USA Wages
The wage inequalities in the U.S. are occasioned by weak wage structures and policies (Gordon, 2016). The inequalities are partially attributable to overpaid C.E.O and managers and underpaid workers. Moreover, the share of the national income that is set aside to cater for wages has been decreasing gradually over the years (Gordon, 2016). Job insecurity and lower wages were common during the Great Depression; however, political responses to the depression and challenges brought about by the World War II led to improvements in the employees’ bargaining power.
The rapid economic growth in the U.S. is attributed to an increase in trade activities with the big four Asian “tigers”: Taiwan, South Korea, Hong Kong, and Singapore. According to Krugman (2008), countries experiencing remarkable economic and trade growths have relatively low average wages, and the U.S. is not an exception. Research indicates that by 1990, the mean hourly wages in the four tiger nations were about 25 percent of the U.S. wage levels. In 1995, the figures rose drastically to about 39 percent. According to the 2005 estimates, Mexico’s average hourly compensation was 11 percent of the USA level, and China experienced greater than 3 percent mean hourly compensation rates (Krugman, 2008). According to the BSL forecast, the U.S. has lower wages, irrespective of the fact that it is experiencing a remarkable growth in international trade.
Ideally, international trade has led to wage differentials between exporting countries and firms as well as the rising wage inequality in industrial countries. A rise in U.S. wage inequality in the 1980s is attributed to a high demand for labour by exporters that employed highly skilled and non-production-line employees, which was not the case with non-exporting enterprises. Skilled workers earn higher wages in exporting firms than their low-skilled counterparts. Consequently, the skills structure has far reaching implications on wages and trade.
References
Becker, S. O., Ekholm, K., & Muendler, M. A. (2013). Offshoring and the onshore composition of tasks and skills. Journal of International Economics, 90(1), 91-106.
Colin Gordon Growing Apart. (January 02, 2016). Retrieved from <http://scalar.usc.edu/works/growing-apart-a-political-history-of-american- inequality/wages-and-earnings>
Krugman, P. R. (2008). Trade and wages, reconsidered. Brookings Papers on Economic Activity, 2008(1), 103-154. Retrieved from <http://www.brookings.edu/~/media/projects/bpea/spring%202008/2008a_bpea_krugman. pdf>
