Testosterone Pit - 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:
From the White House paper
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:
http://www.testosteronepit.com/home/2012/1/11/when-the-white-house-touts-falling-wages.html
