Global Economy’s Stubborn Reality: Plenty of Work, Not Enough Pay

LILLESTROM, Norway — In the three-plus decades since Ola Karlsson began painting houses and offices for a living, he has seen oil wealth transform the Norwegian economy. He has participated in a construction boom that has refashioned Oslo, the capital. He has watched the rent climb at his apartment in the center of the city.

What he has not seen in many years is a pay raise, not even as Norway’s unemployment rate has remained below 5 percent, signaling that working hands are in short supply.

“The salary has been at the same level,” Mr. Karlsson, 49, said as he took a break from painting an office complex in this Oslo suburb. “I haven’t seen my pay go up in five years.”

His lament resonates far beyond Nordic shores. In many major countries, including the United States, Britain and Japan, labor markets are exceedingly tight, with jobless rates a fraction of what they were during the crisis of recent years. Yet workers are still waiting for a benefit that traditionally accompanies lower unemployment: fatter paychecks.

Why wages are not rising faster amounts to a central economic puzzle.

Some economists argue that the world is still grappling with the hangover from the worst downturn since the Great Depression. Once growth gains momentum, employers will be forced to pay more to fill jobs.

But other economists assert that the weak growth in wages is an indicator of a new economic order in which working people are at the mercy of their employers. Unions have lost clout. Companies are relying on temporary and part-time workers while deploying robots and other forms of automation in ways that allow them to produce more without paying extra to human beings. Globalization has intensified competitive pressures, connecting factories in Asia and Latin America to customers in Europe and North America.

“Generally, people have very little leverage to get a good deal from their bosses, individually and collectively,” says Lawrence Mishel, president of the Economic Policy Institute, a labor-oriented research organization in Washington. “People who have a decent job are happy just to hold on to what they have.”

The reasons for the stagnation gripping wages vary from country to country, but the trend is broad.

Graphic | Why Aren’t Wages Rising Faster Now That Unemployment Is Lower? When labor markets tighten, wages are expected to rise. But in recent years, as unemployment has fallen below 5 percent in the United States, wages have not been increasing as fast as in the past. Economists debate the reasons; workers grapple with the consequences.

In the United States, the jobless rate fell to 4.2 percent in September, less than half the 10 percent seen during the worst of the Great Recession. Still, for the average American worker, wages had risen by only 2.9 percent over the previous year. That was an improvement compared with recent months, but a decade ago, when the unemployment rate was higher, wages were growing at a rate of better than 4 percent a year.

In Britain, the unemployment rate ticked down to 4.3 percent in August, its lowest level since 1975. Yet wages had grown only 2.1 percent in the past year. That was below the rate of inflation, meaning workers’ costs were rising faster than their pay.

In Japan, weak wage growth is both a symptom of an economy dogged by worries, and a force that could keep the future lean, depriving workers of spending power.

In Norway, as in Germany, modest pay raises are a result of coordination between labor unions and employers to keep costs low to bolster industry. That has put pressure on Italy, Spain and other European nations to keep wages low so as not to lose orders.

But the trend also reflects an influx of dubious companies staffed by immigrants who receive wages well below prevailing rates, undermining union power.

That this is happening even in Norway — whose famed Nordic model places a premium on social harmony — underscores the global forces that are at work. Jobs that require specialized, advanced skills are growing. So are low-paying, low-skill jobs. Positions in between are under perpetual threat.

“The crisis accelerated the adjustment, the restructuring away from goods producing jobs and more into the service sector,” says Stefano Scarpetta, director for employment, labor and social affairs at the Organization for Economic Cooperation and Development in Paris. “Many of those who lost jobs and went back to work landed in jobs that pay less.”

Union Power Eroded

In November 2016, a week after Donald J. Trump was elected president on a pledge to bring jobs back to America, the people of Elyria, Ohio — a city of 54,000 people about 30 miles west of Cleveland — learned that another local factory was about to close.

The plant, operated by 3M, made raw materials for sponges. Conditions there were influenced by an increasingly rare feature of American life: a union that represented the workers.

The union claimed the closing was a result of production being moved to Mexico. Management said it was merely cutting output as it grappled with a glut coming from Europe. Either way, 150 people would lose their jobs, Larry Noel among them.

Mr. Noel, 46, had begun working at the plant seven years earlier as a general laborer, earning $18 an hour. He had worked his way up to batch maker, mixing the chemicals that congealed into sponge material, a job that paid $25.47 an hour.

Now, he would have to start over. The unemployment rate in the Cleveland area was then down to 5.6 percent. Yet most of the jobs that would suit Mr. Noel paid less than $13 dollars an hour.

