Photo courtesy of House Ways and Means Committee.

By Rahee Jung and Finn D. Reynolds

Executive Summary:

• Recent polls reveal that millennials support U.S. engagement in free trade agreements more than all other age demographics.
• Policymakers should take note of this trend, and further engage the United States in free trade agreements to grow the economy for the next generation of American workers.
• Increased trade in the past two decades has contributed to the current industry trends, which millennials directly benefit from. Therefore, millennials tend to view free trade agreements more favorably than older generations because they are on the “right side” of these industry trends.
• The evidence supporting this assertion can be broken down into four principle factors:
  1. Industry Trends Align with Export Trends: Given that trade has greatly increased the U.S. competitive advantage in services, the growing services industries provide millennials the opportunity to benefit from more job prospects and greater wage growth in the field.
  2. Changing Perception of Automation: Millennials grew up during a digital and technological revolution, and are more naturally inclined to understand the decline in low-skill manufacturing as a consequence of technology-enabled automation.
  3. Millennial Flexibility and Durability: Millennials are more flexible than older generations when it comes to changing jobs or industries, and therefore are more able to adapt to automation and globalization.
  4. The Benefits of Free Trade Agreements Are Ingrained: Having grown up in the age of NAFTA and the WTO, millennials have enjoyed the benefits of free trade through an influx of inexpensive foreign imports.

Introduction

According to recent polls conducted by Gallup and Pew Research, support for U.S. free trade agreements is highest amongst millennials.

Sources: Gallup, Pew Research (2014), Pew Research (2015)

These polls show that, between younger and older Americans, there is a stark difference in opinion regarding free trade agreements. The cause of this difference can be explained by analyzing the impacts of existing U.S. free trade agreements, and the subsequent perception of these impacts.

This paper presents evidence to support the assertion that millennials largely support free trade agreements because they directly benefit from them. Furthermore, the demographic difference in opinion of free trade agreements can be explained by evolving industry, education, and economic trends.

Industry Trends Align with Export Trends

Overtime, industry trends in the United States have shifted away from goods-producing industries and increasingly towards service-producing industries. Millennials are benefiting from an expanding job market in the service industry complemented by consistent annual growth in U.S. service exports.

The implementation of the WTO and trade agreements like NAFTA have opened foreign markets for U.S. exporters by eliminating barriers to trade. As a result, U.S. exports overall have grown consistently each year, especially in services where the U.S. has cultivated a strong competitive advantage in the global marketplace. This export growth has contributed to the success of service-producing industries.

Since 2000, real U.S. exports of services have increased an average of 3.4% each year, in contrast, total exports increased an average of just 2.7% per year. Corresponding with this growth, the U.S. has cultivated a surplus in trade in services. This surplus is displayed with all major U.S. trading partners. In 2016, the U.S. had a $38 billion trade surplus with China and a $54 billion trade surplus with the EU.

The growth of U.S. service exports has aligned with domestic industry trends. The share of services employment relative to total employment has been on an upward trend for nearly seventy-years, while the share of manufacturing employment has steadily decreased.

Source: Bureau of Labor Statistic, Current Employment Statistics

In 1950, the share of employment was 31% in manufacturing and 61% in services. Since then, employment in services has increased by 100 million workers to 86% of total employment. Employment in manufacturing–which peaked in 1978 at just over 19 million workers–has decreased to just 12.5 million workers, or 8.5% of total employment, as of 2017.

Additionally, the Bureau of Labor Statistics (BLS) projections of industry employment for the next ten years forecasts further growth in service-producing industries. The projections indicate that 18 of the 20 fastest growing industries will be in the services, while just two will be in manufacturing.

This means that for millennials, there will continue to be fewer workers who need to compete against cheap, foreign manufacturing labor. Subsequently, more workers will be able to enjoy the U.S. competitive advantage in a growing service-producing industry, which will support a trend of overall economic growth. Based on projected trends for the next ten years, the growth in the service-producing industry provides an optimistic prospect for millennials.

A potential U.S. withdrawal from important trade agreements like NAFTA would understandably dampen millennial’s optimism for the future. Millennials would instead benefit from the U.S. entering into more trade agreements that would open up additional markets for service industry exports.

Changing Perception of Automation

Over the past few decades, there has been a generational shift in perceptions regarding the cause of declining low-skill manufacturing jobs in the United States. For Baby Boomers and Generation X, the primary cause for the decline is believed to be trade agreements that encourage outsourcing.

However, the reality in today’s economy is that technology-enabled automation is the main driver of low-skill job displacement, while trade is playing a relatively smaller role.

Trade economists have estimated that the increase of net imports between 1978 and 1990 is associated with a 7.2% decline in manufacturing jobs. Furthermore, a Ball State analysis found that of the 5.6 million manufacturing jobs lost from 2000 to 2010, roughly 87.8% were due to productivity gains. Simultaneously, just 13.4% can be attributed to the negative trade balance. A report from the McKinsey Global Institute further corroborates that high routine work like low-skill manufacturing jobs are most susceptible to automation.

Generational views on the disadvantages of trade have changed accordingly. Millennials–who are more naturally acclimated to this technological reality–have a different perception of the causes of low-skilled manufacturing job loss.

