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Chinese Wages are Rising While American Wages Fall. Amazingly, This Might Be a Good Thing.

Chinese Wages Up US Wages Down

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The new Global Wage Report from the International Labour Organization (ILO) shows that wages for American and Chinese workers are trending in opposite directions. The bad news? Chinese wages are rising while American wages fall.

It’s convenient to suggest that the 2008 financial crisis and the ensuing global recession are to blame for stagnant U.S. take home pay, but a full five years after our collapse our wages show no sign of rebounding. Instead, a drop of 1.1 percent between September 2011 and September 2012 occured.

According to the new report, this trend is not Americentric.  Average wages in Western Europe and Japan have also declined.  Meanwhile, wages in Eastern Europe, Brazil and Peru have steadily risen.  In China, our beaming pariah of unfairness and exploitation, Chinese wages have tripled.  Still, pause must be taken: a mile-wide income gap exists between the two economic superpowers with American workers averaging $47,000 annually versus the equivalent of $8,700 in China.

The Milwaukee Journal-Sentinel took the new figures and ran with them across Wisconsin. There, wages have dropped at twice the clip of the national average.  Wisconsin currently ranks 44th in private sector wages.  The public sector fares even worse in the land of Walker n’ Koch at a cool 49th.

Out. Of. 50.

Despite an undying “open for business” spin machine, the Walker administration has led Wisconsin to another 44th ranking, this one in terms of job creation.

The problem, sadly, is beginning to give off “new normal” vibes.  But, improved worker conditions outside of the U.S. may be the saving grace of this ILO report. American companies will become less and less driven to take advantage of cheap, foreign labor as that labor becomes less and less cheap.  Master Lock is a good Wisconsin example of this. They have been “re-shoring” as John Schmid touches on in his Journal-Sentinel piece:

In the industrial heart of Milwaukee, union machinist Mike Bink applauds the growth of a Chinese middle class. “I’m very happy their wages are moving up,” said Bink, who heads the shop floor union at Master Lock Co.

Like countless other American manufacturers, Master Lock outsourced much of its production to Mexico and China starting in 2000. But as labor unrest began to ripple across China, pushing Chinese wages higher, Master Lock reversed course two years ago and began to bring a share of production back from China.

Obama visited the factory a year ago to hold it up as a hopeful national symbol of American competitiveness. As much as any other U.S. company, Master Lock came to stand for “re-shoring” or “in-sourcing,” the notion that production can return to the U.S. profitably.

To help achieve that competitiveness, the union workforce has absorbed numerous pay and benefit concessions, including the creation of a two-tier system providing lower pay and benefits for new workers. Master Lock has added several dozen jobs at the Milwaukee facility and plans to add more as it invests in new, highly automated equipment. Still, its 400 employees are well below the peak of 1,300 in the late 1990s.

Bink’s union just reached a tentative five-year agreement that he said includes a nominal pay increase but backsliding on other benefits.

Higher wages in China “make us look better” by comparison, Bink said.

“It brings their labor costs closer to ours,” he said. “And when you add in delivery times, it makes us look like an attractive place to make locks.”

Get your hopes up and read the entire ILO report here.


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