Texas Liberal

All People Matter

Are American Workers Overpaid?—We Need To Find A Viable Economic Future

A recent New York Times story suggests that the wages Americans earn for manufacturing work may have to decline as much as 20% to remain competitive with global rivals.

From the story—

“Of course, workers in the United States should earn more than their peers in China, Moldova or Vietnam. Americans take advantage of the higher productivity that makes their country rich: better education and infrastructure, abundant capital and a strong work ethic. But how much higher should American wages be? The answer depends in large part on two measures: the difference in productivity in making goods that can be traded across borders, and the quantity of such goods. Both measures point to a narrowing wage gap. Many factors are raising productivity in poor countries. Fast development, cheap capital and more efficient shipping all help. Cheap communication via the Internet reduces costs and makes it easy to trade many more goods and especially services.The global wage gap has been narrowing, but recent labor market statistics in the United States suggest the adjustment has not gone far enough.

One indicator is unemployment, which has risen unexpectedly rapidly. The 7.3 million jobs lost are more than triple the 2 million during the 1980-82 recession. Some of that huge increase reflects the sharp decline in gross domestic product, but there could be another factor: the recession shows that many workers are paid more than they’re worth. Another possible sign is the huge surge in reported productivity, which has begun while output is declining. That suggests that some production is being outsourced, often to lower-paid foreign workers.

The big trade deficit is another sign of excessive pay for Americans. One explanation for the attractive prices of imported goods is that American workers are paid too much relative to their foreign peers.

Global wage convergence is great for the poor but tough on the overpaid. It’s possible to run the numbers to show that American manufacturing workers should take average real wage cuts of as much as 20 percent to get into global balance. The required cut may be smaller. But if American wages get stuck above global market-clearing levels, as in the 1930s, the result could well be something approaching Depression-era levels of unemployment. Anything would be better than that. Both moderate inflation to cut real wages and a further drop in the dollar’s real trade-weighted value might be acceptable.”

It is hard to look at the future and see good prospects for the average American worker. Most folks are never going to be able to find jobs in “knowledge industries” or whatever term is used at the moment to denote jobs for the relative articulate and skilled few in a country that has no real interest in educating all people. Why would our elite pay the taxes needed to create competitors for their children for the shrinking supply of good jobs? Where would a fully educated workforce find jobs?

This fact of a hard-pressed American labor force is one of many reasons the health care reform “debate” is so maddening. Where do people think they are going to find good benefits in the future? If government does not help provide good health insurance, where do people think it will come from as employers cut back?

The American Prospect, a liberal magazine of politics and views, has a series of articles that discuss the role regulation,  organizing by workers, and sound public policy can play in helping maintain a supply of good jobs in our country.

Regardless of one’s politics, how can anybody in this country look at the economic future and feel hopeful about the path ahead? The issue is not people in other countries who have a right to decent lives no different from anyone in the United States. The issue is what we do as working people here in America to make sure that we have  a viable future in a changing world.

November 13, 2009 - Posted by | Uncategorized | , , , , ,

2 Comments »

  1. I’m shocked that anyone could even try to make such a ridiculous argument as American workers being overpaid. These corporations are still making record-breaking profits, while worker’s wages have been stagnant for many years (even though production has risen).
    The off-shoring of American jobs is an attempt to get around unions and laws that protect American workers from being abused. If they can’t abuse American worker’s, the greedy corporations will find a country where they can abuse their workers.
    Corporations don’t have a heart, and will abuse their workers (and consumers at the drop of a hat). Off-shoring is an attempt to turn back the clock to the early 18th century, when companies made outrageous profits by making workers work for poverty wages.
    I think we should figure out how much they save by shipping jobs overseas, and then impose an import tax equaling that amount when they try to bring the goods back to sell in America.
    We need to stop the abuse of workers, both here and abroad.

    Comment by Ted McLaughlin | November 13, 2009

  2. Great comment. Nothing I can add.

    Comment by Neil Aquino | November 13, 2009


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