Re exchange between Doug and Max:
Doug: ". . . Service sector workers, who are by far a majority of the U.S.
working class, may well gain from trade."
Max: "What gain would that be?"
The single most important determinant of real wages of service workers is
likely the minimum wage. If international trade contributes to lower US
prices (but don't reduce minimum wage or service wages), then service
workers might benefit from trade as far as consumption goes.
But, IF the minimum wage is effected by international trade in some way then
maybe service workers are not necessarily better off when trade increases.
Whether by coincidence or not, the correlation over 1960 to 1999 between the
real value of the minimum wage and the ratio of trade deficit divided by GDP
is 0.6. (Of course, the real value of min wage generally fell after 1970 and
the trade deficit started to get worse a bit later so the correlation is not
a surprise).
Why might worsening trade deficit lead to lower real minimum wage? Possibly,
trade problems pushes min wage increases off the political agenda. (Assuming
Congress/Press/President can focus on only one economic issue at the same
time).
Possibly, trade deficit contributes to nationalist/pro-capitalist ideology
and this tends to lead public to look more at wages as a cost to business
and to possibly think that increased min wages might reduce competitive
positions of US firms. These things might make an increase in the minimum
wage less politically practical.
Further, as management in certain 'trade-impacted' industries becomes more
aggressive in keeping wages down for trade reasons, this aggression might
spillover to affect aggressiveness in other (service) industries.
Eric
Eric Nilsson
Economics
California State University, San Bernardino
San Bernardino, CA 91711
[EMAIL PROTECTED]
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