February 09, 2012
So would trade policy that was not designed to lower their living standards. Nicholas Kristof devoted his column to the worsening plight of white workers without college degrees over the last three decades. He notes that the share of prime age workers with only a high school degree who have dropped out of the labor force has quadrupled since 1968.
This can be explained in part by the Federal Reserve Board to pursue policies that promoted full employment. When the economy did achieve low rates of unemployment, as was the case in the late 90s, workers at all education levels were being pulled into the labor force. There were strong wage gains at all points along the income distribution. If the Fed was actually doings its job and promoting full employment, instead of ignoring asset bubbles, like the stock and housing bubbles, the late 90s would be the norm rather than the exception.
Trade policy has also worked to weaken the economic situation of these workers since it has been designed to put them in direct competition with low-paid workers in Mexico, China and other developing countries. By contrast, the protectionist barriers that make it difficult for lawyers, doctors and other highly educated professionals from these countries from competing with our professionals have generally been left in place. The theoretical and actual result of such policies is a redistribution from less educated workers to more educated workers.
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