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The Trend of American Wages and Benefits

American wages

American wagesMany auto repair techs are unhappy with the state of wages and benefits in the industry, and we’ve discussed a number of their complaints. We haven’t talked about how their wages compare to the wages of other American workers, however. This is important to note because the auto repair industry does not exist in a vacuum; it’s a part of the economy as a whole.

The 20th century was a success story for the American worker, unionized labor, and the middle class, but for much of the century workers did struggle to attain higher or even living wages from their employers. In the early decades of the century continuous immigration kept wages low for the manual laborer or factory worker, and the financial chaos of the Great Depression made most men and women grateful to have any wages at all. Then came World War II and the post-war prosperity everyone remembers.

What many people do not understand about the post-war prosperity in America was that it was largely the result of the destruction that all the other advanced nations of the world experienced as a result of what happened between the years between 1939-1945. Millions of soldiers and civilians were killed, cities were leveled, and infrastructure was destroyed. When the war was over, all of that needed to be rebuilt by the survivors, and in most cases that took decades.

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America didn’t have to rebuild anything after World War II, and its casualty rates were much, much smaller than those of European nations, China, Korea, or Japan. That, coupled with a demand for consumer goods, meant that American workers were in a position to manufacture products the world needed. As a result wages rose. Companies made huge profits, and unions were able to bargain to redistribute some of those profits to the workers.

By the 1970s, though, American wages were already falling. By this time most of Europe and Japan had rebuilt and were competing to produce and sell the same goods to the worldwide market. Workers’ bargaining power in America eroded because other workers worldwide were willing to work for less and the goods they produced were cheaper to purchase.

In 1994 the North American Free Trade Agreement, or NAFTA, undercut the bargaining power of American workers even more drastically. When American manufacturers were allowed to move production of their companies to Mexico but still sell their products in America without penalty, many of them chose to relocate where they could pay far lower wages. This meant that a million manufacturing jobs – jobs that paid for the middle class lifestyle of working class Americans – left and never returned.

NAFTA and globalization in general shifted the balance of power from worker to employer again. Companies that did not relocate could merely threaten to relocate if their workers did not accept cuts in wages and benefits. This happened at the same time that technology was also replacing workers. The end result of both globalization and increased technology was that there was far less demand for American workers. Workers who were not in demand did not have much leverage when it came to bargaining for better wages and benefits.

As a result the unskilled American laborer has suffered. Wages have stagnated, and many people do not work at all. Adjusted for inflation, many workers make far less than their counterparts in the 1970s and 1980s. The economic instability of the early 21st century and increased immigration have only exacerbated this trend as workers compete for the few unskilled labor jobs that remain. Since the Great Recession the percentage of workers working freelance, gig jobs, or as independent contractors has gone up sharply – from 10.7 percent in 2005 to 15.8 percent in late 2015. This has happened while unions have contracted or disappeared entirely. In 1973 nearly a quarter of the workforce was a member of a union. Now it’s little more than 10 percent.  

American workers are now on their own in the workforce and must negotiate as individuals. Skilled labor jobs pay much better than unskilled labor, of course, and in industries where there is steady demand for those skills – such as in auto repair – wages are better. As a whole, however, the trend in the American economy is for declining wages with no additional benefits given. In the next blog piece, we will make more direct comparisons between auto repair shop wages and wages for other workers in other sectors of the economy.