“These companies know,” he said. “They know you need a job, and you’ve got to take it.”

In the end, he found a job that paid only slightly less than his previous position. His new factory was a nonunion shop.

“A lot of us wish it were union,” he said, “because we’d have better wages.”

Last year, only 10.7 percent of American workers were represented by a union, down from 20.1 percent in 1983, according to Labor Department data. Many economists see the decline as a key to why employers can pay lower wages.

In 1972, so-called production and nonsupervisory workers — some 80 percent of the American work force — brought home average wages equivalent to $738.86 a week in today’s dollars, after adjusting for inflation, according to an Economic Policy Institute analysis of federal data. Last year, the average worker brought home $723.67 a week.

In short, 44 years had passed with the typical American worker absorbing a roughly 2 percent pay cut.

The streets of Elyria attested to the consequences of this long decline in earning power.

“There’s some bail bondsmen, some insurance companies and me,” said Don Panik, who opened his gold and silver trading shop in 1982 after he was laid off as an autoworker at a local General Motors plant.

Down the block, a man with a towel slung over bare shoulders panhandled in front of a strip club, underneath a hand-lettered sign that said “Dancers Wanted.” A tattoo parlor was open for business, near a boarded-up law office.

One storefront was full of activity — Adecco, the staffing company. A sign beckoned job applicants: “General Laborers. No Experience Necessary. $10/hour.”

Lyndsey Martin had reached the point where the proposition had appeal.

Until three years ago, Ms. Martin worked at Janesville Acoustics, a factory midway between Cleveland and Toledo. The plant made insulation and carpets for cars. She put products into boxes, earning $14 an hour.

That, combined with what her husband, Casey, earned at the plant, was enough to allow them to rent a house in the town of Wakeman, where their front porch looked out on a leafy street.

Then, in summer 2013, word spread that the plant was shutting down, putting 300 people out of work.

Ms. Martin took 18 months off to care for her children. In early 2015, she began to look for work, scouring the web for factory jobs. Most required associate’s degrees. The vast majority were temporary.

She took a job at a gas station, ringing up purchases of fuel, soda and fried chicken for $9 an hour, less than two-thirds of what she had previously earned.

“It almost feels degrading,” she said.

Her hours fluctuated. Some weeks she worked 35; most weeks, 24.

A competitor to Ms. Martin’s former employer has set up a factory directly opposite the plant where she used to work. The company hired 150 people, but not her. She said she had heard the jobs paid three to four dollars less per hour than she used to make.

Ms. Martin recently took a new job at a beer and wine warehouse. It also paid $9 an hour, but with the potential for a $1 raise in 90 days. In a life of downgraded expectations, that registered as progress.

Fear Factor

Conventional economics would suggest that this is an excellent time for Kuniko Sonoyama to command a substantial pay increase.

For the past 10 years, she has worked in Tokyo, inspecting televisions, cameras and other gear for major electronics companies.

After decades of decline and stagnation, the Japanese economy has expanded for six straight quarters. Corporate profits are at record highs. And Japan’s population is declining, a result of immigration restrictions and low birthrates. Unemployment is just 2.8 percent, the lowest level in 22 years.

Yet, Ms. Sonoyama, like growing numbers of Japanese workers, is employed through a temporary staffing agency. She has received only one raise — two years ago, when she took on a difficult assignment.

“I’m always wondering if it’s O.K. that I never make more money,” Ms. Sonoyama, 36, said. “I’m anxious about the future.”

That concern runs the risk of becoming self-fulfilling, for Japan as a whole. Average wages in the country rose by only 0.7 percent last year, after adjusting for the costs of living.

The government has pressed companies to pay higher wages, cognizant that too much economic anxiety translates into a deficit of consumer spending, limiting paychecks for all.

But companies have mostly sat on their increased profits rather than share them with employees. Many are reluctant to take on extra costs out of a fear that the good times will not last.

It is a fear born of experience. Ever since Japan’s monumental real estate investment bubble burst in the early 1990s, the country has grappled with a pernicious residue of that era: so-called deflation, or falling prices.

Declining prices have limited businesses’ incentive to expand and hire. What hiring companies do increasingly involves employment agencies that on average pay two-thirds of equivalent full-time work.

Today, almost half of Japanese workers under 25 are in part-time or temporary positions, up from 20 percent in 1990. And women, who typically earn 30 percent less than men, have filled a disproportionate number of jobs.

Years of corporate cost-cutting has weakened Japan’s unions, which tend to prioritize job security over pay.

The recent uptick in wages, although modest, has raised hopes of increased spending that would embolden businesses to raise pay and to upgrade temporary workers to full-time employees.

