Worker-level Responses to the USMCA High Wage Labor Value Content Rules Requirement

There is robust empirical evidence that overall, NAFTA has had, at most, a small aggregate effect on wages, employment, unemployment, and GDP growth. However, NAFTA’s negligible net effects mask significant negative effects on employment and wages for some industries and regions, and by gender. Under the United States–Mexico–Canada Agreement (USMCA), multiple measures were included to safeguard against U.S. job losses. One such measure is USMCA’s high wage components of the labor value content (HW-LVC) requirement. In this paper, we investigate if the announcement of these measures ameliorated the demographically asymmetric labor adjustment effects of NAFTA. Our baseline results indicate that in the anticipatory period since USMCA’s HW-LVC publishing and before the rules entered into force, overall auto industry hours worked have remained unchanged, and auto worker wages have experienced a 6.6% increase. In contrast to these baseline estimates, we find that female production workers experienced lower wage growth than their male counterparts during the in post-publishing period before the rules entered into force. Black workers demonstrated no statistical change in wages or hours from the pre-USMCA period. The divergence of female production worker wage growth from the aggregate autoworker estimates highlight the importance of a distributional approach to analyses of worker-level welfare effects, as our aggregate worker estimates masked relevant subgroup heterogeneity.