Free Trade Disproportionately Harms Black and Brown Workers
Published February, 2022
The U.S. structural, race-based social and economic inequities that undermine the economic and social welfare of people of color have been further exacerbated by dislocations caused by U.S. trade policies, according to a report published in January, 2021, by Global Trade Watch, the trade and globalization policy arm of the nonprofit consumer advocacy organization Public Citizen (www.tradewatch.org).
Since the start of the North America Free Trade Agreement (NAFTA) in 1995 and the World Trade Organization (WTO), which Congress approved China’s entry in 2000, 3.2 million U.S. jobs have been certified as lost to trade under the Trade Adjustment Assistance (TAA) program. More than a million of these jobs losses are attributed to NAFTA. The U.S.-China overall deficit increased 164 percent by $192 billion and millions of U.S. jobs were lost in the “China shock.” More than 60,000 U.S. factories have closed and net U.S. manufacturing employment has declined by 4.5 million, with most manufacturing workers who find reemployment forced to take pay cuts.
NAFTA displaced more than two million Mexicans engaged in farming and related work after subsidized U.S. corn flooded the Mexican market after the country eliminated policies that only allowed corn imports if domestic production failed to meet demand. Many Mexicans displaced by NAFTA headed to border towns to work in the maquiladoras, factories for export to the United States, or cross the U.S. border in search of work, creating a precarious workforce that was easily exploited by companies on both sides of the border. Since then, Mexico’s real wages have decreased, and over half of the population lives in poverty.
After the implementation of NAFTA, well-paying, union auto-sector jobs in the United States were outsourced to Mexico, where U.S. companies paid workers less per day than they paid U.S. workers per hour to do the same jobs. From the start of NAFTA to 2019, the trade deficit with Mexico in autos and auto parts increased 3,004 percent. The suppression of independent unions in Mexico and government policies to lock in low wages has fueled the offshoring of production. In 2019, General Motors announced that it would close plants in the Midwest as it shifted its most popular vehicles’ production to Mexican plants. Ford decided to make its new Mustang hybrid SUV in Mexico. To the extent the auto sector has added U.S. jobs, growth has been in Southern states with anti-union “right to work” laws, where workers in non-unionized auto sector factories making non-U.S. brands are paid considerably less than autoworkers employed by the Big Three U.S. automakers in Midwestern union plants. Between 2001 and 2018, Michigan lost 125,200 auto jobs while Alabama gained 25,200. Non-union jobs in foreign-owned auto factories represent 48 percent of U.S. vehicle production, up from just 17 percent in 2000.
Manufacturing wages are higher, on average, than those in the service sector with an average of $27.70 per hour in 2019, compared to $16.56 in leisure and hospitality, and $19.68 per hour in retail. The manufacturing median weekly wage is 4.81 percent higher compared to all sectors, 33.5 percent higher than retail and 55.7 percent higher than leisure and hospitality. The unionization rate in manufacturing is about 9.5 percent compared to 5 percent in retail and 3.5 percent for leisure and hospitality. Unions especially benefit people of color as they see larger increases in pay, benefits and employment stability in comparison to the times they held non-union jobs. U.S. companies became more likely to threaten relocation as a means of defeating union organizing drives. Unions had a lower success rate in campaigns where threats to close were used (38 percent) than in campaigns where no such threats were made (51 percent). Free trade has a downward pressure on wages even when workers have union representation. Companies would threaten relocation when cutting wages or benefits in union contract negotiations
Black and Latino workers were disproportionately represented in nine out of the 10 manufacturing industries that have been hit hardest by import competition. While Latinos comprised 8.9 percent of the labor force, they represented 12.3 percent of workers in the manufacturing of fabricated metals, 11.4 percent of furniture and 10.5 percent of plastics and rubber. While Black workers comprised 10.6 percent of the overall labor force in 1995, when NAFTA took effect, they represented 13.5 percent of the workforce in paper manufacturing, 11.4 percent in chemicals, 11.3 percent in transportation equipment and 11.1 percent in primary metals. Blacks represented 13 percent and Latinos 15.4 percent, of the workforce in the beverages industry. While by 1993 the trade deficit in textile and apparel was already $53.1 billion in 2019 dollars, NAFTA-WTO led to a $107.4 billion deficit in 2019. Black workers were 15 percent and Latinos 24 percent of the workforce in textile and apparel.
According to the U.S. Bureau of Labor Statistics, Black workers have lost nearly half a million manufacturing jobs because of NAFTA and the WTO. In the automotive sector, by 2010, Black workers had lost 56,524 jobs. In primary metals manufacturing, they lost 53,800 jobs. They lost 22,100 jobs in the paper manufacturing industry and 18,600 jobs in the beverages and tobacco industry. During the last 25 years, Blacks lost 120,900 jobs in electrical equipment and appliances, 51,200 jobs in fabricated metals, and 30,200 jobs in plastics and rubber manufacturing. Latinos lost 123,000 jobs in the U.S. electrical equipment and appliances industry, and 182,700 jobs in textiles, apparel and leather manufacturing in the last 25 years.
