NAFTA Legacy Series: Lost Jobs, Lower Wages, Increased Inequality

With NAFTA renegotiations about to begin, Public Citizen has compiled the latest information on how NAFTA’s outcomes measure up to its proponents’ promises. This is the first of a four-part expose.

NAFTA was sold to the U.S. public in 1993 with grand promises of improved trade balances and more jobs. Instead, more than 910,000 specific American jobs have been certified as lost to NAFTA – due to rising imports and offshoring – under just one narrow government program that undercounts the damage.

And the United States’ trade small trade surplus with Mexico and small deficit with Canada crashed into a $134.3 billion deficit – counting both goods and services.   The U.S. goods trade deficit with NAFTA partners Canada and Mexico increased 521 percent – it was $173 billion in 2016 - as annual growth of that deficit was 47 percent higher with Mexico and Canada than with countries that are not party to a NAFTA-style trade pact – a group that includes China. And, annual growth of U.S. services exports to Mexico and Canada since NAFTA has fallen to less than half the pre-NAFTA rate.  

As we lost hundreds of thousands of manufacturing jobs, wages were pushed down economy-wide. According to the U.S. Bureau of Labor Statistics, two out of every five displaced manufacturing worker rehired in 2016 experienced a wage reduction, with one out of four taking a cut of greater than 20 percent. For the average manufacturing worker earning more than $38,000 per year, this meant an annual loss of at least $7,700. And as these workers joined the glut of those already competing for non-offshorable service sector jobs, wages in these growing service sectors were also pushed down.

The Center for Economic and Policy Research has discovered that the trade-related losses in wages now outweigh the gains in cheaper goods for the vast majority of U.S. workers.

Lost jobs and lower wages have exacerbated income inequality to levels not seen since the Great Depression. Even proponents of NAFTA admit that trade pressures have likely contributed to today’s historic degree of inequality. The pro-NAFTA Peterson Institute has estimated that 39 percent of observed growth in U.S. wage inequality is attributable to trade trends.

To read more about NAFTA’s effects on the U.S. economy, jobs and income inequality, please click here.