Until that happens, workers will probably remain hunkered down, reluctant to spend.

“I have enough to live on now,” Ms. Sonoyama said, “but I worry about old age.”

Global Threats

No one is supposed to worry in Norway.

The Nordic model has been meticulously engineered to provide universal living standards that are bountiful by global norms.

Workers enjoy five weeks of paid vacation a year. Everyone receives health care under a government-furnished program. Universities are free. When babies arrive, parents divvy up a year of shared maternity and paternity leave.

All of this is affirmed by a deep social consensus and underwritten by stupendous oil wealth.

Yet even in Norway, global forces are exposing growing numbers of workers to new forms of competition that limit pay. Immigrants from Eastern Europe are taking jobs. Temporary positions are increasing.

In theory, Norwegian workers are insulated from such forces. Under Norway’s elaborate system of wage negotiation, unions, which represent more than half of the country’s work force, negotiate with employers’ associations to hash out a general tariff to cover pay across industries. As companies become more productive and profitable, workers capture a proportionate share of the spoils.

Employers are supposed to pay temporary workers at the same scale as their permanent employees. In reality, fledgling companies have captured slices of the construction industry, employing Eastern Europeans at sharply lower wages. Some firms pay temporary workers standard wages but then have them work overtime without extra compensation. Unions complain that enforcement patchy.

“Both the Norwegian employer and the Polish worker would rather have low paid jobs,” said Jan-Erik Stostad, general secretary of Samak, an association of national unions and social democratic political parties. “They have a common interest in trying to circumvent the regulations.”

Union leaders, aware that companies must cut expenses or risk losing work, have reluctantly signed off on employers hiring growing numbers of temporary workers who can be dismissed with little cost or fuss.

“Shop stewards are hard pressed in the competition, and they say, ‘If we don’t use them then the other companies will win the contracts,” said Peter Vellesen, head of Oslo Bygningsarbeiderforening, a union that represents bricklayers, construction workers and painters. “If the company loses the competition, he will lose his work.”

Last year, companies from Spain and Italy won many of the contracts to build tunnels south of Oslo, bringing in lower-wage workers from those countries.

Mr. Vellesen’s union has been organizing immigrants, and Eastern Europeans now comprise one-third of its roughly 1,700 members. But the trends can be seen in paychecks.

From 2003 to 2012, Norwegian construction workers saw smaller wage increases than the national average in every year except two, according to an analysis of government data by Roger Bjornstad, chief economist at the Norwegian Federation of Trade Unions.

When Mr. Karlsson, the painter, came to Norway from his native Sweden in the mid-1990s, virtually everyone in the trade was a full-time worker. Recently, while painting the offices of a government ministry, he encountered Albanian workers. He was making about 180 kroner per hour, or about $23, under his union scale. The Albanians told him they were being paid barely a third of that.

“The boss could call them, and 20 guys would be standing outside ready to work,” Mr. Karlsson said. “They work extra hours without overtime. They work weekends. They have no vacations. It’s hard for a company that’s running a legitimate business to compete.”

He emphasized that he favored open borders. “I have no problem with Eastern Europeans coming,” he said. “But they should have the same rights as the rest of us, so all of us can compete on equal terms.”

Even in specialized, higher-paying industries, Norwegian wage increases have slowed, as unions and employers cooperate toward improving the fortunes of their companies.

That is a pronounced contrast from past decades, when Norway tallied up the profits from oil exports while handing out wage raises that reached 6 percent a year.

As the global financial crisis unfolded in 2008, sending a potent shock through Europe, Norway’s high wages left businesses in the country facing a competitive disadvantage. That was especially true as mass unemployment tore across Italy, Portugal and Spain, depressing wages across the continent. And especially as German labor unions assented to low pay to maintain the country’s export dominance.

Starting in mid-2014, a precipitous descent in global oil prices ravaged Norway’s energy industry and the country’s broader manufacturing trades. That year, Norwegian wages increased by only 1 percent after accounting for inflation, and by only a half percent the next year. In 2016, wages declined in real terms by more than 1 percent.

Peder Hansen did not relish the idea of a smaller pay raise, but neither was he terribly bothered.

Mr. Hansen works at a nickel refinery in Kristiansand, a city tucked into the nooks and crannies along Norway’s southern coast. His plant is part of Glencore, the mammoth Anglo-Swiss mining firm. He sits at a computer terminal, controlling machinery.

Much of what the refinery produces is destined for factories in Japan that use the nickel to make cars and electronics. Lately, nickel prices have been weak, limiting revenue. This year, Mr. Hansen’s union accepted an increase of about 2.5 percent — a tad above inflation.

