Science & Technology

The long afterlife of “China shock”

MIT economist David Autor is a co-author of a new study showing that the US region, which has been devastated by cheap manufacturing imports from China since 2001, is still economically distressed. Credit: iStockphoto

MIT The region of the United States, which has been hit by open trade with China, has not recovered after more than a decade, according to a new study by economists.

In 2001, the United States normalized long-term trade relations with China, and China became a member of the World Trade Organization. Many are expected to support the economies of both countries. Instead, in the next few years, cheap imports from China have fallen significantly below US manufacturing, especially in industries such as textile and furniture manufacturing. By 2011, this “China shock” from trade Was responsible One million jobs were lost in the US manufacturing industry, and a total of 2.4 million jobs were lost. Many areas have been hit particularly hard, especially in the South Atlantic and Deep South regions. As a result, consumers benefited from slightly cheaper goods nationwide, but workers in many places devastated their lives. It was a remarkable discovery in a 2013 paper by MIT economist David Autor and his colleagues David Dorn and Gordon Hanson.

Currently, Autor, Dorn, and Hanson are publishing a follow-up paper, The Persistence of the China Shock. Brookings Review, About the long-term effects of the Chinese shock. They found that trade pressure from China’s imports had leveled off since 2011, but the hardest-hit US region has not recovered from the rapid decline they suffered. MIT News We talked to Autor, a professor of economics at MIT, about his new discoveries.

NS: The “China Shock” had a devastating impact on the US economy in some regions and regions between 2001 and 2011. What did you find in the next few years?

NS: China’s shock continued when we first wrote about it, and China continued to gain market share in the United States. [We have now found] The shock in China peaked around 2010-2012. Has the place rebounded in the next 10 years? Unfortunately, where manufacturing has lost employment, the overall employment-to-population ratio and revenue levels have continued to decline, while the reliance on transfer benefits has increased. Economicists have made the word “creative destruction” famous. We’ve seen destruction, but there’s no creative rebound yet.

NS: Why did China’s trade shock last so long in certain places?

NS: One of the things that made me confused about China’s trade shock was that few people went when things got tougher. We didn’t see people move for better opportunities, as in the historical story of US resilience. One group that tended to move more was young adults. This is logical because it is generally highly mobile and arguably the most profitable. We also know that the level of education in metropolitan areas is a very strong predictor of economic resilience. Often not the same beneficiary, but more educated places tend to be able to reinvent themselves. Pittsburgh reinvented himself. Once a steel town, it is now the center of healthcare and technology. But it’s probably not mostly former steel workers doing the job. Overall, this situation is disappointing.

NS: In this paper you point out that this is not the only major shock we have seen, but should be prepared for other economic shocks. It’s not another implication of your work that the US economy moves from shock to shock, at least to some extent, and do we need to think about what happens in those situations?

NS: Yes. For example, the move to cleaner energy sources has reduced employment in US coal production by 80% since 1979. You can see that the more severely affected areas do not tend to return immediately. With West Virginia Coal, we can say: That’s less than 100,000. Why are we so sentimental about this? What’s the big deal? And the answer is that those people are in just a few places and are really hurt. What miners can do to get equal pay or equal pay in the community is not just as good. This is a lesson for the future. NS [renewable] The energy transition creates a lot of new work and is very investment intensive, but it means that losses are concentrated because we are using different technologies in different places.

Geographical concentration makes these things particularly harmful — the fact that everything happens in one place at a time. Domestic furniture manufacturing in the United States was basically drawn to Chinese trade. Although not high-end bespoke furniture, Wal-Mart and Target products are currently made in China and Vietnam.

In contrast, office computing over the last few decades has hollowed out the ranks of management support positions, but these are not really similar. [problems] Because it’s one profession of many companies that aren’t angry. Demand for a category of workers is low, but I’m not saying, “Well, Topeka was once the capital of American government support.” There is no such thing. Meanwhile, China’s trade has made American furniture manufacturing infeasible. And it’s not just woodworkers who lose their jobs. Office support personnel, financial professionals, transportation implications, and more.

NS: This paper is also about China. You know that China was expanding its manufacturing industry when it gained access to the US market. Therefore, the impact was greater. Therefore, you cannot simply delay the time or reverse the policy. The loss of the US manufacturing industry was due to this situation.

NS: That particular battle is over. We lost it, or it was a ceasefire, or they won some territory and we could say we held the line, but the battle is over. Since then, the nature of competition between the United States and China has changed. This is currently a competition between the great powers of military power, semiconductors, electric vehicles, energy generation, aircraft and helicopters, and communications equipment, not a job. [in the same way].. It’s who will be Apple, Boeing, Intel, not the number of people hired to make shoes or hit furniture in a small town.

The lesson for the future is not about how to fight the competition in the manufacturing industry.not [only] Regarding the trade itself, it is about the adjustment of the unemployed and the affected areas. How expensive it is, how slow it is, and how it can work better. Because it’s not over yet. Even if China’s exports are wrapped in Lucite tomorrow, there will continue to be many economic shocks.

NS: So what are the best policy steps to help people and places affected by this type of shock?

NS: I think there are different levels of policy. If we knew what we knew now, I would have been more gradual in China’s trade policy. We also need to implement better economic adjustment support. The United States spends an order of magnitude less than GDP on what we call aggressive labor market policy. Denmark spends about 3 percent of GDP on it. It spends about 0.3% of GDP on it. Denmark has a very fluid labor market. Most workers can be dismissed in Denmark for most reasons, and people do not expect to continue their lifelong work. However, the state is deeply involved in retraining and revitalization.

The second angle of attack is a location-based policy, which I’m not very good at. There is an enterprise zone that gives wealthy developers money to do what they would do anyway.Granted training, and [policies] Stimulating employers to create local jobs sometimes works. It’s not that you can’t reinvent the wheel. However, there is no off-the-shelf toolkit for that.

Another approach is to target investment and intervention in people who need to enter the labor market. I’m working on a lot of experiments on this: one is to reduce the abuse of criminal record checks, the other is a high-intensity STEM training program for people without a college degree, and the other is at home. Care delivery trying to change the quality of medical work. Less than 4 out of 10 adults in the United States have a four-year college degree and are interested in encouraging employers to reduce their qualifications as a way to improve access to work that supports their families. Is increasing.

So one level is about trade and policy. One is about the adjustment system. The third is about location-based policies. And fourth is an intervention to improve labor market opportunities for people without a college degree.

Reference: “On the Sustainability of China Shock” by David Autor, David Dawn, and Gordon H. Hanson, October 2021 National Bureau of Economic Research..
DOI: 10.3386 / w29401

The long afterlife of “China shock” The long afterlife of “China shock”

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