Real Manufacturing Wages in the First World

The Great Stagnation reaches everywhere

https://research.stlouisfed.org/fred2/graph/?g=2i5z

As usual for international comparisons I couldn’t find good PPP numbers for, the peaks are set the same for each country.

As everybody knows, U.S. real average hourly wages have been stagnant for approximately forty years. The influx of women into the labor force has corresponded to women moving into higher-paying occupations, thus having little net effect on real average hourly wages, as well as real average hourly wages for males. As real manufacturing wages have been recorded longer and are the best proxy for real wages in the U.S. as a whole, I’ve used real manufacturing wages here to illustrate their rise and stagnation across the First World. As the U.S. is the richest of the major economies, and has been for a long time, it is to be expected that it has had the slowest rate of real wage growth, and, consequently, longest real wage stagnation.

The major exceptions to the trend of stagnating real wages over the past decade or two I could find are Sweden and especially Finland, which have had strong real manufacturing wage increases in the past couple decades, but these are not known as major manufacturing countries, so I’ve excluded them. Mexico’s real manufacturing wages have been stagnant since 1980 and have been surprisingly stable since the start of the century, and don’t expect any miracles coming out of there. Korea’s real manufacturing wages have doubled since 1990, with the post-Great Recession recovery being much slower than the post-1997 one. Mexico is excluded here because it is not first-world, and Korea is excluded here because it is not all caught up (though it certainly mostly is).

Germany, Italy, and France all have peak real manufacturing wages in the latest period recorded, presumably due to stronger union power than in the U.S. and Canada leading employers to share their income with employees. In the case of Germany, this has coincided with exceptionally low unemployment due to Germany not taking on many unsustainable debt obligations during the 2000-2007 boom. In the cases of Italy and France, real manufacturing wage hikes have coincided with high unemployment. Japan has had falling real manufacturing wages since 2007, and also has also had decently falling unemployment. The U.S. (and, to a slightly lesser extent, Canada) have seen very strong wage stagnation since the late 1970s. The Axis Powers and France (which also had a real GDP/worker peak relative to the U.S. in the 1990s-early 2000s) have a basically similar history of rapid real wage catch-up from the 1950s to the first half of the 1980s, then slower catch-up (though no U.S./Canadian level stagnation) thereafter. Maybe that’s because they were all roughly equally strongly affected by the war, with France a little less so and Japan a little more so, and all recovered from it at the same time.

The interesting story here is the Canadian catch-up. Canada wasn’t affected much by the war, so how did it fall behind the U.S. before the late 1960s, and catch up during the late 1960s-late 1970s? Canada also disproves the leftist implication that U.S.-style real wage stagnation is unique to the U.S. It also seems that the strong European real wage hikes during the period 1973-1983 explain at least some of the rise of European unemployment and (in some countries; not Germany) uncontrolled European inflation, as unions demanded strong late 1960s-style nominal wage hikes and monetary policy makers proceeded to accommodate their demands. Maybe most 1970s-1990s Eurosclerosis can be attributed to European unions expecting the 1960s to go on forever, no matter the changing real economic conditions. Old Krugman once blamed Eurosclerosis on European institutions attempting to enforce equality in a time of universal first-world-wide economic forces (not related to trade) yielding so-called “superstar effects” and other such greater inequality. Perhaps that is the case, with unions keeping real wages high in a time of extraordinary inflation being a large part of this half-failed response to rising equilibrium free-market inequality.

What Makes a Real Country?

In the study of international economics, one must always exclude unreal countries, as the lessons learned from them do not apply to real countries. But what makes a real country? Generally, size, population, and lack of dependence on finance, tourism, and natural resource rents, production, and exports are the leading factors under consideration. Not all countries can be tourist spots, offshore tax shelters, or oil kingdoms, and this applies doubly so to very large and populous countries.

The least real country on Earth is Qatar. Other unreal countries include Singapore, Luxembourg, Monaco, and Lichtenstein (not large enough territory), and, in a great exception, Saudi Arabia, despite its realistic size and population. Norway, despite its small population (smaller than that of Singapore) and high oil production per capita, is generally considered a real country as only a small fraction of its GDP is dependent on natural resource rents and its territory is of a reasonable size.

The most real country on Earth is China. It has the largest population and the second-largest land area of any country in the world and is by no means dependent on natural resource exports. India and the U.S. are also very real, as is Indonesia. Brazil is less real due to the fact half their exports are of primary industry, but it is still very much a real country.

Russia and Chile, despite their dependence on natural resource exports for maintaining the strength of their currencies, are also generally considered real countries due to their decent population and territory size and the vast majority of their economic activity not being related to natural resources.

