Earnings Losses of Workers Displaced from Manufacturing Industries.

A particularly sensitive current policy issue is the effect of changes in tariffs and quotas on employment and earnings. This study examines empirically some of the effects of a permanent labor displacement which might result from changes in international trade policy. Specifically, it presents estimates of how job displacement would change the long-term earnings of workers in 11 industries, and relates the findings to industry characteristics so that they can be projected to industries not directly studied. This study was designed to assist in determining industries in which trade liberalization would impose large losses on workers. Results show that average prime age male workers suffer substantial losses of earnings in industries where the normal rate of labor turnover is low and prime age males make up a high percentage of the total labor force. These industries also tend to be high wage industries. Displacement from the auto and steel industries is estimated to reduce earnings over a 6 year period by about 24%, and by almost as much in several other high wage industries. The estimated loss in low wage industries was much smaller, averaging about 5%, in some cases, such as cotton weaving, no appreciable loss could be detected.