New York Times: Let’s Admit It: Globalization Has Losers

October 15th, 2011

New York Times
October 15, 2011

FOR the typical American, the past decade has been economically brutal: the first time since the 1930s, according to some calculations, that inflation-adjusted incomes declined. By 2010, real median household income had fallen to $49,445, compared with $53,164 in 2000. While there are many culprits, from declining unionization to the changing mix of needed skills, globalization has had the greatest impact.

Yes, globalization. The phenomenon that free traders like me adore has created a nation of winners (think of those low-priced imported goods) but also many losers. Nowhere have these pressures been more intense than in the manufacturing sector, which I saw firsthand as head of President Obama’s Auto Task Force.

A typical General Motors worker costs the company about $56 per hour, which includes benefits. In Mexico, a worker costs the company $7 per hour; in China, $4.50 an hour, and in India, $1 per hour. While G.M. doesn’t (yet) achieve United States-level productivity in China and India, its Mexican plants are today at least as efficient as those in the United States.

G.M. has responded with inarguable logic. While reducing its United States hourly work force to 50,000 from 89,000 over the past five years, its Mexican hourly head count has risen, to 9,235 from 9,073.

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