Labor Wants to Make Nafta Its Friend. Here’s the Problem.

“Stipulating that countries must pay above-market wages when producing export goods for the U.S. feels like outrageous economic imperialism,” said David Autor, an economist at the Massachusetts Institute of Technology. “Should Germany also impose this rule on the U.S., since our manufacturing workers surely make less than their German counterparts who are working under industry-level labor agreements?”

It is not the first time organized labor has thought along these lines. In the early ’90s, when Nafta had yet to become law, the union-backed Alliance for Responsible Trade argued that minimum wages in the tradable-goods sectors of all three North American countries should “move as quickly as possible toward that of the highest-wage country” and allow for a decent quality of life.

This time, though, labor has a better hand. It can afford to be bolder. A quarter of a century ago, unions reluctantly acquiesced to Nafta based on the premise that American workers would get the better end of the deal — new high-skilled, well-paid jobs in a regional supply chain that sent only its low-skill, low-wage bits south of the border.

What’s more, the cheap labor they so feared would become more expensive over time. Investment in Mexico by multinationals serving the North American market would naturally lift Mexico’s standards of living to converge with those of its neighbor to the north, turning Mexicans into rich consumers hungry for American-made products.

This didn’t quite happen. American manufacturing has lost millions of jobs, and typical household incomes have increased by less than half a percent per year. Most troubling for American workers staring into a future in which Nafta is still the name of the game, the wage gap with Mexico has not closed, even with the tepid wage growth in the United States.

U.S. Manufacturing’s Inexorable Decline

Ever since the end of World War II, the share of American workers employed in the manufacturing sector has been in almost steady decline — a trend that predated the inception of Nafta and China’s entry into the World Trade Organization.






SHARE OF U.S. WORKERS EMPLOYED

IN THE MANUFACTURING SECTOR

China becomes

member of W.T.O.

SHARE OF U.S. WORKERS EMPLOYED IN THE MANUFACTURING SECTOR

China…

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