Manufacturing Recovering, but Wages Lag Behind

Tuesday, 29 May 2012 11:39 AM

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The U.S. manufacturing economy has seen an encouraging resurgence over the last several months, but a closer look at manufacturing statistics reveals a recovery driven in part by stagnant wage growth, reports the Wall Street Journal.

As the price of labor rises in countries like Mexico and China, manufacturing wages in America have remained largely static due to the recession. As a result, companies that spent the last decade shipping American jobs overseas now see business savvy in a decision to relocate those jobs in America, a trend some have called “insourcing.”

Because of the recession and the attendant high unemployment, employers have been empowered in their negotiation with labor unions, which have agreed to a relaxation of work rules or a reduction in wages or benefits — concessions that would be anathema in a healthier economy. Some unions have even acceded to a two-tiered contract system that allows new hires to be paid significantly less than more senior workers.

While the growth of manufacturing jobs is seen as a positive contributor to American economic recovery, the loss of expendable income among Americans whose wages have stagnated could mitigate the economic benefits accrued by the manufacturing rebound. As workers exercise diminished purchasing power due to wage growth that lags behind inflation, the prospects for a recovery driven by domestic consumption become more complicated. Some analysts worry that less spending will equal less growth.

Between 1998 and 2010, the number of Americans working in manufacturing decreased by 35 percent. Since 2010, however, manufacturing jobs have increased by 4.3 percent, bringing their total to 11.9 million in April.

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