Call center and customer service jobs have been subject to mass offshoring. People of color, while 36.4 percent of the U.S. workforce, account for 43 percent of U.S. workers engaged as customer service representatives. Over the past 25 years, 71,788 of those U.S. jobs were lost to the Philippines, 58,220 of the U.S. jobs explicitly lost to offshoring. The Business Process Outsourcing industry considers the Philippines a choice venue because call center workers there are paid less than $2 per hour and are denied basic worker rights. U.S. call center workers represented by the Communications Workers of America union have coordinated with their Filipino counterparts, including to protest the arrest of those seeking to organize unions.
States and cities with the largest Black and Latino populations have been hardest hit. Just 15 U.S. states that are home to 85 percent of the total Latino population account for half of the 3.2 million trade-related job losses between 1994 and 2019, and nearly half of the 1 million jobs losses caused by NAFTA, and 2.4 million of the 4 million total manufacturing jobs losses. The 15 states that are home to 58 percent of the Black population account for 1.9 million of the 4 million total manufacturing job losses, 1.8 million of the more than 3.2 million trade job losses and 57 percent of the jobs losses caused by NAFTA from 1995 to 2020. These 15 states account for 2.9 million of the 4 million total manufacturing job losses.
Many cities with large Black populations such as Detroit, Chicago, Pittsburgh, New York and Cleveland were hardest hit by free trade. High and long-term unemployment experienced by Black workers due to deindustrialization contributed to the impoverishment of Black communities, loss of personal wealth, population loss, and decline in municipal financial resources. In Baltimore, people of color constitute 73 percent of its 593,490 residents. From 1995 to 2019, the city lost 44,300 or 42.6 percent of its manufacturing jobs. In Chicago, people of color constitute 68.5 percent of its 2.7 million population. From 1995 to 2019, it lost 219,100 or 44 percent of its manufacturing jobs. In Cleveland, people of color constitute 68.4 percent of Cleveland’s 381,000 population. From 1995 to 2019, the city lost 76,200 or 38 percent of its manufacturing jobs. In Detroit, people of color constitute 90 percent of its 670,000 population. From 1995 to 2019, it lost 48,700 or one-third of its manufacturing jobs. The counties surrounding Detroit and nearby towns like Flint, which have major Black populations, also suffered major NAFTA-related auto sector job loss. In El Paso, people of color constitute 89.5 percent of El Paso’s 681,728 population. From 1995 to 2019, El Paso lost 27,400 or 61 percent of its manufacturing jobs. In Los Angeles,, people of color constitute 73.6 percent of its 3,979,576 people. From 1995 to 2019, it lost 284,500 or 46 percent of its manufacturing jobs. In Milwaukee, people of color constitute 65.9 percent of its 590,157 of its people. From 1995 to 2019, it lost 44,100 or 27.1 percent of its manufacturing jobs. In Philadelphia, people of color constitute 67.4 percent of the 1,584,064 people. From 1995 to 2019, it lost 39,900 or 54.6 percent of its manufacturing jobs. In St. Louis, people of color constitute 56.7 percent of its 300,576 people. From 1995 to 2019, it lost 60,800 or 33.8 percent of its manufacturing jobs.
The 20 U.S. states that are least racially diverse had only 20 percent of all government-certified trade job losses. The 20 U.S. states that are least racially diverse also are states that have less manufacturing and have been less impacted by trade-related job offshoring, representing 65,000 of the 3.2 million job losses and less than 10 percent of U.S. manufacturing job losses.
Latino and Black workers who lost their jobs were less likely than white workers to find a replacement job. For every 100 Black workers or Latino workers who lost their jobs, 21.2 of Black workers and 21.8 of Latino workers remained unemployed, compared to 14.3 of white workers for every 100 who lost their jobs. The reduced number of well-paying jobs available for non-college-educated workers exacerbates underlying structural racial discrimination. Of the 58 percent of Americans without college degrees, 68 percent of Blacks, 77 percent of Latinos and 54 percent of whites did not have college degrees as of 2019.
Actual wages for Latino workers are 25 percent and for Black workers 23 percent lower than wages for white workers. Displaced manufacturing workers find reemployment in non-offshorable service sectors that pay less. About two out of every five manufacturing workers displaced and rehired experienced a wage reduction, and about one of every four took a pay cut of greater than 20 percent. For the median manufacturing wage of $39,500 per year, this meant an annual loss of at least $7,900.
NAFTA reduced wage growth in the most affected industries by 17 percentage points relative to other industries. More than half of Black workers and about 60 percent of full-time Latino workers earn less than $15 per hour, compared with 42 percent of full-time U.S. workers. While the manufacturing sector lost about 4 million jobs between 1993 and 2019, other sectors with jobs available to those without college education, such as retail and leisure and hospitality, gained 6.8 million jobs but, with average wages of $18.11 per hour, these sectors pay two-thirds that of manufacturing. Latino workers make up 24 percent and Black workers 13.1 percent in the leisure and hospitality sector. As increasing numbers of trade-displaced workers have joined the glut of workers competing for these non-offshorable jobs, real wage growth has been extremely modest in these growing sectors.
