Making stuff doesn't pay very well.

Photographer: Ty Wright/Bloomberg

Farewell to the Blue-Collar Elite

Justin Fox is a Bloomberg View columnist. He was the editorial director of Harvard Business Review and wrote for Time, Fortune and American Banker. He is the author of “The Myth of the Rational Market.”
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Something momentous happened back in November, although I’m not sure anybody noticed it at the time. Maybe because it’s such a mouthful.

Here goes: In November, the average hourly earnings of production and nonsupervisory employees in durable-goods manufacturing dropped below the average hourly earnings of all private nonfarm production and nonsupervisory employees for the first time on record. They’ve stayed lower since. According to the latest jobs data released Friday, durable-goods manufacturing workers made $20.79 an hour in March; private-sector workers overall made $20.89.

In other words, factory workers don’t make more than other workers any more. Here’s their disappearing wage premium, charted back to 1964:

The trajectory is similar for manufacturing as a whole, but not quite as dramatic. Nondurable-goods manufacturing includes a lot of jobs that have never paid well, such as pulling chickens apart or sewing clothes together. Durable-goods manufacturing workers -- especially those who made big things such as cars and airplanes -- were long the U.S. economy’s blue-collar elite.

A few still are: aerospace products and parts workers made an average of $36.29 an hour in February. But overall, the great factory-worker wage premium has disappeared. Workers in motor-vehicle and motor-vehicle-parts manufacturing, for example, made 50 percent more than private-sector workers in general in the early 1990s. Now the autoworker premium is down to 2 percent. And that doesn’t reflect the big disparity in pay between workers with legacy union contracts and those being hired today -- the average auto-industry wage for workers who aren’t long-serving union members is now surely below that of private-sector workers in general.

The factory-worker premium probably existed for a while, but it was in the mid-1970s that it really got big. What happened? My best guess is that, as the U.S. economy was hit by multiple recessions and increasing international competition in the 1970s, big manufacturing unions such as the United Automobile Workers and United Steelworkers were able to protect their members while most American workers suffered.

Around the same time, though, the number of durable-goods manufacturing workers stopped growing, surely in part because they were paid so well. Throughout the 1980s and 1990s, factory-worker unions were able to keep things in a holding pattern -- employment didn’t drop much, and the wage premium over other workers stayed high. Then, with the new millennium and China’s spectacular rise as a manufacturing power, came a decline in both manufacturing wages and employment that became an outright collapse since the Great Recession. Here’s the durable-goods employment chart:

Even after the economy began to pull out of recession, the decline in the durable-goods wage premium continued. But manufacturing employment has been growing since the recession.  If you look at durable-goods-manufacturing employment as a share of overall nonfarm employment, the last five years are different from anything we’ve seen in decades:

May 2010 through May 2012 was the first two-year stretch since the 1970s that factory employment grew faster than overall employment. Since then the ratio has remained more or less unchanged -- and even that, as the chart shows, is something that hasn’t been true for a long time. The decades-long decline in durable-goods manufacturing employment seems to have finally ended. The factory job is back -- or has at least stopped disappearing. It just doesn’t pay very well.

  1. These numbers are all seasonally adjusted. Also, I used private-sector wages as the comparison because the Bureau of Labor Statistics doesn’t track public-sector wages in its monthly establishment surveys.

  2. The BLS has factory-wage data going back to 1939, but the overall private-sector wage numbers start in 1964, so that’s where the chart starts.

  3. March numbers aren’t out yet for narrower job categories.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Justin Fox at justinfox@bloomberg.net

To contact the editor on this story:
James Greiff at jgreiff@bloomberg.net