Alan Tonelson discusses two reporters and their relentless search for the truth in the U.S.’s ‘unprecedented’ wage decline. Hint: ineffective trade policies in Washington

The impact of U.S. trade policies on the American economy and its domestic manufacturing base continues to be one of the worst reported stories in the American media. Since the great debate over the North American Free Trade Agreement a decade-and-a-half ago, the vast bulk of news coverage of this seminal issue has been either hopelessly biased against domestic manufacturers and their employees, lazy, apathetic, downright incompetent, or various combinations of the above.
The onset of a new year, however, is a great time to look back and acknowledge some of those reporters who have not only broken the mold, but gone so far as to perform herculean works of research and analysis. Not coincidentally, the two reporters I personally consider most worthy of attention for their work in 2007 are based in cities that, unlike New York or Washington, D.C., still depend heavily on domestic manufacturing. (And in the interests of truth in advertising, both journalists consulted with me and my colleagues at the U.S. Business and Industry Council as they started their projects.)

The first example of outstanding globalization-related journalism came from David Knox of the Akron (Ohio) Beacon Journal on Sept. 30. Knox, who heads the paper’s efforts to use information technologies to strengthen news coverage, has also become its statistics guru. Earlier this year, he set out to investigate just what’s been happening with America’s wages and living standards in recent decades.

Knox delved so deeply into the official data from the U.S. Census Bureau that his results impressed even numbers junkies at the blue ribbon think tanks. Along the way, he added significantly to our knowledge about the unprecedented wage decline that has gripped the American workforce since the early 1970s. More important, he demolished many of the myths concocted by cheerleaders for the economic policy status quo to rationalize and justify this miserable performance.

After literally pouring through 50 years of Census data on the earnings of workers by year of birth, Knox not only found that they have fallen since the early 1970s. He discovered that young people working today are paid much less in their first earnings years than their parents. And he learned that the big mid-career wage catch-up enjoyed by the first post-World War II generations of young workers – the GI generation and their immediate successors – had shrunk dramatically by the 1980s.

Knox’s research also revealed that wage decline cut across race and gender lines. And the well educated have been hardly immune – contrary to the promises made by globalization’s apostles in the 1990s. In addition, he established beyond reasonable doubt that the middle class has indeed been shrinking as a share of all workers. Worse, about equal percentages of these workers have dropped below middle class levels as have risen above them.

Far from simply ticking off facts, Knox recognized that they refute lots of the living standards happy talk that’s dominated too much reporting about the economy. For example, are you impressed that household incomes keep rising? You won’t be after Knox’s explanation: The fall in workers’ wages has been offset only by more spouses and even children entering the workforce, and by all working longer hours – coping strategies that seem impossible to maintain. As Knox pointedly asked, “…what happens when Americans run out of spouses, kids, and working hours to prop up their bottom line?”

Most gratifying, however, Knox was receptive to the argument that misguided U.S. trade policies deserve much of the blame for this genuine living standards crisis. He quoted the obligatory cheery academic insisting that more and better education for American workers will eventually reverse wage decline – which conveniently forgets the inherent abilities of workers everywhere, including third world countries with huge, wage-suppressing labor surpluses, to upgrade their skills and knowledge, and the success so many have achieved.

But Knox also presents the viewpoint that Washington needs to stop pursuing trade agreements that focus so tightly on offshoring manufacturing and its high wage jobs, and start cracking down on the unfairly traded imports that are swamping American markets.

Three months after Knox’s report appeared, Pacific Northwest readers got a close up look at how trade policy failures are hollowing out even one of America’s longstanding globalization winners – the commercial aerospace industry – and pauperizing its workers. Enterprising reporting by Dominic Gates and Justin Mayo of Boeing’s original hometown newspaper, the Seattle Times, uncovered the gory details.

In 2003, Washington State handed out huge tax breaks for commercial aerospace firms aimed at preserving assembly jobs for Boeing’s revolutionary 787 Dreamliner and strengthening the large cluster of local parts companies that Boeing’s presence has naturally spawned. In return, companies accepting the tax breaks needed to provide the state government with detailed employment and wage data – exactly the kind of information that Americans and their leaders need to understand the full effects of economic globalization, but that companies generally hold tightly to their vests.

Gates and Mayo realized what a rare goldmine of company-specific information the state had created. As a result, their article irrefutably documents how the relentless cost-cutting pressures created for domestic manufacturers today by Washington’s mismanagement of trade policy are turning an archetypical high-wage industry into a lower and lower paying sector.

The authors spent months analyzing the state data on the 161 companies – including Boeing – that took the breaks and the more than 66,000 workers they employ (52,000 at Boeing alone). Their article meticulously details how a two-tier wage structure has emerged in Washington State’s commercial aerospace sector – still-lucrative employment at unionized Boeing for blue collar and white collar workers alike, but dramatically worse paying jobs at the company’s generally non-unionized suppliers.

Not that Gates and Mayo portray Boeing as a corporate saint. Instead, they note that the assembly and systems-integrating giant has long been outsourcing parts and even design work to local non-union subcontractors that can do the work much cheaper. The plus side of this strategy, as the authors readily acknowledge, is that the jobs are much likelier to stay in-state – and in the United States more generally. The minus side is that the price entails driving these wages down uncomfortably close to Wal-Mart levels – $10 per hour.

As a result, many of the economic benefits of promoting manufacturing are lost, and the sector’s ability to attract talented young people shrivels. Indeed, the average non-Boeing commercial aerospace production worker in Washington now earns slightly less than the average for all Washington workers.

Specifically, Gates and Mayo found that in 2006, the median wage for Boeing production workers was nearly $28 per hour – almost twice that of a non-Boeing production worker. And whereas 92 percent of Boeing production workers earned at least $42,000 annually in base pay, only 20 percent of their non-Boeing counterparts fell into this category.

Similar trends hold for engineers. At Boeing, less than 1 percent of these professionals earn $20 per hour or less. Outside Boeing, however, that’s become top-level pay for engineers.

One of the authors’ most interesting findings concerns worker education and training – now all the rage in the “other Washington” as a way to preserve high wage U.S. jobs in the teeth of more and more trade policy ineptitude. In Washington State, however, it’s becoming common for engineers to come from the ranks of skilled production workers – and without academic training or elaborate government reeducation programs. These new professionals learn through in-house programs and on-the-job practice. The bottom line is new evidence for what we at the U.S. Business and Industry Council have been saying for a long time: The best kind of job training is a job.

The national media could learn a great deal from these stand-out regional reporters. Unfortunately, they show little interest. Repeated efforts by me to persuade Washington and New York-based journalists to highlight this work have fallen on deaf ears. As a result, the nation as a whole is denied crucial information for properly and thoroughly evaluating U.S. trade policy and the rest of globalization. Luckily, the Internet has created a means for end-running these media obstacles, as demonstrated by Web sites like the U.S. Business and Industry Council’s www.AmericanEconomicAlert.org – and of course the US Industry Today column you’ve just finished!

Alan Tonelson is a Research Fellow at the U.S. Business and Industry Council Educational Foundation in Washington, D.C. A contributor to the Council’s AmericanEconomicAlert.org website, he is also a consultant to CNN anchor Lou Dobbs and the author of The Race to the Bottom (Westview Press, 2000). The views expressed here are his own.


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