International trade's effect on the labor market: How does it affect wages?

Casual observation suggests that internationally competitive sectors have higher wages than uncompetitive sectors. There are two possible reasons for this relationship. First, greater import and export shares can influence wages. Second, there are characteristics of internationally competitive sectors, regardless of trade shares, which influence wages. The study shows that trade can influence wages by changing the elasticity of labor demand and by changing profits which affects wages in a rent sharing environment. The study also divides the manufacturing product market into three sectors: (1) high-tech, (2) a common technology sector whose technology is found throughout the world and (3) the natural resource intensive sector. In general, high-tech sectors are internationally competitive while the other two sectors are not. Efficiency wage considerations suggest that the high-tech sector should pay higher wages.March and May Current Population Survey data is used to appraise the wage patterns. Overall, at low union densities, trade benefits nonproduction workers relative to production workers. Conversely, trade benefits production workers at high union densities. In addition, union members' wages are more influenced by international trade than nonunion members. Furthermore, support for end game interpretations is found. However, international trade has a small influence on wages. Regardless of trade intensities, the high-tech sector paid the most followed by the resource intensive and internationally common technology sectors for both nonproduction and production workers. In fact, this differential is quite large.There are several public policy implications from this study. First, trade is not a major factor in the changing US wage structure. Second, strategic trade policies to improve the wage levels of particular sectors is inadvisable. Third, domestic policies intended to encourage the high-tech sector have potential to increase the number of "good" jobs. Fourth, in response to international trade, union wage policies play an ambiguous role in determining the international competitiveness of a sector.U of I OnlyETDs are only available to UIUC Users without author permissio