Falling wages in the US

I reported earlier this month on new data showing that the median wage for men in the US has fallen since 1973.

Laura Wood has a story which helps to explain why. General Motors has decided to reopen a factory in Tennessee, instead of shifting the plant to Mexico. That's good news but it has come at a cost. Many of the workers at the factory will be re-employed on a new contract. They will be on a second-tier pay scale of only $15.00 per hour.

That is unlikely to be a living wage for a male employee. The wage would have to be supplemented by the wife also doing paid work.

I can't say I'm enthused by the idea that workers in the US have to have their wages pushed down to compete with wage levels in Mexico. It's especially problematic if the resulting wages mean that a man isn't able to support a family.

Around the time that Australia became a nation there were debates about whether there should be large scale immigration from low wage countries or whether such immigration should be restricted in favour of a high wage economy. As part of the Australian Settlement it was decided to limit such immigration and to provide industry support so that men could be paid a basic wage, sufficient to support a wife and three children.

It was a policy that was retained for the most part until the 1980s. And it seems to have worked, at least compared to elsewhere:

In the 1977 Eliot Janeway Lectures on Historical Economics at Princeton University, the Nobel Prize winning economist W Arthur Lewis pointed out that at the turn of the twentieth century the world's two leading prosperous countries at the time, Australia and Argentina, chose different paths to development. Argentina chose the laissez faire approach involving specialisation in agricultural products in line with its comparative and natural advantages; Australia opted for a broadly based economy which would spread the benefits of economic growth.

History shows we made the right choice.

But have we now made the Argentinian choice? The Australian economy seems very dependent now on mineral exports (and selling university places and some agricultural products).

I'm not an economist, so I'm open to other opinions on this subject. But it seems to me that it's unlikely to be in the interests of workers in countries like the USA and Australia to have to compete with workers in low wage economies through open borders and globalised free trade. The end result of that process is likely to be stagnant or even falling wages, as well as a loss of the economy's industrial base.