Long-Term Effects of the China Shocks

A comprehensive new paper prepared for the Census Bureau’s Center for Economic Studies offers a sobering look at what happened to places most affected by the Chinese trade pressures in the early 2000s.  During this period, manufacturing communities around the US saw massive job losses and plant closures, and, unfortunately, the adjustment process has been a struggle. 

The new report takes a deep dive into how workers, businesses, and communities responded, and the findings can make for depressing reading. While most regions do end up replacing the lost jobs, the quality of jobs declines precipitously as manufacturing employment is replaced by jobs in lower-paying service sector positions.  Few of the displaced manufacturing workers take these new jobs or move to other regions with better job opportunities. Instead, they tend to age in place.  Most of the new jobs are taken by young workers and immigrant workers who move to the region for their first jobs. These changing employment and demographic patterns transform the region into a much different place, creating adjustment challenges for long-time residents and new workers as well.  And, significant economic hardships persist.  As the authors note, “after the China trade shock, local labor markets in these (former manufacturing) regions specialize in low-wage, regionally traded services, supported by income transfers—whether public, private, or non-profit.”  While these findings will not surprise those who work or live in these former manufacturing communities, they should be a wake-up call for even further rethinking of how we support trade-impacted places.