The almost one million Black, Latino and Asian workers who were displaced because of the increased deficit following the China trade deal may have suffered a pay cut as large as 25.5 percent as workers moved from jobs paying $45,800 per year to new categories of jobs available to them at their education levels that pay $35,340 per year. Median weekly earnings in 2020 were $786 for Latino workers and $806 for Black workers, compared to $1,002 for U.S. workers overall. The median weekly wage for Black women was $779, and for Latinas $717, while the median weekly wage for women overall was $913.
Five out of the 10 most unequal states in the nation, New York, Florida, California, Illinois and New Jersey, are home to large Latino and Black populations, and three of the top 10 – Nevada, Massachusetts and Washington – have large representations of Latino families. These eight states are among the 10 states with the biggest jumps in income share accumulated by the richest 1 percent from 1972 to 2015, who increased their share of income by at least 10.7 percent, leaving less for the rest of the people in their state. From 1972 to 1993, the share of all income accumulated by the top 1 percent increased in states with large Latino populations by 0.23 percent and with large Black populations by 0.20 percent. During the NAFTA-WTO era, this increased to 0.28 percent in states with significant Latino populations and 0.26 percent in states with a large Black population. In the least diverse states, between 1972 and 1993, the share of income held by the top 1 percent grew by 0.19 percent each year, and during the NAFTA-WTO years it decelerated to 0.15 percent. Between 1994 and 2020, the top 1 percent increased its total net worth by $21 trillion, while the bottom 50 percent actually saw its net worth decrease by $320 billion over the same period. In 1994, the top 1 percent owned 23 percent of all assets, while the bottom 50 percent owned 8 percent of all assets. By 2019, the top 1 percent increase their share to 27.8 percent while the bottom 50 percent share decreased to 6 percent.
The median wealth for white families is 41 times that of Black families and 22 times that of Latino families. Median Black family wealth in the United States is $3,500, which represents only 2 percent of the median white family’s $147,000. The median Latino family wealth is $6,500,, representing 4 percent of that of a median white family. From 1995 to 2016, the median Black family wealth has increased only by $308 and the median Latino family’s wealth has increased by $1,345. The average white family has increased its wealth by more than $50,000.
Each manufacturing job producing value for final demand supported more than three other jobs in the supply chain, from generating raw materials to delivery to the customer. Each manufacturing job loss jeopardizes these other jobs, as well as jobs at restaurants and other businesses that workers losing well-paid jobs can no longer afford to patronize, and jobs in construction and governments services supported by the taxes of manufacturing firms and well-paid workers. The resulting broad-based wage stagnation contributed significantly to growing inequality. Latino and Blacks are underrepresented in financial services such as banking and securities, where the disproportionate returns to economic growth have gone in recent years. Lost wages during working years impact the retirement savings of Latinos and Blacks, who are more likely to spend retirement at or near the poverty level. Around 69 percent of Latinos and 60 percent of Blacks age 65 or older have incomes less than two times the supplemental poverty threshold, compared to 44 percent of whites.
“In his 2016 presidential campaign, Donald Trump hijacked progressives’ critique of corporate globalization and job offshoring, but reframed it into a narrative of resentment with racialized appeals to target white working-class voters,” according to the report. “As Donald Trump failed to deliver on his promises to stop job offshoring or to create a ‘manufacturing boom’ by ‘bringing back’ or creating millions of new manufacturing jobs, in 2020 a surge in union voters and voters who earn $50,000 or less in key swing states ousted Trump, initial exit poll analysis show.”
Initial analysis from exit polling show that working-class voters, of all races and ethnicities, were key to ousting Trump from the White House and electing Joe Biden. At the national level, 56 percent of union voters supported Biden while 40 percent supported Trump, nearly double Hillary Clinton’s union-voter margin in 2016. Biden beat Trump’s Wisconsin union vote 58 percent to 39 percent, and in both Michigan and Nevada, Biden’s margin with union voters was larger than Clinton’s in 2016. Biden won 55 percent of voters living in households making $50,000 and less. While 37.1 percent of the entire population lives in households with income less than $50,000, 53.8 percent of Black households and 44.1 percent of Latino households earn less. In Wisconsin, Biden won voters making $50,000 and less by 22 points, 60 to 38 percent. In Georgia, Biden won 56 percent of these voters to Trump’s 42 percent. In Michigan, they voted for Biden 57 percent to 42 percent for Trump. In Pennsylvania,, Biden captured 56 percent of their vote to Trump’s 42 percent.
The 2020 network exit polls did not ask about trade, as they did in 2016 when exit polling found trade issues and job offshoring to be key factors in swing Midwestern states that had voted for Obama twice and then Trump. During the Trump administration, 311,427 U.S. jobs were lost to trade, with 202,543 explicitly listed as offshored. The trade deficit in Trump’s final year in office was 26.4 percent higher than in Obama’s last year.
by Ingrid Lopez-Rodriguez