NCPA - National Center for Policy Analysis


November 8, 2007

Like so many assumptions about trade, the belief that more global competition has somehow lowered the living standards of the average American worker and family is just a myth.  The critics have it all wrong: The middle class isn't disappearing -- it's moving up, says Daniel Griswold, director of the Cato Institute's Center for Trade Policy Studies.

According to the U.S. Census Bureau:

  • The share of U.S. households earning $35,000 to $75,000 a year (in 2006 dollars) -- roughly, the middle class -- has indeed shrunk slightly over the last decade, from 34 percent to 33 percent.
  • But so, too, has the share earning less than $35,000 -- from 40 percent to 37 percent.
  • It's the share of households earning more than $75,000 that's jumped -- from 26 percent to 30 percent.

Trade has helped America transform itself into a middle-class service economy, says Griswold:

  • Yes, the country's lost a net 3.3 million manufacturing jobs in the past decade -- but it's added a net 11.6 million jobs in service and other sectors where average wages are higher than in manufacturing.
  • Most of these new jobs are in better-paying categories, like professional and business services, finance, education and health services.

Trade and globalization have also helped bolster the balance sheets of American households by delivering higher incomes, lower interest rates and wider investment opportunities, says Griswold:

  • From 1995 to 2004, the real median net worth of U.S. households jumped by 31 percent, boosted by rising home values and stock prices.
  • Even with the recent housing slump, average home values remain more than 2.5 times what they were a decade ago, according to the S&P/Case-Shiller index.

Source: Daniel T. Griswold, "The Truth on Trade," Cato Institute, November 7, 2007.

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