There is a report by Reuters that Ford is investing $400 million in a new plant in Chicago that will build the next generation of its Explorer SUV. This will add about 1,200 jobs. About 600 UAW workers that are currently on indefinite layoff have the first shot at these jobs. The rest of the jobs will go to new workers at $14 per hour. This is about half of what current assembly line workers make.
This is a positive development in the U.S. labor market. It is necessary for wages in the U.S. to come down in order to compete with China and other countries where manufacturing workers earn less than $1 per hour with no benefits. One problem with wages in the U.S. is that they are “sticky” downward, meaning they can rise but rarely fall.
Wages need to equalize between low wage countries like China and high wage countries like the U.S. The only real justification for wage differentials is if one country’s workforce is more skilled. Geographical preferences no longer hold in this ade of globalization.
The currently unemployment rate in the U.S. is about 17%, which amounts to about 20 million U.S. without a paycheck. The reason for the unemployement is the millions of manufacturing jobs that moved to China during the past decade. For the U.S. economy to get back on track, there needs to be at least 15 million more people working than there is now. Reducing hourly wages is one way for U.S. workers to become more competitive.
