One of the more shortsighted and self-destructive policies local governments embrace is the pursuit, via tax breaks and other enticements, of manufacturing plants. The idea is that if a municipality gets a company to relocate a factory within its borders, then riches will flow from the added jobs.
It doesn’t usually work out that way. In reality, such competition ends up marginally benefiting the company and its shareholders at the expense of the community from which the factory moved, and the taxpayers of the community it moved to. And even the promise of the new manufacturing jobs rings hollow, according to this new report by the National Employment Law Project. While manufacturing jobs have increased in recent months after years of steady decline, the new jobs aren’t quite like the old jobs.
Here are three significant bullet points from NELP's new report, “Manufacturing Low Pay: Declining Wages in the Jobs That Built America’s Middle Class”:
-- While in the past, manufacturing workers earned a wage significantly higher than the U.S. average, by 2013 the average factory worker made 7.7% below the median wage for all occupations.
-- Today, more than 600,000 manufacturing workers make just $9.60 per hour or less. More than 1.5 million manufacturing workers – one out of every four – make $11.91 or less.
-- Real wages for manufacturing workers declined by 4.4% from 2003 to 2013 – almost three times faster than for workers as a whole.
So what’s driving this? The decline of organized labor, for one thing (likely to get even worse with states like Michigan going the “right to work” route). But even organized industries have suffered. The auto industry has one of the strongest unions in the country, but the off-shoring of production and the bankruptcies of two of the Big Three automakers have cost hundreds of thousands of jobs and significant contract concessions. That includes no or negligible wage hikes since 2007 and a two-tier wage system in which new hires are paid significantly less than existing workers. And the UAW workers have fared better than most other factory workers without unions.
More broadly, the globalization of labor has been a significant factor in the downward pressure on wages (as has a reliance by manufacturers on temp workers hired through agencies). Companies have been “on-shoring” manufacturing jobs, leaving foreign labor markets to return to the U.S. But it’s not through an altruistic desire make amends for the problems created by off-shoring good-paying blue-collar jobs in the first place. It’s that the costs of doing business overseas - including transportation and labor - have increased while the U.S. labor market has become cheaper because it has become weaker, due in no small part to decades of overseas competition. As a culture, we like to think that competition is good. And it usually is. But when the competition is in labor markets, the race is downhill and results in bigger shareholder portfolios and smaller worker paychecks.
According the NELP, the median manufacturing wage in the U.S. is $15.66 an hour, or around $34,000 a year. Naturally, a weak-paying job is better than no job, but the NELP report points out that the current increase in the manufacturing base does not signal a return to economic health for blue-collar workers, the foundation of the American middle class. In a sense, the manufacturing industry is joining the service industry as a large employment base of jobs that don’t pay a livable wage.
But the real winners here are the corporations that have benefited from government policies and international trade agreements at the cost of American workers and communities that relied on manufacturing for their local economies (Edward McClelland’s “Nothin’ But Blue Skies: The Heyday, Hard Times, and Hopes of America's Industrial Heartland" paints a good portrait of the impact).
The upshot: We as a nation need to press the federal government to rethink trade policies, especially as it pushes for ever more deals to make it easier to ship goods and jobs around the world. The looming Trans-Pacific Partnership (look at it as NAFTA for the Pacific Rim) might be good for global manufacturers and American consumers, but those consumers are also American workers. Driving down retail prices while also driving down family incomes is the wrong spiral for community stability and a steady or improving standard of living.
A century ago, Henry Ford figured out that if he wanted a mass market capable of buying his cars - cheaper to make with his moving assembly line - then he needed to pay higher wages. He understood the connection between wages paid and products bought. These days, the focus seems to be more on wages squeezed. And that’s no way to preserve, or strengthen, a middle class capable of driving a vibrant consumer economy.
Follow Scott Martelle on Twitter @smartelle.