Two cheers for the comeback of American manufacturing. Or maybe just one.
The manufacturing sector has experienced a modest renaissance since it hit bottom during the Great Recession. The number of manufacturing jobs is set to rise this year, as it has every year since 2010. Profits are soaring — in 2012, after-tax profits of manufacturing firms hit a record high of $289 billion. Share values have soared with them. The Standard & Poor’s 500 Industrials Index has risen 59 percent more than the overall 500-stock index since 2009, Bloomberg reported last month.
Wages, however, are falling. Although the average wage for all workers, adjusted for inflation, has declined by about 1 percent since May 2009, Bloomberg reported, it has declined by 3 percent for workers in the more-profitable-than- ever manufacturing sector.
Numbers like these explain the epic drama playing out in Washington’s Puget Sound region, from which Boeing, long the area’s dominant employer, has threatened to at least partially decamp. Several weeks ago, with the reluctant blessing of union leaders who feared the company might relocate production, Boeing presented its workers with an ultimatum: Either they had to agree that the new hires who would build the company’s new 777X passenger jetliner would have to work for 16 years, rather than the current norm of six, to bump up to full union scale, or Boeing would build the plane elsewhere. Instead of making roughly $28 an hour to build one of the world’s most sophisticated pieces of machinery, workers would make roughly $17 an hour, or less, until they’d put in a decade and a half on the job.
By a 2-to-1 margin, the workers rejected their leaders’ recommendation and voted down the offer. Boeing then initiated a bidding war to see how much in tax breaks it could wring from states that wanted the work. More than a half-dozen states have sent in bids, some with side agreements from local unions that members would work at reduced rates, some with no such agreements because unions barely exist in their states.
It’s not as if Boeing is a clothing manufacturer scrambling to meet the price competition of rivals that make their goods in Bangladesh. Boeing’s sole competitor in the large-scale passenger-plane market is Airbus, the European conglomerate whose workers’ wages are comparable to those in the United States. But Boeing has already located one major plant in South Carolina, where workers make about $10 an hour less than their Puget Sound counterparts. It’s through such moves, and the threat of further such changes, that U.S. manufacturers have increased their profits at the expense of their workers’ paychecks.
None of the workers at either end of Boeing’s pay scale makes anything like the federal minimum wage, but I suspect the anxiety instilled by these kinds of stories is one reason there is wide, and growing, support for raising the minimum wage. It takes no great imaginative leap to see a time in the not-too-distant future when the incomes of all but a fortunate, talented tenth of the U.S. workforce are reduced or held stagnant. Indeed, the median inflation-adjusted salary for American men is already lower today than it was in 1969. Tyler Cowen, a heterodox libertarian economist, has written that the U.S. economy is morphing into one in which 10 to 15 percent of the workforce will be wealthy and the remainder will resign themselves to making do with less. He foresees little likelihood that the eradication of the broad middle class will lead to a United States “torn by unrest.”
I am not sure that the docility of the American people can be so readily assumed. The adoption of minimum-wage increases and living-wage ordinances throughout increasingly liberal cities and blue states suggests that where workers have the capacity to rebalance the economy through legislation, they’ll do just that. With the near-elimination of unions from the private-sector economy, legislation remains the sole means available for workers to bargain for their fair share of their company’s revenue, particularly in sectors, such as retail, that can’t really relocate. That’s why the victories of those workers demonstrating at Wal-Mart and fast-food outlets have taken the form of legislated increases in local minimum wages, rather than resulting in union contracts.
The fight for higher minimum wages may be just the beginning of a long battle to rebalance the economy. If laws are not changed to enable workers to form unions without fear of being fired, the battle for higher median, not just minimum, wages will eventually be fought in the legislative arena as well. Profits that come at the expense of downwardly mobile workers may find little honor — or legislative support — in their own country.