{"id":267034,"date":"2019-03-13T10:32:56","date_gmt":"2019-03-13T14:32:56","guid":{"rendered":"https:\/\/policyoptions.irpp.org\/issues\/populism-rises-look-fallen-wages\/"},"modified":"2025-10-07T22:26:54","modified_gmt":"2025-10-08T02:26:54","slug":"populism-rises-look-fallen-wages","status":"publish","type":"issues","link":"https:\/\/policyoptions.irpp.org\/fr\/2019\/03\/populism-rises-look-fallen-wages\/","title":{"rendered":"As populism rises, look at what has fallen: Wages"},"content":{"rendered":"

The Canadian Global Affairs Institute recently hosted its annual trade policy conference, Canada\u2019s State of Trade: At Home and Beyond<\/a>. It was an informative event that covered various topics of concern to the business and trade policy community: Canada-US trade; trade with Europe; trade opportunities and challenges in China; the perennial issue of barriers to internal trade.<\/p>\n

But the underlying drift of both the formal and informal discussions centred on growing protectionism \u2013 chiefly in the US \u2013 owing to what we might call the \u201cNew Populism.\u201d Angst was expressed among business and the trade wonks about rising protectionism in America and possible spillover into Canada.\u00a0 The frustration was palpable. Why do many people get seduced by protectionism when it is so well established that it isn\u2019t in their self-interest? The conventional economic arguments were aired on how protectionism ultimately hurts consumers, businesses and economies alike.<\/p>\n

One key question posed was how can we convince workers to resist the seduction of the populist huckster who peddles the protectionism tonic? The only solution suggested, as it so often has been going all the way back to the US-Canada free trade debates of the late 1980s, was a greater effort to educate people about the benefits of trade to jobs, incomes, consumer choice, economic efficiency and so on. In other words, workers need a good dose of Economics 101.<\/p>\n

What was left largely unexplored, however, was the source(s) of protectionism and populism. Yet, it\u2019s hard to find a useful antidote to populism and protectionism without diagnosing the underlying cause of the disease.<\/p>\n

So why are so many Americans increasingly protectionist? And do we need to worry about this afflicting Canada?<\/p>\n

An industry has sprung up in the US trying to explain the rise of President Trump\u2019s brand of populism and protectionism. The explanations range broadly from a generation long trend of outsourcing and offshoring of American manufacturing jobs to a corrupt political system in Washington.<\/p>\n

There could, however, be another straightforward factor \u2014 namely, workers aren\u2019t being paid what they deserve. Debates about trade have tended to focus on jobs that have allegedly been lost to more wage-competitive jurisdictions. What is less discussed is the general erosion in real wage growth that has attended the age of globalization.<\/p>\n

Figure 1, compiled by the Financial Times,<\/em> draws on data from the U.S. Bureau of Labour Statistics and other sources to show the historical relationship between labour productivity growth and real hourly pay of non-supervisory employees (which accounts for 80 percent of the American private-sector work force) over a 65-year period. From 1948 to the early 1970s \u2014 the so-called Golden Age \u2014 these two lines overlapped, as conventional economic theory predicts. But beginning around 1973, they began to diverge, and the divergence grew more and more pronounced over the following four decades, particularly when the modern age of globalization and trade liberalization emerged in the 1980s.<\/p>\n