Paul O’Malley was kind enough to send me this link entitled Midwest Economy: Automotive wages in flux. I wanted to get a link up before I lost it in the shuffle. Basically, manufacturing wages have been stagnant since 1980. Automotive wages fare slightly better, but the Midwest’s share of automotive employment is falling.
My only editorial comment at the moment is that worker productivity has increased since 1980. Why hasn’t their earning power gone up in a corresponding fashion? The fruits of that extra production is going somewhere, I presume.
The data are interesting, although it seems not to include non-wage compensation, such as health insurance, pensions, etc. It would be interesting to see if including those forms of compensation would make any difference in overall compensation growth.
My unscientific sense of those things is that non-wage compensation has probably been gutted more than the wages over the past 25 years. Although, I guess it would depend on how you count health care — dollars spent by the employers have probably gone up on health care while the services received for those dollars have decreased.
Easy, just compare how much money is put into 401(k) matching today vs how much was put into acutal retirement plans before.
I think it would show that wages have actualy declined.
Off the topic but I wish to give a word of thanks to Paul O’Malley for submitting a detailed submission to the DOT docket on behalf of keeping the SW counties located in the Central time zone.
yes, non-wage compensation explains this– both theoretically and empirically…
as an aside, one used to hear frequent (and specious) comparisons between CEO compensation and worker wages/income
The non-wage aspect of income deserves attention. Health and retirement plans are tax favored forms of compensation (in the case of retirement plans tax deferred, and in the case of health insurance tax excluded). Wage earners could be rationally expected to prefer these to the extent they could do without current income. I wonder if the rate of increase in health care costs is resulting in a decline in the amount of health care received even if more is being spent in real terms to acquire health insurance.
“My only editorial comment at the moment is that worker productivity has increased since 1980. Why hasn’t their earning power gone up in a corresponding fashion?”
Thinking about this it seemed to me that there was a trap here in assuming that the output of labor necessarily has value. But the value from labor depends almost totally upon the quality of management. Taking the automobile industry as an example, if management decides on building the wrong vehicles for the market all the worker productivity in the world will not save the company or its vehicles. Of course it doesn’t help if management is overpaying itself, or wasting company resources on prestige projects (see Ford Motor’s purchase of Jaguar), but labor does not have some absolute value.
Two people can apply equivalent effort to a task and get widely varying results.
For example, if you want lawyering done, an hour of Doug’s time is worth something. An hour of my time might leave you worse off than you were!
Some early economists went off the rails when they assumed that the value of labor was proportional either to the effort expended or the time spent.
Sadly, this is not true – not necessarily because of defects in human character, but because of variations in human ability.
Just another way for the universe to demonstrate that life is not fair, I guess.