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When The White House Touts Falling Wages
Wolf Richter www.testosteronepit.com
150 factory workers in China threatened to jump off the roof of an iPhone factory unless they received a raise. Similar stories are accumulating. Inflation, especially in food and other essentials, has been rampant over the last few years—and to make ends meet, desperate workers sometimes take drastic measures. These anecdotes underscore a major trend in China: skyrocketing cost of labor.
In the US, it’s the opposite. Since 2000, real wages (adjusted for inflation) have declined. The White House even touts this horrid statistic in its just released paper, Investing in America: Building an Economy That Lasts. Clearly, the paper is not intended for the rank and file. It outlines how current policies are making America competitive with low-wage countries like China. And one of the principal strategies is ... lowering wages:
The paper also touts the administration’s claim of having created 3.2 million jobs over the last 22 months. But these numbers are based on surveys, formulas, and statistical adjustments. The BLS’s Employment Participation rate, which the paper wisely leaves unmentioned, measures the percentage of people age 16 and older who have jobs. It’s the least corruptible employment number available—and at 58.5%, it's where it was in 1983.
BLS Employment Population Ratio
The long decline from 64.7% (April 2000) parallels another statistic in the paper: from 2001 - 2007, three million manufacturing jobs were lost. Those were the Bush years, obviously. But what happened during the Obama years? Unmentioned, but just as bad.
From the White House paper
The tiny hook at the bottom is the ballyhooed uptick. But during the next economic downdraft, the line will plunge again. And that slack in employment has contributed to the decline in real wages.
The problem for a high-wage country in a globalized economy is that jobs will be globalized as well. The decision whether or not to offshore production comes down to calculating the total cost of doing business overseas. This includes worker productivity, transportation, supply chain risks, legal and political risks, currency risks, intellectual property risks, expenses for expats, delays, flexibility, environmental issues, taxes, import duties, etc. Hence, for US manufacturing to be competitive, wages don’t need to match Chinese wages, but they need to be closer. That approach in wages has been happening—at a great expense to US workers. And now there are some results.
The paper mentions Ford and Caterpillar as examples of large companies that have announced investments in the US to ‘insource’ jobs from overseas. Those announcements, when they do occur, are made with great political fanfare.
Yet the same companies are still making massive investments in China and other low-wage countries, though no US politician takes credit for that. And there are many others. Merck disclosed from its headquarters in New Jersey that it would build a new facility in Beijing, part of its $1.5 billion investment in China. Nissan, which has large plants in the US, just announced that it would build a plant in Mexico. And government-subsidized solar panel makers, well, for how they just started a trade war, read... The Trade Debacle with China.
So the net of outsourcing and insourcing among large companies still favors outsourcing. But under certain circumstances and on a small scale, companies might try to insource. And that is a step in the right direction.
Smaller companies face different dynamics. It has always been expensive, difficult, and risky for them to offshore production. Many have done it, lured by cheap wages, only to learn costly lessons. And now anecdotal evidence is piling up that they’re having second thoughts. The paper lists KEEN, a footwear maker, and Master Lock as examples of companies that have brought back jobs. I personally know one consumer products company that shut down its manufacturing operations in China and relocated production back to the US (though it still operates plants in other parts of the world). And this is a trend that will likely accelerate.
But low-wage countries will continue to draw jobs away from the US. The numbers couldn’t be clearer: in 2011, the trade deficit with China hit another record north of $320 billion. So taking credit for a wave of ‘insourcing’ from China, as the paper does, has an aura of political grandstanding.
But you can't blame the Chinese. They're trying hard to get into the circle of developed countries. Even with products that, well.... Merde! Chinese Wines Did What to French Wines?
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So odd all that rhetoric and no mention that 40yrs ago the labor force was doubled by adding women. At a time when most did not need two incomes to survive. I realize it is much more important to ignore the basic supply/demand stuff but it is kind of hard here given it was almost a full doubling of supply. Wonder why that was omitted? Doesn't quite jive with the obvious agenda is the most likely answer.
the governmental overhead cost for hiring full time workers is now approximately 35% over wages which is at an all time high. Anyone can check this merely by phoning a temp agency and asking what their fee currently is and then add 5%.
