What Japanese Imports in the 1980s Can Tell Us About Employment Today

The joint processes of industrialization and globalization have undoubtedly reshaped the United States labor market in the post-war period. The dislocation of previously prosperous manufacturing industries in the United States, particularly in what is now called the Rust Belt, has shifted the workforce towards both service sector jobs and jobs requiring higher education and skill levels. These shifts have exposed inequities in the American education system and social safety net, as economic realities force workers to react. When employment opportunities shift as the economy modernizes, new opportunities require educational achievement and skills development that are far from evenly distributed across racial and ethnic boundaries in the United States.

In their working paper, “Stalled Racial Progress and Japanese Trade in the 1970s and 1980s”, Mary Kate Batistich and Timothy Bond of the University of Notre Dame and Purdue University, respectively, attempt to measure the racial disparities in employment caused by manufacturing import competition. As the authors note, American importation of Japanese goods rose by an average of $8.5 billion annually over the period from 1975 to 1986. This growth represents an increase from 1.1% to 3.5% of U.S. spending on imported manufactured goods. Growth in U.S. purchases of Japanese products slowed in the late 1980s due to a mix of currency fluctuations and protectionist policies.

During the period after World War II until the Japanese import boom, Black male median earnings as a share of white male median earnings improved significantly from 52% to 70% from 1962 to 1976. While far from true equality, this represented significant progress. This period included the Civil Rights Movement and the passage of the Voting Rights Act, both of which certainly improved the general economic conditions of Black citizens, as well as increased funding to Black majority districts, particularly in the Jim Crow South. As Elizabeth Cascio and Ebonya Washington show in their 2013 paper, Valuing the Vote: The Redistribution of Voting Rights and State Funds Following the Voting Rights Act of 1965, the expansion of voting rights led to significant increases in local education spending. Black workers saw significant opportunity gains from the 1950s to the 1970s. Unfortunately, the advancement in earnings equality actually reversed starting in 1976, so much so that the median earnings ratio decreased to 61% by 1984, equivalent to the median ratio 16 years earlier.

Batistich and Bond attempt to show evidence that the rise in Japanese imports can be tied to the regression in earnings equality through geographic variation across the United States. They explore how each community was exposed to import competition based on the products it historically produced. To avoid capturing import flows resulting from demand shifts or a decline in production due to other reasons, the authors only exploit the Japanese imports into the U.S. that can be predicted by the growth in Japanese imports by other countries. This approach isolates imports resulting from Japan’s global competitiveness, rather than changes in the U.S. The analysis showed that the specific exposure to Japanese imports corresponded with a racial disparity in decreased employment. The researchers found no evidence for changes for white employees in the same geographic area, while Black employment decreased only in manufacturing. The researchers also found a significant decrease in Black workforce participation in regions particularly impacted by Japanese imports. The overall effect amounts to a 1% decrease in Black manufacturing employment specifically because of competition with Japanese goods – a change that does not appear amongst the white working population. In simpler terms, through careful statistical study, the researchers established a direct relationship between importation of Japanese goods and the specific displacement and worsening outcomes for Black workers.

Many economists and industrial engineers have examined the reasons for Japan’s manufacturing superiority during this period, but most generally attribute their increased market share with improved production techniques, including the adoption of lean manufacturing and the Toyota Production System. The focus on waste elimination and quality assurance reduced costs and increased product reliability. After the 1980s, the Japanese economy entered a recession and many American manufacturers either initiated joint ventures with Japanese firms or adopted the practices already prevalent in Japan. These practices transformed many manufacturing jobs to skilled labor positions. Given the advantage that white workers had in education and skills training, they more easily adapted to the changing requirements of manufacturing jobs after the adoption of Japanese practices.

As Batistich and Bond point out, a great deal of recent research has focused on the impact of Chinese imports on white working class employment, but their paper clarifies that this effect is merely a repetition of what happened to Black manufacturing employment in the 1970s and 1980s. Many political commentators, particularly after the 2016 election, focused on the plight of the white working class without necessarily considering that Black manufacturing workers had already experienced a similar dislocation. Generally, the most economically vulnerable folks face the strongest consequences of dislocation. Given the societal privilege of the white population, this demographic was able to remain relatively unscathed during the first dislocation due to increased Japanese imports as Black workers were negatively impacted. Now, white manufacturing workers are at the forefront of the dislocation from increased Chinese imports. As Cascio and Washington previously proved, though improved voting access increased public expenditure on education and public services in Black communities, Black workers still suffered inferior educational opportunities, and thus employment prospects, leaving them more vulnerable to competition from workers on the other side of the world.

The researchers stop short of a policy recommendation, though such systemic issues rarely yield simple policy solutions. The researchers do posit that the regression in equity may have led to a long-term impact on Black unemployment, as the economic disadvantage may have evolved into broader decreased achievement through the 1990s and 2000s. Educational and economic inequities leave Black workers more exposed to globalization. With China fully arriving on the global landscape as a manufacturing power and the widespread rise of automation, policymakers can use this history to ensure that the U.S. provides equitable educational resources to all citizens to create a competitive workforce that will be resilient to economic forces beyond its control.

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Batistich, Mary Kate, and Timothy Bond. “Stalled racial progress and Japanese trade in the 1970s and 1980s.” (2019).

Cascio, Elizabeth U., and Ebonya Washington. “Valuing the vote: The redistribution of voting rights and state funds following the voting rights act of 1965.” The Quarterly Journal of Economics 129, no. 1 (2014): 379-433.