Friday, 6 February 2009

Globalization - what it really means

How have US workers fared during the Bush/Clinton years? Did they see their living standards increase in real terms?

This chart tracks real compensation per hour in US manufacturing. In effect, it is the wage rate adjusted for inflation.

In many respects, it is a shocking data series. Since 1992, US wages in manufacturing increased by a little over 20 percent. Moreover, virtually all that increase was during the second Clinton adminstration. During the Bush years, wages were basically flat.

Globalization was the cause of stagnant US wage rates. US firms had to compete with lower paid Chinese workers. Higher US wages would have killed off US manufacturing completely.

How did US workers afford those Chinese made 42 inch Plasma TVs? Debt.

5 comments:

Anonymous said...

Protectionism is obviously the answer, Alice.

Neilson said...

What actually happened to US manufacturing unemployment? Were jobs exported to China?

A chart maybe?

Anonymous said...

1198-2002 could be described as a domestic manufacturing bubble and have nothing to do with inflation. Lot's of tech/networking/telecom manufacturing going on then that stopped growing.

Anonymous said...

How did I type "inflation" when I meant "globalisation"?

Sureseam said...

Do be careful of govt stats: they are somewhat twisted for political convenience.

http://www.chrismartenson.com gives a pretty good summary of the way CPI is rigged in the USA.

Would love to know if someone does a similar expose on the UK?