates for more research on technology changes on low skilled workers.[Need an essay writing service? Find help here.]
Although this study finds evidence on how trade has played a role in the poor labor market situation, use of secondary data was biased as it ignored part time workers as well as others with lower labor attachments. In this case, the impacts of increased imports competition could be worse than indicated for the low skilled work force. On the other hand, this study did not factor in frictional unemployment associated with low skilled workforce. With the country experiencing high labor mobility, use of data from transactional level census estimates fails to account for the changes in wage differences among this group.
Kemeny, T., Rigby, D., & Cooke, A. (2015). Cheap Imports and the Loss of US Manufacturing Jobs. World Economy, 38(10), 1555-1573.