Few academic papers have been as influential—or as misunderstood—as those by David Autor, David Dorn and Gordon Hanson. Politicians and pundits often use these authors’ papers to claim that China’s rise has cost the U.S. up to 2.4 million jobs due to surging Chinese imports between 1999 and 2011. But these studies focus narrowly on what happened to manufacturing employment in local labor markets, not the U.S. as a whole.
It’s true that communities exposed to heavy Chinese import competition saw steep drops in manufacturing jobs and a rise in local unemployment. Crucially, the displaced workers mostly stayed put rather than moved for new work. It’s no wonder these academic papers resonated because they highlighted real pain in America’s industrial heartland. But treating the China shock as a verdict on national employment is a mistake.
There is growing evidence that, while Chinese imports did hammer certain regions, they didn’t cause large net job losses across the entire U.S. Recent research from the National Bureau of Economic Research finds that job losses locally were mostly balanced by job gains in other regions. Manufacturing-heavy areas in the Midwest and South saw employment declines, but services jobs sprouted in coastal and high-tech hubs like the West Coast and Northeast. Import competition shifted jobs rather than eliminated them.
By analyzing supply chains, researchers have found that the China shock slightly increased total U.S. employment from 2000 to 2007. Cheaper imports reduced costs for businesses and consumers, which stimulated demand and job growth in other sectors. On average there was a net employment gain of 1.27% in each region exposed to Chinese trade, alongside wage gains, when accounting for broader effects. Remarkably, even in some communities hit hardest by import competition, the overall employment effect was positive once new service jobs are counted.
None of this means that manufacturing workers caught in the transition didn’t experience hardship. Those who lost good factory jobs often struggle. Many didn’t relocate. The tragedy of the China shock is largely local.
Continue reading at The Wall Street Journal.
James Heckman, PhD, is a senior fellow at the Archbridge Institute and a Nobel laureate in economics (2000). He has appointments in the Department of Economics, Harris School of Public Policy, and the Law School at The University of Chicago. He is also the founder and director of the Center for the Economics of Human Development.
Hanming Fang
Hanming Fang, PhD, is Joseph M. Cohen Term Professor of Economics at the University of Pennsylvania.
Economics of Flourishing
Few academic papers have been as influential—or as misunderstood—as those by David Autor, David Dorn and Gordon Hanson. Politicians and pundits often use these authors’ papers to claim that China’s rise has cost the U.S. up to 2.4 million jobs due to surging Chinese imports between 1999 and 2011. But these studies focus narrowly on what happened to manufacturing employment in local labor markets, not the U.S. as a whole.
It’s true that communities exposed to heavy Chinese import competition saw steep drops in manufacturing jobs and a rise in local unemployment. Crucially, the displaced workers mostly stayed put rather than moved for new work. It’s no wonder these academic papers resonated because they highlighted real pain in America’s industrial heartland. But treating the China shock as a verdict on national employment is a mistake.
There is growing evidence that, while Chinese imports did hammer certain regions, they didn’t cause large net job losses across the entire U.S. Recent research from the National Bureau of Economic Research finds that job losses locally were mostly balanced by job gains in other regions. Manufacturing-heavy areas in the Midwest and South saw employment declines, but services jobs sprouted in coastal and high-tech hubs like the West Coast and Northeast. Import competition shifted jobs rather than eliminated them.
By analyzing supply chains, researchers have found that the China shock slightly increased total U.S. employment from 2000 to 2007. Cheaper imports reduced costs for businesses and consumers, which stimulated demand and job growth in other sectors. On average there was a net employment gain of 1.27% in each region exposed to Chinese trade, alongside wage gains, when accounting for broader effects. Remarkably, even in some communities hit hardest by import competition, the overall employment effect was positive once new service jobs are counted.
None of this means that manufacturing workers caught in the transition didn’t experience hardship. Those who lost good factory jobs often struggle. Many didn’t relocate. The tragedy of the China shock is largely local.
Continue reading at The Wall Street Journal.
James Heckman
James Heckman, PhD, is a senior fellow at the Archbridge Institute and a Nobel laureate in economics (2000). He has appointments in the Department of Economics, Harris School of Public Policy, and the Law School at The University of Chicago. He is also the founder and director of the Center for the Economics of Human Development.
Hanming Fang
Hanming Fang, PhD, is Joseph M. Cohen Term Professor of Economics at the University of Pennsylvania.
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