In order for trade deals like the Trans-Pacific Partnership (TPP) to succeed in a sustainable way, we must start viewing free trade as an economic engine that will boost the living standards of all Americans.
Congress has been debating whether to give President Obama “fast-track” authority to negotiate terms and conditions with the twelve nations involved in TPP. But for free trade to help everyone, other things need to be fast-tracked as well, such as America’s workforce and educational systems.
True, the wages of middle-class workers are lagging, and on the surface that might appear to be due to free trade. For example, here in South Georgia, many manufacturing jobs have moved to Asia and Central America. However, many local workers have skills that are not transferable, and the newer jobs involve technologies they have not yet mastered.
Though the media tends to mischaracterize trade by emphasizing jobs lost through outsourcing, it ignores the way many monotonous, physically exerting jobs are being replaced by more desirable, higher-paying jobs.
I am amazed we rarely hear about the huge advances in quality of life that come with free trade. Look at the breadth of Americans now connected on the Web, for example.
As a college educator in a high poverty area, I see what is at the fingertips of students who make a fraction of my income. They take exams on phones, post elaborate videos on social media, and communicate in ways that astound me. That would not be possible without increased competition driving down prices.
Despite many Asian markets preventing open access to American firms, the U.S. still managed to sell $698 billion worth of products to the TPP countries in 2013, representing almost half (44 percent) of our total exports. Imagine how much more we could sell if we didn’t face restrictions in those countries.
Many Americans do not fully understand how and why free trade benefits everyone. Because of what economists like to call “comparative advantage,” all countries tend to specialize in areas where they excel. That enables:
- Consumers to enjoy a greater range of products and services at lower prices;
- Workers to gain access to more jobs at higher wages; and
- Firms to buy cheaper component parts and gain greater access to foreign markets.
Too often, we hear that industry benefits from free trade at the expense of workers. But don’t workers benefit from healthy industry? Don’t we want firms to be profitable, leading to more jobs, rather than layoffs?
Good jobs are there, but they require greater credentials and skills than ever before. That is why America needs a cogent, viable plan to create jobs across the economy with higher wages. High-paying jobs now require much more critical thinking and technological expertise than before – a challenge for the 70 percent of adults over 25 years old who don’t possess a college degree.
Empower the private sector to fast track the development of workforce skills. Our current strategy for training workers relies too heavily on an excessively compensated bureaucracy, such as state employment agencies and U.S. Departments of Labor offices. Since workforce trends change by the second, those dollars would be better spent if reallocated back to business owners in the form of lower taxes. For example, many companies faced with new projects will have additional revenues available to pay technical colleges to retrain their workers.
Many critics of free trade argue that firms are greedy, profit-driven, and interested in money-saving layoffs. True, firms are interested in higher profits, but that enables firms to expand operations, not reduce them. To do that, they need better-skilled workers who will of course earn higher wages.
Let’s fast track our educational system, too. Right now, students can exit college reciting a Shakespeare sonnet but have no familiarity with an Excel spreadsheet. When possible, universities should form alliances with industry to help prepare at least some of their graduates for the challenges of the global economy. My college has even invited local business to share thoughts about necessary skills and other curricular goals they’d like to see for our students.
We must also help working adults, though, since so many of them are struggling to make ends meet in an era of lagging wages. Here are three simple ways we can do that: change the incentive structure of educational institutions by emphasizing college completion; allow adults to earn college credit from their job experiences; and waive graduation requirements not critical to future career objectives.
As important as it is to fast-track President Obama’s ability to negotiate free-trade pacts, let us not be derailed from fast-tracking our workers on a path toward stronger education, better skills, and higher wages.
Aaron Johnson is an assistant professor of economics at Darton State College in Albany, Georgia. E-mail him at econprofaj@gmail.com.