Why are American Workers getting Poorer? Estimating the Impact of Trade and Offshoring Using the CPS

Avraham Ebenstein, Ann Harrison, Margaret McMillan, Shannon Phillips

NBER Working Paper No. 15107
Issued in June 2009
NBER Program(s):   EEE   ITI

Previous studies typically find small or insignificant effects of globalization on US workers. We argue that much of the impact on wages has been missed because globalization has led workers to move from higher paid manufacturing jobs to lower paid service jobs. To show this, we link industry-level data on trade and offshoring with individual-level worker data from the Current Population Surveys. Previous research focused on industry-level exposure to globalization, which we show has no significant impact on worker wages. Our new measure of occupational exposure to globalization shows significant effects of globalization on wages. Offshoring to low wage countries is associated with wage declines for US workers, and the workers most affected are those performing routine tasks. Import competition is associated with wage declines, while exports are associated with wage increases. We present evidence that globalization has led to the reallocation of workers away from higher wage manufacturing jobs into other sectors and other occupations. We estimate that occupation switching due to trade led to real wage losses of 12 to 17 percent.

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This paper was revised on February 22, 2013

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Document Object Identifier (DOI): 10.3386/w15107

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