Economic Snapshot | Trade and Globalization

High wages aren’t to blame for the decline of U.S. manufacturing

The idea that high manufacturing wages in the United States are causing growing job losses and declining U.S. export competitiveness is common, but incorrect. Germany has among the highest manufacturing wages in the world and has maintained a relatively stable manufacturing sector in the face of competition from China. In 2013, average hourly pay in German manufacturing was $48.98, more than one-third higher than the United States ($36.64). And while U.S. manufacturing employment declined by 31.0 percent (5.4 million jobs) between 1997 and 2013, it fell only 4.7 percent in Germany.

Instead of blaming high wages and pushing manufacturing jobs into the low-wage, nonunion southern states, we can rebuild the U.S. manufacturing sector by fighting currency manipulation and unfair trade, and by adopting policies that support manufacturing, including increasing spending on research and development, increasing spending on infrastructure, and investing in training programs.

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See more work by Robert E. Scott