Richard Florida is a co-founder and editor at large of CityLab and a senior editor at The Atlantic. He is a university professor in the University of Toronto’s School of Cities and Rotman School of Management, and a distinguished fellow at New York University’s Schack Institute of Real Estate and visiting fellow at Florida International University.
Manufacturing compensation is closely related to productivity, global economic competitiveness and overall human development
The United States ranks 14th in the world in wages and compensation for manufacturing workers, according to new data released by the Department of Labor's Bureau of Labor Statistics. That's on par with Ireland and Italy and far behind Norway, Denmark, Sweden, and Germany, among others. American manufacturing workers earn an average of $34.74 in total hourly compensation, just 60 percent of the $57.53 that workers in top-ranking Norway receive. The table below shows the total hourly compensation (including benefits) as well as pay for time worked for the top 20 countries in 2010.
|Country||Pay for Time Worked||Total Hourly Compensation|
|14. United States||$23.22||$34.74|
|17. United Kingdom||$21.16||$29.44|
|20. New Zealand||$17.29||$20.57|
The U.S. is more comparable to other countries in terms of pay for hours worked, paying manufacturing workers $23.22 an hour on average, more than Italy but less than Ireland or Canada, and substantially less than Denmark or Switzerland.
U.S. manufacturing wages have come under further pressure as large established companies like General Electric, Ford and others have instituted two-tier pay practices, paying newly hired workers significantly less than established ones even as they bring manufacturing jobs back to America, as The New York Times reported last week.
These companies argue that such wage reductions are required to make U.S. manufacturers globally competitive with those offshore. But as the Times notes: "The shrunken pay scale for newcomers — $12 to $19 an hour versus $21 to $32 an hour for longtime workers — threatens to undo the middle-class status of even the best-paid blue-collar jobs still left in manufacturing."
Generally speaking, American workers receive a relatively lower level of benefit compensation than workers in European nations, even though cost of the American health-care system is relatively high. Benefits make up about a third of total compensation in the U.S. compared to 40 percent in many European and Scandinavian countries.
A quick look at the table above suggests that the level of compensation provided to manufacturing workers reflects a nation’s overall level of economic, social, and human development. And that is indeed the case, according to a simple statistical analysis by my colleague Charlotta Mellander.
Manufacturing compensation is closely related to productivity (measured as economic output per capita), global economic competitiveness and overall human development as well as my own Global Creativity Index. This is all in line with basic economics. And manufacturing compensation and wages are higher in nations with higher levels of education and where greater shares of the workforce are employed in knowledge, professional and creative jobs. In other words, manufacturing compensation and wages rise as nations become more post-industrial. Higher manufacturing compensation is also related to lower levels of inequality and higher levels of happiness.
Manufacturing workers are paid the best in the most advanced nations, places that boast advanced safety nets, generous benefit systems and high productivity. Post-industrial economies might not have the most manufacturing jobs, but their workers are the best paid. Instead of adopting a low-road strategy of trying to reduce manufacturing costs and wages in order to compete with China or other emerging economies, the U.S. would be better off with a high-road one, promoting policies that improve innovation, skills and productivity.