Competition from China and other low-wage rivals, coupled with fallout from the 2007-’09 financial crisis, has put American wages under such unprecedented strain that they have shifted into reverse — not merely stagnating, but falling.
“Water finds its equilibrium, its own level,” said Jeff Joerres, chief executive of Milwaukee-based global staffing giant ManpowerGroup Inc., who refers to this accelerating leveling of wages as “global labor arbitrage.”
“It’s happening so fast on a global scale that it’s scary,” Joerres said.
In the United States, the phenomenon is not limited to isolated and vulnerable sectors, such as commodity manufacturing. Rather, wages have fallen across the entire national economy — down 1.1 percent in the 12-month period from September 2011 to September 2012, the most recent comparisons available.
“Average weekly wages declined in every industry except for information,” the U.S. Bureau of Labor Statistics reported in its latest economic census.
That quarterly report has shown year-over-year declines only six times since the data collection began in 1978 — and four of those have occurred since 2009.
Nor is the United States the only advanced economy in the world affected. The average of wages in Western Europe, Japan and the U.S. fell in a “double dip,” declining in both 2008 and 2011, according to the Swiss-based International Labor Organization.
In China, meanwhile, wages have roughly tripled in the past decade, leading a trend of rising wages among developing economies such as Brazil, Peru and Eastern Europe, the ILO said.
“This is not a rosy path, folks,” Joerres said. “We don’t get to choose our borders in which we create our own rules.”
The viselike pay squeeze promises to become more common as global economies become more connected — “the new normal,” according to Joerres.
Wage competition was a familiar if slower-moving dynamic of the pre-global age, but it took place almost exclusively within national confines, as when a new auto works in the 1980s bypassed unionized Detroit in favor of nonunion states in the American South, which in turn kept Detroit wages under pressure.