Greece, despite its curiously high GDP per capita for its institutions, is also considered a real country due to the vast majority of its economic activity not being related to tourism.

Of the Four Asian Tigers, Singapore and Hong Kong are generally considered unreal countries due to the small size of their territories. Korea is universally considered to be real. Taiwan has over 20 million people, but it also has quite a small territory. As it is near the most real of the world’s countries, it is easy to see it as unreal, but if the Netherlands is to be counted as a real country, then why should Taiwan not be? Taiwan is not a tax shelter, nor is it particularly dependent on finance.

Some of the Caribbean islands have large tinges of unreality due to their strong reliance on finance and tourism, but as only one of these nations is first-world, it is difficult to see how they can be considered excessively unreal.

Switzerland is a half-real country. Its strong dependence on finance and small territory makes it difficult to consider it fully real.

Of all the countries in Africa, Equatorial Guinea, a small oil dictatorship, is by far the least real, with the Seychelles being the second-least real, due to its excessive dependence on tourism.

Despite their suspiciously strong dependence on primary industry, New Zealand, Australia, and Canada are generally considered pretty real, as primary industry forms only a small part of their economies.

There’s Something Rotten About Leftist Rhetoric Regarding the State of Kansas

To those in the distant future: at the time I’m writing this the present Leftist rhetoric regarding the State of Kansas is composed of crap like this:

“Two years later, in 2014, the promised economic benefits hadn’t arrived – in fact, Kansas was lagging badly in job growth, bleeding money and slashing spending to try to make up for the losses.”

“Point being, the woeful employment numbers in Kansas are now a horrible long-term trend.”

“The governor promised his “pro-growth tax policy” would act “like a shot of adrenaline in the heart of the Kansas economy,” but, instead, state revenues plummeted by nearly $700 million in a single fiscal year, both Moody’s and Standard & Poor’s downgraded the state’s credit rating, and job growth sagged behind all four of Kansas’ neighbors.”

Of course, as the good Scott Sumner pointed out, if all this was true, the great mystery was why Sam Brownback was re-elected in 2014.

Needless to say, the above are, to a great extent, leftist lies:

https://research.stlouisfed.org/fred2/graph/?g=29Ri

https://research.stlouisfed.org/fred2/graph/?g=29Rk

https://research.stlouisfed.org/fred2/graph/?g=29Rn

I notice nothing important happening since Brownback’s election. Nothing at all. And this graph by Kevin Drum should be a textbook example of how to nakedly lie with statistics. Of course, don’t expect Krugman not to have joined in on the fun.

Also, as the good Scott Sumner says, this shows that, for leftists, the effectiveness of fiscal stimulus depends >100% on how it is named.

More Neo-Nazi Neoconnery

Summary of Cotton’s remarks:

1. Putin is Hitler! We need to be more like Hitler and start an unprovoked attack on Russia*

1.1 Munich! Munich! Munich!

2. Russia is an enemy.

3. Ukraine is under occupation.

4. Estonia and Latvia are worth conducting military operations against!

5. There are still 100s of thousands of refugees left to be made homeless!

6. Appeasement everywhere! Georgia didn’t attack first with its tanks!

7. I can’t pronounce Russian names while spouting on about the country!

8. Krim was invaded! It totally wasn’t the will of the Crimean people to join Russia.

9. I am the new Hitler! Operation Barbarossa 2.0 now!

10. No American arms have been sent to Ukraine!

11. No, seriously, when I said Operation Barbarossa 2.0, I meant it.

12. Also, destroy the Syrian gov’t, and make up phony excuses to prevent the removal of Iranian sanctions.

13. Operation Barbarossa 2.0! Literally! In Eastern Ukraine!

*The alternative to Munich was… what? An unprovoked invasion of Germany.

I want the guy who said you don’t have to pass an IQ test to be a Senator back!!!

Neocons≈Neo-Nazis

It’s one thing to call for nuclear war against Turkey and the Turkish people (as I do). It is quite another to call for conventional war against the second-longest established nuclear power, as well as the only country with a nuclear stockpile even remotely close to the size and capability of that of the U.S.

Obviously, I cannot say the neocons are totally equivalent to neo-Nazis. The neocons are philosemitic (if not actually Semitic); the neo-Nazis are antisemitic. The neocons descend from Trotsky and his concept of world revolution; neo-Naziism descends from German racialism and militarism, as well as from local racial tensions. The neocons promote dildocracy; the neo-Nazis are generally against it. But in at least one instance, they are peas in a pod.