Fact Checker: Trade agreements let corporations pay ‘pennies an hour’ wage, and duck environmental standards

Introduction

'Since 2001, we have lost 60,000 factories in America, not all of it attributable to trade. There are other factors, but a lot of it has to do with trade. Bottom line is these trade agreements enable corporate America - and that is why they wrote them, to shut down plants in America, not pay workers in Iowa or Vermont 20, 25 bucks an hour, not obey environmental regulations, not provide health care, shut em' down, move abroad, pay people pennies an hour and bring their products back into the country.”

Source of claim: Democratic presidential candidate and Vermont Sen. Bernie Sanders speaking with the Iowa Federation of Labor.

Analysis

Sanders wants to retool trade agreements such as the Trans-Pacific Partnership and the North American Free Trade Agreement to better protect domestics jobs and better support workers abroad, he said.

Given the claim's breadth, we'll take it in chunks.

First, the number of factories closed: Bureau of Labor Statistics data showed a decrease of 59,792 manufacturing establishments from 397,552 in 2001 to 337,760 in 2014.

Then, as evidence of the wages claim, Warren Gunnels of the Sanders' campaign cited news articles and government statistics.

He cited a 2007 New York Times article about the closure of the Maytag plant in Newton. An Iowa couple lost a combined income of $43 an hour plus health care benefits when it closed in 2006 in a reorganization that sent work to Mexico.

He also cited national BLS workforce figures, showing the average hourly earnings for manufacturing is $19.88.

But for Iowa specifically, which was cited in the claim, BLS' State Occupational Employment and Wage Estimates data from May 2014 showed average wages for all 'production” fields, which includes supervisors, was $16.34.

A BLS report from 2012, the most recent available, comparing countries on hourly compensation in manufacturing, showed such U.S. workers were paid an average of $35.53 an hour, which includes $8.65 an hour in 'social insurance expenditures” such as health care.

How does that compare with other countries? This ranked No. 14 in the world.

Mexico paid $6.48 ($1.95 in benefits) an hour. Philippines $2.01 ($.17) and South Korea $18.01 ($3.70), according to the BLS. But Germany, one of the nation's main trade partners, has higher compensation packages of $47.38 per hour, which includes $10.24 in social insurance expenditure.

As for the environmental claim, Gunnels pointed to a 1992 Multinational Monitor article highlighting the lack of protections in Mexico.

The bimonthly publication, which published from 1980 until 2009 through Ralph Nader's Essential Information, is listed as a partner of the Center for Investigative Reporting.

The Monitor article focused on maquiladoras, or factories in free-trade zones with little oversight to prevent toxic waste dumps and pollution. Such factories had tripled in 10 years.

Several cases cited in the article tied back to U.S. companies. For example, investigators found a river behind General Motors' Rimir plant with xylene at levels more than 6,000 times the U.S. standard.

By comparison, companies here face regulations through the Environmental Protection Agency and the Occupational Safety and Health Administration, and other government agencies.

'Generally, the countries that attract standard (not high-end) manufacturing FDI (foreign direct investment) have less stringent environmental standards, less onerous requirements for benefits or social security-type payments and lower average wages,” said Russell A. Green, a fellow for the Baker Institute for Public Policy at Rice University in Houston, during an interview with Fact Checker.

He disputed the 'pennies an hour” claim, but noted it may be 'poetic license.”

Gary Burtless, a senior fellow of economic studies at the Brookings Institute in Washington took issue with Sanders' suggestion the agreements have hurt U.S. workers as a whole. They helped the United States export more passenger and personal jets, for instance, which helped U.S. factories in the sector, he said.

'It is a serious error to think that all or even most of the manufacturing decline is due to lower trade barriers and expanding manufacturing in low-wage countries,” he said in an interview.

Lindsay Oldenski, associate professor in the School of Foreign Service at Georgetown University, said while some U.S. workers lose jobs to offshoring, data from a 2014 policy brief 'tells us that expansion abroad by U.S. firms creates more jobs than it destroys.”

In many cases, foreign countries can locate production in the United States where they have access to a more skilled workforce than low-skill, low-paying countries, she said.

'Inward investment is an important component of trade agreements that isn't mentioned at all in the quote you referenced,” she said.

Conclusion

The problem with an analysis of this claim is the nation trades with virtually every country around the globe. Sanders cherry picks examples to make a point.

On the 60,000 loss in U.S. factories, he is correct. And corporations can outsource to countries with lax environmental regulations and lower pay.

However, Sanders misleads to paint overarching negative effects of trade agreements without also stating the positive benefits, and he exaggerates how much manufacturing workers earn in Iowa.

Fact Checker scores this a C.

Criteria

The Fact Checker team checks statements made by an Iowa political candidate/office holder or a national candidate/office holder about Iowa, or in advertisements that appear in our market. Claims must be independently verifiable. We give statements grades from A to F based on accuracy and context.

If you spot a claim you think needs checking, email us at factchecker@sourcemedia.net.

This Fact Checker was researched and written by B.A. Morelli.