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This chapter is from the book

Where the Jobs Are

Employees in labor-intensive industries, where labor costs represent a significant portion of product cost, are predictably the hardest hit by Chinese competition. Industries like textiles and garments rely on low or minimum wage labor, often done by immigrants from Mexico, Africa, and the Caribbean, yet they cannot compete with wages of barely above 50 cent an hour. With the exception of Bangladesh, Vietnam, and a few others, even developing economies cannot compete with such wages, especially when accompanied by higher productivity and infrastructure advantages. American makers of textile, apparel, and related products have been protected until now by international quota agreements and other tariffs, but those are coming down now. Low transportation cost, quick delivery, and fast reaction to changing consumer tastes are no longer sufficient to shield the industry from Chinese competition even when combined with political pressure on the part of elected officials in affected regions, such as the Carolinas.

China's job impact will not remain confined to labor-intensive industries. As the country moves up the technology ladder, the jobs affected will also be better paying and knowledge based. In the manufacturing sector, white-collar jobs, from accountants to back-office, are especially at risk, as are jobs within the service economy, such as insurance and banking. Although the latter, as well as software, are presently less at risk from China then they are from other countries, from India to Ireland, China is a factor: One reason for India's software push is that it is one of the few sectors where it is globally competitive vis-à-vis China, and even that edge may come under pressure as China upgrades its educational system.

The Chinese market is also creating many jobs for those industries that export their goods and services to China. China is the fastest growing U.S. export market; however, the magnitude and the composition of the U.S. trade deficit with China suggests that the number of jobs created there by exports to America is much higher than the number of jobs owing their existence to U.S. exports to China. Further, the job gains and the job losses are in different regions, industries, sectors, and company types. The variable impact is, in turn, laying the ground for conflict and misalignment of interests between winners and losers in this round of the trade game.

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