Global economy’s refrain: plenty of work, but little pay
Low unemployment is failing to spur an increase in wages.
LILLESTROM, NORWAY — In the three-plus decades since Ola Karlsson began painting houses and offices for a living, he has seen oil wealth transform the Norwegian economy. He has participated in a construction boom that has refashioned Oslo, the capital. He has watched the rent climb at his apartment in the center of the city.
What he has not seen in many years is a pay raise, not even as Norway’s unemployment rate has remained less than 5 percent, signaling that working hands are in short supply.
“The salary has been at the same level,” Karlsson, 49, said as he took a break from painting an office complex in this Oslo suburb. “I haven’t seen my pay go up in five years.”
His lament resonates far beyond Nordic shores. In many major countries, including the United States, Britain and Japan, labor markets are exceedingly tight, with jobless rates a fraction of what they were during the crisis of recent years. Yet workers are still waiting for a benefit that traditionally accompanies lower unemployment: fatter paychecks.
Why wages are not rising faster amounts to a central economic puzzle.
Some economists argue that the world is still grappling with the hangover from the worst downturn since the Great Depression. Once growth gains momentum, employers will be forced to pay more to fill jobs.
But other economists assert that the weak growth in wages is an indicator of a new economic order in which working people are at the mercy of their employers. Unions have lost clout. Companies are relying on temporary and part-time workers while deploying robots and other forms of automation in ways that allow them to produce more without paying extra to human beings. Globalization has intensified competitive pressures, connecting factories in Asia and Latin America to customers in Europe and North America.
“Generally, people have very little leverage to get a good deal from their bosses, individually and collectively,” said Lawrence Mishel, president of the Economic Policy Institute, a labor-oriented research group in Washington. “People who have a decent job are happy just to hold on to what they have.”
The reasons for the stagnation gripping wages vary from country to country, but the trend is broad.
In the United States, the jobless rate fell to 4.2 percent in September, less than half the 10 percent seen at the worst of the Great Recession. Still, for the average U.S. worker, wages had risen by 2.9 percent over the previous year. That was an improvement compared with recent months, but a decade ago, when the unemployment rate was higher, wages were growing at a rate of better than 4 percent a year.
In Britain, the unemployment rate ticked down to 4.3 percent in August, its lowest level since 1975. Yet wages had grown only 2.1 percent in the past year. That was below the rate of inflation, meaning workers’ costs were rising faster than their pay.
In Japan, weak wage growth is both a symptom of an economy dogged by worries, and a force that could keep the future lean, depriving workers of spending power.
In Norway, as in Germany, modest pay raises are a result of coordination between unions and employers to keep costs low to bolster industry. That has put pressure on Italy, Spain and other European nations to keep wages low so as not to lose orders.
Union power eroded
In November 2016, a week after Donald Trump was elected president on a pledge to bring jobs back to the United States, the people of Elyria, Ohio — a city of 54,000 people about 30 miles west of Cleveland — learned that another local factory was about to close.
The plant, operated by 3M, made raw materials for sponges. Conditions there were influenced by an increasingly rare feature of American life: a union that represented the workers.
The union claimed the closing was a result of production being moved to Mexico. Management said it was merely cutting output as it grappled with a glut coming from Europe. Either way, 150 people would lose their jobs, Larry Noel among them.
Noel, 46, had begun working at the plant seven years earlier as a general laborer, earning $18 an hour. He had worked his way up to batch maker, mixing the chemicals that congealed into sponge material, a job that paid $25.47 an hour.
Now, he would have to start over. The unemployment rate in the Cleveland area was then down to 5.6 percent. Yet most of the jobs that would suit Noel paid less than $13 an hour.
“These companies know,” he said. “They know you need a job, and you’ve got to take it.”
In the end, he found a job that paid only slightly less than his previous position. His new factory was a nonunion shop.
“A lot of us wish it were union,” he said, “because we’d have better wages.”
Last year, only 10.7 percent of U.S. workers were represented by a union, down from 20.1 percent in 1983, according to Labor Department data. Many economists see the decline as a key to why employers can pay lower wages.
In 1972, so-called production and nonsupervisory workers — some 80 percent of the U.S. workforce — earned average wages equivalent to $738.86 a week in today’s dollars, after adjusting for inflation, according to an Economic Policy Institute analysis of federal data. Last year, the average worker brought home $723.67 a week.
In short, 44 years had passed with the typical U.S. worker absorbing a roughly 2 percent pay cut.
The streets of Elyria attested to the consequences of this long decline in earning power.
One storefront was full of activity — Adecco, the staffing company. A sign beckoned job applicants: “General Laborers. No Experience Necessary. $10/hour.”
Lyndsey Martin had reached the point where the proposition had appeal.
Until three years ago, Martin worked at Janesville Acoustics, a factory between Cleveland and Toledo. The plant made insulation and carpets for cars. She put products into boxes, earning $14 an hour.
That, combined with the wages her husband, Casey, earned at the plant, was enough to allow them to rent a house in the town of Wakeman, where their front porch looked out on a leafy street.
Then, in summer 2013, word spread that the plant was shutting down, putting 300 people out of work.
Martin took 18 months off to care for her children. In early 2015, she began to look for work, scouring the web for factory jobs. Most required associate degrees. The vast majority were temporary.
She took a job at a gas station, ringing up purchases of fuel, soda and fried chicken for $9 an hour, less than twothirds of what she had previously earned.