Remember Monday’s post on a debate over pay in the manufacturing sector? One of the frustrations I expressed was that U.S. government data on manufacturing compensation that includes non-wage benefits and that’s adjusted for inflation didn’t seem to be available. Therefore, it was difficult to judge whether benefits were (at least) making up for the decline in real wages suffered by manufacturing workers (as insisted by the National Association of Manufacturers), or whether this drop-off in hourly pay genuinely is cause for worry (as insisted by the National Employment Law Project).
Yet thanks to yesterday morning’s release of new labor productivity figures by the Labor Department, I saw that this missing data isn’t missing after all. As part of its efforts to track productivity, Labor compiles figures on real hourly compensation for major sectors of the economy, and manufacturing is one of them. And the statistics seem to prove beyond reasonable doubt both that there’s a major problem with manufacturing pay, and that most of the latest labor productivity gains achieved by the sector have resulted from skimping on compensation, not by some combination of more advanced technology and smarter management.
As shown in the Bureau of Labor Statistics’ interactive database, during the current recovery, which has seen labor productivity rise by 15.29 percent in manufacturing, real hourly compensation in the sector has fallen by three percent.
That’s a striking contrast with the previous economic expansion, which lasted from the final quarter of 2001 to the final quarter of 2007. Then, hourly compensation in manufacturing actually increased – by 6.44 percent in real terms. But labor productivity grew much faster than in the current recovery – by 26.32 percent.
Similar results emerge after adjusting for the different lengths of the two expansions. Over the first five years of the current recovery, inflation-adjusted hourly compensation in manufacturing fell by 3.11 percent, and productivity improved by 14.47 percent. Over the first five years of the previous recovery (which lasted a total of six years), inflation-adjusted hourly compensation in manufacturing increased by 5.28 percent, and manufacturing productivity rose by 21.85 percent.
The composition of productivity gains is best gleaned from Labor Department data on multi-factor productivity, which includes all inputs into all sectors of the economy, not just labor. For manufacturing, the latest of these statistics only goes up to 2012, which limits the conclusions that can validly be drawn about the current recovery. But the declining contribution made by capital-intensivity since 2007 (shown in Table B) certainly reinforces the idea that spending on new machinery and equipment – including on “information processing equipment” and “intellectual property products” – has been anything but central to manufacturing’s efficiency lately.
As I keep noting, few have ever called American domestic manufacturing during the previous bubble decade a sector on the upswing. And yet it managed a feat apparently beyond the ken of this decade’s supposedly renaissance-ing industry – increasing productivity and pay at the same time. Hmmm.