Higher Wages through International Trade

October 2, 2014

Median pay in 2013 was 8 percent below its pre-recession level. In a recent op-ed, Dartmouth’s Matthew Slaughter presents his solution: enable more trade.

In new research, Slaughter finds that pro-trade policies “could create 10 million new high-paying trade-connected jobs in the U.S. over the next decade.”

Additionally, research by Slaughter and other economists has found that workers at companies that operate internationally earn more than domestic companies to the tune of “about 15%-20% more in companies that export or import, and about 25%-30% more in multinationals.”

Perhaps most importantly, trade leads to higher incomes. Slaughter finds that international trade has increased GDP by $1.7 trillion higher in 2013 than it would have been otherwise. This translates to more than $13,600 per U.S. household.

So, how do we unlock further potential job and income gains from trade? Slaughter has some suggestions (emphasis added):

“Because trade involves a dynamic mix of products, customers and production methods, creating more good American jobs connected to trade requires a variety of policies. To open new markets and extend supply chains, this means liberalizing trade and investment through creative initiatives like the Trans-Pacific Partnership and the Trans-Atlantic Trade and Investment Partnership. To broaden business ties abroad, it means expanding and streamlining high-skill immigration. To attract and retain more global companies, it means reducing and simplifying America's high-rate, high-complexity business-tax code. To provide more workers the skills and opportunities to participate in and benefit from trade, it means strengthening America's education and safety net.”

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