Lower wages, greater employment and capital investment in the US – a wise choice ?

An article in the New York Times (Dec 29, 20110 describes wage decreases of $ 10 to $ 15 per hour for manufacturing jobs in Kentucky – a prerequisite “competitive wage” at which General Electric moved production to Kentucty and invested $ 800 million. US manufacturing wages and benefits per unit of production have dropped by 13.6 % in the last decade, while costs in China have increased. This makes US manufacturing competitive and creates jobs – albeit lower paying jobs. Is this a tradeoff – lower wages but job creation – that manufacturing firms have to make and that US employees have to accept to become globally competitive ? Should state governments attract such jobs with tax breaks to reduce unemployment or should they also append to these lower wages to compensate for their savings in unemployment benefits ? What will be the long run impact of a smaller middle class participation by employees in the manufacturing sector ?

About aviyer2010

Professor
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