Unions cave to economic realities.

Manufacturers are hiring again in America, softening a long slide in factory employment. But for a new generation of blue-collar workers, even those protected by unions, the price of employment is likely to be lower wages stretching to retirement.

A price is determined by supply and demand. Wages, the price of labor, are determined based on the supply and demand for that labor. In a recession, there is excess supply (unemployment) and often, as is now, decreased demand. All of this means lower wages. This is clear to any student of elementary economics. I’m not sure that is news to anyone but a journalist. What is news is the phrase, “even those protected by unions.”

The NYT reports:

The wages for the new hires, however, are $10 to $15 an hour less than the pay scale for hourly employees already on staff — with the additional concession that the newcomers will not catch up for the foreseeable future. Such union-endorsed contracts are also showing up in the auto industry, at steel and tire companies, and at manufacturers of farm implements and other heavy equipment, according to Gordon Pavy, president of the Labor and Employment Relations Association and, until recently, the A.F.L.-C.I.O.’s director of collective bargaining.

“Some companies want to keep work here, or bring it back from Asia,” Mr. Pavy said, “but in order to do that they have to be competitive in the final prices of their products, and one way to be competitive is to lower the compensation of their American workers.”

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. A similar contract limits the wages of new hires at a nearby Ford Motor Company stamping plant, but neither G.E.’s 2,000 hourly workers nor Ford’s 2,900, nor their unions nor the mayor, Greg Fischer, have objected.

Quite the contrary, all argue that job creation must take precedence over holding the line on wages, given that the unemployment rate in this Ohio River city is above 9 percent and several thousand people apply for every unfilled, $13-an-hour factory job. “The trade-off is absolutely worth it,” Mayor Fischer said, arguing that while the city is actively subsidizing G.E.’s expansion here, mainly through tax rebates, that is not enough. “You must have a globally competitive wage to create jobs,” the mayor insisted.

Unions have long favored increased benefits for their members at the cost of higher unemployment within their respective sectors. This is true across time and place. Often growth can hide the effects as demand for labor increases, but there is no free lunch. Wages must come down, and will stay down until the imbalance between supply and demand is corrected – read, “globally competitive.” Then American manufacturers will demand more of it; employment and wages will rise.

It is kind of us to wish that those working in manufacturing made more. I don’t even pretend that my job is physically taxing, and can’t imagine swinging a nine-pound hammer as a career. But such wishes are arrested by economic realities.

Free market economists have long argued that inflated wages via union contracts push jobs overseas. It’s nice to see the unions finally acknowledge this.


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