Manufacturing corporations and mainstream economists (like Laura Tyson) will be happy: manufacturing is once again profitable in the United States.
And the reason that manufacturing is so profitable is that, as the Wall Street Journal shows, real wages for manufacturing workers are declining.*
The celebrated revival of U.S. manufacturing employment has been accompanied by a less-lauded fact: Wages for many manufacturing workers aren’t keeping up with inflation.
The wage lag is a key factor contributing to the rebounding competitiveness of U.S. industry. A recent uptick in factory employment and the return of some production to U.S. shores from abroad both added jobs that probably otherwise wouldn’t exist. . .
“The U.S. has held manufacturing wages in check while there has been strong wage growth in China and moderate wage growth in Mexico,” says economist Gordon Hanson of the University of California, San Diego, referring to two of the U.S.’s biggest lower-wage competitors.
A decline in real wages means, in Marxian terms, that the rate of exploitation is rising. And that’s the secret behind the increase in manufacturing profitability.
With unemployment still high and global competition intense, employers have the upper hand in asking unions to relax work rules and restrain, or reduce, wages and benefits. Scores of U.S. companies have negotiated two-tier contracts with unions that allow them to pay new hires less than existing workers or otherwise restrain wage and benefit costs.
Real earnings for production and other nonsupervisory workers in manufacturing are back to where they were in 2000. Coupled with an impressive burst of factory productivity, output per hour in American manufacturing has accelerated while real wages continue to decline.
In the midst of the Second Great Depression, manufacturing employers have found the formula for success: increased exploitation in the USA.
*There is one hitch, however: declining real wages mean that, for workers, there’s less income and therefore less money to spend.
“Workers really understand the global economy,” says Cindy Estrada, a 43-year-old vice president of the United Auto Workers. The rank and file know they need to be competitive on wages, she says. But some companies are pushing pay down so far — $10 or $11 an hour with monthly health care contributions of as much as $400 a month — that workers can’t afford to buy the cars they build, she adds.