One would have to be ingesting LSD to start a labor intensive business in the US.
Forced downward mobility in a country where material poverty is all but gone,
just cannot make this stuff up.
and I love the other guys-one world order mantra post-exactly headed towards a nation of renters, that ride a bike or the bus. Sound familiar? Eventually we will work ourselves down to 450sq ft of living space vs 900 as well as decimate the military and in the end nothing will be different. The government will still be in hock past it's eyeballs, the same folks will be complaining about haves and have nots except they will actually have just cause for a change.
Nobody with significant skills will work for minimum wage.
Anyone without significant skills may need to work for below minimum wage in order to gain skills that make them worth more than minimum wage... or at least to earn enough to survive.
Simple. Wake up and get real. Leave people alone to arrange their own voluntary agreements, employers and employees too.
If you want to give special advantages to "poor folks", why not promote the idea that "poor folks" should not be subject to ANY government taxes or fees at any level of government, including property tax and sales tax. Probably just about everyone would be okay with that kind of help. I sure would. That way every penny they earn would go much further, and the massive drag of massive government would stop holding them down.
How and why is no minimum wage policy going to make any difference? Talk to any small business owner about what they think about minimum wage. We do not need the state regulating what should be a liveable wage.
A minimum wage job is just that. There should be some incentive to those working for 'minimum wage' to move on to bigger and better things, not wait for the state to order their employer to pay them more just because...
Can you quote or cite a situation where not having a minimum wage has actually reduced wages?
Enforcing immigration laws (rewarding legal citizenship and a commitment to the nation) would eliminate the need for the minimum wage; as would ending entitlements along with corporate tax breaks, offshoring of jobs, tort reform, etc, etc.
Everyone is grubbing for the easy path.
Okay, you get easy path results.
The “Maestro of Collateral Damage” [aka Alan Greenspan] explains this in his book. Wage compression/suppression has been a policy initiative for quite some time. The Bernanke, Obama et al just carry the torch of those before them…
Watch this clip from the 3:45 mark on http://www.youtube.com/watch?v=oqx88MyUSck
We need to bring in cheaper executives and economists from overseas to compress the wage scales in the corner offices.
Either that or go long pitchforks, torches, and rope.
What these fools don't realize is that socialism has constructed a fine network of entitlements for people to get by on and NOT take that shit wage job.
Meanwhile, back in Republicrat land, they have off-shored one after another career salary job overseas and maximized sick-care expenses to increase Tort, Insurance, and Corporate hospital income.
Collapsing from both ends, and I believe both sides are so trapped in their own paradigms they don't see it. The sharks at the very, very top do, but they don't care - they have escape plans (Henry Paulson, et. al.).
Gee, wonder why we have 45 million + on Food Stamps?
So...the 70% consumption economy is recovering because of...?
Looking at the two bottom charts, GW Bush really did a number on his Country!!
Good Lord Almighty!!
Not even two wars could work their usual magic.
Blame that idiot Clinton and the dummycrats for passing NAFTA and GATT
Don't blame me I voted for Perot!
A vote for Perot was a vote for Clinton.
They're just being good little corporate widgets. Their job is to sell people the "benefits" of the Company Store Business model. After the past 3 years, they could probably sell manure as health food, and people would say that it tastes good.
http://georgesblogforum.wordpress.com/2011/11/02/the-daily-climb-2/
More cars have been sold in China than the USA since 2008. Automobile manufacturers will continue to invest over there and do what ever the Chinese government asks of them to get their piece of the market. The only thing the USA can do is impose the same rules on Chinese goods coming into this country. Rules like, if you want access to our markets then you have to build it here.
who gives a rats ass the 'number of cars sold' compared to the usa....how much did the cars sell for compared to the prices we pay ? takes a lot of $3000 cars to equal a $30,000 toyota here in the usa.....
Then there's the question of "How many people in the USA are willing to spend $30,000 on a Toyota...if they could even borrow the money?"