This finding is supported by two polls on trade and technology. Across age groups, perception on the harms of NAFTA is not in line with perception on the harms of technology.

Distribution of age groups supporting NAFTA is highly skewed towards young adults, whereas distribution of age groups who are worried about job loss from new technology is much more evenly distributed. Comparing these polls reveals that older generations view trade more negatively than they view technology.

For example, 25% of the youngest age bracket and a similar proportion, 27% of the oldest age bracket, were worried about job loss from technology. On the other hand, 73% of the youngest age bracket and a much smaller proportion, 34% of the oldest age bracket, viewed that NAFTA is good for the U.S.

But as suggested by the McKinsey’s report, “technology destroys jobs, but not work,” meaning that the decline of low-skill manufacturing as a share of employment is accompanied by the creation of new types of “digital middle-skill” jobs unforeseen at the time. According to another report from McKinsey, one-third of new jobs created in the U.S. in the past 25 years did not exist, or barely existed, 25 years ago.

Recently, more manufacturing industries have incorporated new technologies into their production. Consequently, their jobs have evolved to now require digital skills, which provides an opportunity for American workers to regain global competitiveness in a more high-tech manufacturing industry. The next section will explain why millennials are better adapted than older generations to find these new kinds of jobs.

Millennial Flexibility and Durability

Millennials are more flexible and durable than older generations in changing their careers in the face of industry shifts and globalization. According to LinkedIn, in 2016, millennials were 50% more likely to relocate and 16% more likely to change industries for a new job than non-millennials. This can be attributed to several factors.

First off, younger generations tend to perceive learning as a lifetime task more than older generations do. Therefore, they are more likely to continue their learning beyond attaining degrees in order to ensure they have the skills to compete in an evolving economy.

According to a Pew survey, 54% of all working Americans think it will be essential to develop new skills throughout their working lives. Among adults under 30, the number goes up to 61%. Another survey, conducted by Manpower in 2016 found that 93% of millennials were willing to spend their own money on further training.

Additionally, perception of job hopping has changed overtime. When Baby Boomers entered the workforce, it was the norm to stay with an employer for decades. This is no longer the case for millennials. According to BLS, the average number of years that U.S. workers stay with their employer is 4.6 years. For younger employees, the number is just 2.3 years.

Lastly, millennials have followed recent educational trends by continuing to seek higher educational attainment. Obtaining a bachelor’s degree or higher enables millennials to be more prepared to work in a broad range of industries. The overall number of Americans (over the age of 25) with a bachelor’s degree has steadily increased since 1971–the year when Baby Boomers were just entering the workforce.

Source: Census Bureau

According to Burning Glass Technologies, an increasing number of employers are requiring that their workers have a bachelor’s degree. These employers use this as a rough, rule-of-thumb screening system to recruit better workers.

The Benefits of Free Trade Agreements Are Ingrained

Millennials were born into the era of free trade agreements. They grew up with the WTO, NAFTA, and thirteen other free trade agreements that the U.S. has implemented since 1985. As a result, they have enjoyed the benefits of a diversification of products and of inexpensive imports coming into the U.S. from the global marketplace.

Source: USITC

The overall influx of inexpensive foreign imports has become a customary reality for millennials. Real U.S. imports of goods have nearly doubled from $1.23 trillion in 1999 to $2.36 trillion in 2017.

Though the modern wave of globalization has been well under way since 1960, Baby Boomers and Generation X have not been accustomed to all of the benefits of free trade agreements in the same way as millennials. These older generations–who were in the labor force before, during, and after many of these trade agreements were implemented–experienced the job losses in manufacturing that have occurred overtime. From 1985-2005, Americans over the age of 30 (as of 2017) were a part of the labor force. In this period, there was an average loss of 2.7% in manufacturing jobs as a share of the total employment.

Additionally, U.S. engagement in free trade agreements has given American consumers access to a wider variety of products and made products less expensive. An International Trade Commission (ITC) report revealed that “consumers saved as much as $13.4 billion in 2014 from the tariff reductions associated with [free trade] agreements.”

While millennials have lived and worked in an era where the benefits of America’s trade agreements have mainly outweighed the detriments, older generations have had a varying experience over a longer period of time. This fact certainly contributes to the difference in support that millennials have for free trade agreements versus the general opposition expressed by older generations.

Conclusion

Various factors have set the stage for millennials to lose less and gain more from free trade agreements than older generations.

The result of three decades of a technological and digital revolution, as well as U.S. engagement in 14 free trade agreements with 20 countries, have cultivated strong and thriving service-producing industries. Growing up under these circumstances, millennials have evolved to be more durable to industry shifts–an outcome of better education and a greater openness to lifetime learning.

Most importantly, millennials are fortunate to live in a period where they can gain a competitive advantage in industries with many high-paying job prospects. For millennials, there are more reasons to support than oppose free trade.

Policymakers should take note of millennial’s support for free trade, and take steps to open more foreign markets and eliminate barriers to trade–particularly trade in services–through further engagement in free trade agreements. Such actions would have the vast support of millennials, as well as continue to drive a growing economy forward for generations to come.