Globalization and the Politics of Pay: Policy Choices in the American States (American Governance and Public Policy)

In the American federal system, states actively compete for jobs, business investment, and factory locations. Labor costs have played an important role in such interstate competition since the days of the pre-Civil War plantation economy. In recent years, however, global economic trends have put added pressures on businesses and government to reduce labor costs. At least, that is what most politicians, the media, and the business community believe. "Globalization and the Politics of Pay" examines the economic, political, and social causes and consequences of declining wages in the United States. It challenges the conventional wisdom that globalization is to blame for the decline in workers' earnings. Susan B. Hansen presents a comprehensive analysis of the many factors affecting labor costs and concludes that many of them result from choices made by the states themselves through the laws and policies they enact. In addition, free-market ideologies and low voter turnout have had greater effects in keeping wages down than globalization. In fact, foreign trade and investment can actually result in higher pay in the state labor market. In this rigorous yet surprising study, Hansen develops new measures of state and federal labor costs to test competing theories of the consequences of reducing wages and benefits. Most economists would argue that higher labor costs cause higher unemployment, and that reducing labor costs will lead to higher levels of job creation. But citizens and elected officials must weigh any employment gains in lower-wage jobs against slower state economic growth, declining personal income, and a less-competitive position in international trade. Cutting state labor costs is shown to have adverse social consequences, including family instability, high crime rates, poverty, and low voter turnouts. The book concludes with policy recommendations for state governments trying to balance their need for more jobs with policies to enhance productivity, living standards, social stability, and international competitiveness. Contents......Page 8 List of Tables and Figures......Page 10 Preface......Page 12 1. Globalization, Interstate Competition, and Labor......Page 16 Labor Costs and State Competitiveness......Page 21 Theoretical Foundations......Page 24 Labor Costs: Why So Low in the United States?......Page 26 The Impact of Competitive Federalism on Labor Costs......Page 36 Plan of the Book......Page 38 2. The State Role in Labor Costs......Page 42 States and Labor Costs before the New Deal......Page 43 New Deal Efforts to Nationalize Labor Markets......Page 48 Taft-Hartley and State Right-to-Work Laws......Page 51 Contemporary State Efforts to Restrain Labor Costs......Page 53 Measuring State and Federal Labor Costs......Page 67 What Matters......Page 72 Convergence or Divergence in State Labor Costs?......Page 73 States in the International Economy......Page 77 Economic and Demographic Trends and State Labor Costs......Page 81 State Labor Costs, Labor Unions, and Partisan Trends......Page 85 Public Preferences and Ideology......Page 91 Voter Turnout and Trends in State Labor Costs......Page 94 Comparing Economic, International, and Political Factors......Page 96 Conclusion......Page 101 What Matters......Page 104 4. The Economic Effects of Cutting Labor Costs......Page 105 Previous Research on State Labor Costs and Economic Development......Page 106 State/Local Taxes and State Economies......Page 111 State Economies and Federal Policies......Page 113 Hypotheses, Data, and Measures......Page 117 The Economic Effects of State Labor Costs......Page 118 Exports, FDI, and State Economic Trends......Page 122 Conclusion......Page 123 What Matters......Page 125 Possible Consequences of Reducing Labor Costs......Page 127 Testing for the Consequences of Trends in State Labor Costs......Page 130 Economic Consequences of Declining Labor Costs......Page 132 Social Consequences of Declining Labor Costs......Page 134 Labor Costs and Population Trends......Page 136 Trends in Voter Turnout and State Labor Costs......Page 138 Policy Consequences and Declining State Labor Costs......Page 139 Testing for the Independent Effects of Declining Labor Costs......Page 141 Conclusion......Page 146 What Matters......Page 147 6. Conclusion: Lessons Learned and Policy Options for the States......Page 148 The Economists' Preferred Alternative: Investment in Human Capital......Page 150 A New Role for Organized Labor?......Page 156 Changing Health Care......Page 158 Increasing Workers' Wages......Page 160 Creating Better Jobs......Page 164 European Alternatives to the Low-Wage Strategy......Page 166 The Triumph of the Low-Wage Strategy?......Page 169 What Matters: Policy Recommendations for the States......Page 176 A. Explaining State Differences in Labor Costs......Page 178 B. Time-Series Analysis of State Economic Outcomes,1970–2000......Page 183 C. Analysis of Social Consequences of Declining Labor Costs......Page 191 D. Data and Sources......Page 195 Notes......Page 197 References......Page 209 B......Page 231 C......Page 232 E......Page 233 G......Page 234 I......Page 235 L......Page 236 N......Page 238 P......Page 239 S......Page 240 T......Page 241 W......Page 242 Z......Page 243 Examines The Economic, Political, And Social Causes And Consequences Of Declining Wages In The United States. Hansen Challenges The Conventional Wisdom That Globalization Is To Blame For The Decline In Workers' Earnings And Presents A Comprehensive Analysis Of The Many Factors Affecting Labor Costs, Concluding That Many Of Them Result From Choices Made By The States Themselves Through The Laws And Policies They Enact. In Addition, Free-market Ideologies And Low Voter Turnout Have Had Greater Effects In Keeping Wages Down Than Globalization. In Fact, Foreign Trade And Investment Can Actually Result In Higher Pay In The State Labor Market. Most Economists Would Argue That Higher Labor Costs Cause Higher Unemployment, And That Reducing Labor Costs Will Lead To Higher Levels Of Job Creation. But Citizens And Elected Officials Must Weigh Any Employment Gains In Lower-wage Jobs Against Slower State Economic Growth, Declining Personal Income, And A Less-competitive Position In International Trade. Cutting State Labor Costs Is Shown To Have Adverse Social Consequences, Including Family Instability, High Crime Rates, Poverty, And Low Voter Turnouts. – From Publisher Description. Globalization, Interstate Competition, And Labor -- The State Role In Labor Costs -- Explaining State Differences In Labor Cost Trends -- The Economic Effects Of Cutting Labor Costs -- Social And Political Consequences Of Declining Labor Costs -- Conclusion. Susan B. Hansen. Includes Bibliographical References (p. 197-217) And Index. "Incredibly timely. Hansen is a leading scholar in the state politics field who has compiled an impressive body of work dealing with the political causes and consequences of declining wages."?Paul Brace, Clarence L. Carter Professor, Baker Institute for Public Policy, Rice University "An excellent book and a fine addition to the literature on economic development policy and American federalism. It serves as an important critique of the notion that globalization is behind the decline in American workers' well-being."?Peter Eisinger, Henry Cohen Professor, Milano Graduate School, New School for Management and Urban Policy