Photo: flickr aflcio
China is taking American jobs, labour unions, politicians and economists, have accused for some time. The logic is simple. While a manufacturing job in the U.S. may pay $50 an hour, when salary and benefits are factored in, Chinese factory laborers make little more than a few hundred dollars a month.With American companies moving operations to China and international companies preferring the cheaper Chinese-made goods, the Economic Policy Institute found the U.S. lost 2.8 million jobs in the past decade. While all states have been affected, 24/7 Wall St. looked at the 10 states that lost the most jobs to China.
Over the past decade, American imports from China have grown much more than what the country has been able to export into it, causing a massive loss of jobs. “Between 2001 and 2010, the trade deficit with China eliminated or displaced 2.8 million jobs,” the EPI noted in a paper released this month. As would be expected, 1.9 million of those jobs, or nearly 70%, were in manufacturing, the EPI found. The greatest damage occurred in the computer and electronic parts industry, as well as several finished manufactured goods sectors such as apparel and motor vehicles and parts.
China was able to achieve manufacturing cost advantage by moving millions of laborers from rural areas to cities with newly built facilities. Even American companies such as Walmart (NYSE: WMT) cannot afford to buy goods made in the U.S. when they are made so much more efficiently — and of course, so much cheaper — abroad.
Cheap labour may well be the main reason for China’s manufacturing advantage, but currency manipulation could be another, the EPI states. While the cost of labour affected China’s exports, the currency manipulation, which happened despite China joining the World Trade organisation in 2001, distorted its imports. American policymakers have long assumed that as China’s huge middle class grew, U.S. companies’ sales to these new consumers would also grow. But it did not work out that way, the EPI reports: “as a result of China’s currency manipulation and other trade distorting practices, including extensive subsidies, legal and illegal barriers to imports, dumping and suppression of wages and labour rights, the envisioned flow of U.S. exports to China did not occur.” Added to its labour cost advantage, this currency manipulation has been devastating to many U.S. companies.
24/7 Wall St. has looked at the 10 states that have had the greatest number of jobs displaced or lost to China in the past decade based on the EPI report: Growing U.S. Trade Deficit with China Cost 2.8 Million Jobs Between 2001 and 2010. We also included the number of jobs lost through imports and gained through exports due to trade with China.
The EPI research does not make an exact forecast of how many more American jobs may be lost due to China’s manufacturing cost advantages and questionable trade policies. And the damage, of course, did not suddenly end in 2010, and is almost certainly ongoing. In fact, nearly half a million jobs were lost or displaced from 2008 to 2010 alone. The joblessness problem in the U.S. is so severe that any added erosion of employment opportunities from forces outside the country will make a recovery of the American economy all the more difficult.
These are the 10 states losing the most jobs to China.
Net job change: -88,600
Jobs lost: 99,300
Jobs gained: 10,700
Two of the nation's 20 hardest-hit congressional districts are located in Massachusetts. The first of these is the 5th congressional district, which includes the cities of Lowell, one of the country's earliest textile centres, and Lawrence, home of a number of textile and electronics manufacturers. The state's neighbouring 3rd congressional district also lost an exceptional number of jobs. This district includes Worcester, another historically significant textile city, which has since increased its technology industry.
Source: 24/7 Wall St.
Net job change: -103,500
Jobs lost: 124,100
Jobs gained: 13,500
Ohio is one of the U.S.'s biggest manufacturing states. It is home to major companies such as Procter & Gamble (NYSE: PG) and AK Steel Corporation (NYSE: AKS). However, the state's manufacturing sector is declining at a faster rate than the nation's. The automobile sector has had the highest unemployment growth since 2007, although companies in other sectors have contributed to sending jobs overseas as well.
Source: 24/7 Wall St.
Net job change: -232,800
Jobs lost: 269,300
Jobs gained: 36,400
Texas has suffered greatly from the trade deficit with China due, largely, to the prominence of the computer and electronic parts industry in the state. Four of the top 20 congressional districts that lost the most jobs in the country are located in the state. Many Chinese companies have close ties with Texas. Two companies, Huawei and ZTE, have set up their U.S. headquarters in the state. Oil company CNOOC (NYSE: CEO) has also bought an exceptionally large amount of mineral rights in the state in order to extract shale oil.
Source: 24/7 Wall St.
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