“If they were to increase our wages too much, the company would lose customers,” Mr. Hansen says. “It’s as simple as that.”

He exudes faith that his company’s fortunes will be shared with him, because he has lived it. At 24, he earns 630,000 kroner a year, with overtime, or more than $80,000. He owns a two-story house in Kristiansand, and he has two cars, an Audi and an electric Volkswagen. The lives of company executives seem not far removed from his own.

“The C.E.O. of the plant is a humble person,” he said. “You can say ‘Hi.’”

But for some workers, the plunge in oil prices has tested faith in the Norwegian bargain.

In Arendal, a coastal town of wooden houses clustered around a harbor, Bandak, a local employer, succumbed to the crisis. The company made equipment connecting oil pipelines. As orders grew scarce in late 2014, a series of layoffs commenced. Workers ultimately agreed to a 5 percent pay cut to spare their jobs.

“We wanted to keep all of our employees, so we stuck together,” said Hanne Mogster, the former human resources director. “There was a lot of trust.”

But the company soon descended into bankruptcy. And that was that for the 75 remaining workers.

Per Harald Torjussen, who worked on Bandak’s assembly line, managed to find a job at a nearby factory at slightly better pay.

Still, his confidence has been shaken.

“It feels a lot less secure,” Mr. Torjussen says. “We may be approaching what it’s like in the U.S. and the U.K.”

China’s Electric Vehicle Push Lures Global Auto Giants, Despite Risks

TIANJIN, China — Volkswagen, the German auto giant, is get yourself ready for a quick expansion in the creation of planet the coming year — and also the greatest begin production come in China. Vehicle is making China the hub of their electric vehicle development and research. Renault-Nissan, in france they and Japanese carmaker, and Ford Motor have hustled to setup joint electric-vehicle ventures in China.

Global automakers see the way forward for planet, also it looks Chinese. The greatest players are shifting crucial scientific and style try to China because the country invests heavily in vehicle-charging stations and research and pushes automakers to embrace battery-powered vehicles.

China underscored that ambition over the past weekend, if this stated it might eventually ban the purchase of gasoline- and diesel-powered cars in an unspecified date.

However the auto industry’s response — moving electric vehicle design and production to China — represents a large risk.

From high-speed trains to wind generators, China has lengthy prodded American, European and Japanese companies to give their know-how in return for use of its exciting new market. Then Chinese companies used that understanding and lavish government support to defend myself against foreign rivals.

China wants the large players to talk about their electric vehicle understanding, too. The foreign automakers face new Chinese rules that put heavy legal pressure in it to transfer electric-vehicle technology for their local partners. Chinese officials will also be set to impose stringent rules that will pressure automakers like Volkswagen and G.M. to market new-energy cars in the united states if they would like to continue selling that old-fashioned gasoline-powered types too.

Graphic More Watts on the highway

Still, Western companies state that they are fully aware the potential risks of transferring technology — which the possibilities may help them achieve their very own electic vehicle ambitions faster..

“We have been in a learning process together together,” stated Jochem Heizmann, the main executive of Volkswagen’s China operations. “That process is a lot quicker than we are utilized to performing these things. Within our normal processes, it wouldn’t be possible arrive at the marketplace the coming year.Inches

Planet are members of a wider debate concerning the country’s industrial ambitions. Within plan known as Produced in China 2025, China hopes to become dominant player in many other futurist technology, like artificial intelligence and robotics. Chinese officials reason that the push can help develop China’s economy making it less determined by foreign technology, a dependence that may expose it to security risks.

Some business groups and lawmakers — and more and more, people of President Trump’s administration — say company executives hand out valuable trade secrets with regard to short-term gains.

“Multinational firms happen to be beginning to collapse to China’s policies, investing in risk the way forward for this sector and numerous jobs and economic benefits,” stated Michael Wessel, a commissioner from the U . s . States-China Economic and Security Review Commission, that was setup by Congress to watch the bilateral relationship.

Auto executives insist that they’re using good judgment. Rules that China issued in The month of january requiring these to share technology are vaguely worded and may allow a minimum of some components to make abroad and imported. Chinese officials stated here a few days ago at China’s primary annual automotive technology conference they would introduce policies that will help get more foreign purchase of its new-energy vehicles, giving some aspire to foreign auto executives.

“We don’t have any concerns in accordance with the quantity of I.P. that you will find shared,” stated Matt Tsien, obama of G.M.’s China operations, referring tor ip.

Vehicle continues to be collaborating using its partner, the Shanghai Automotive Industry Corporation, on advanced compounds such as the Chevrolet Volt, which G.M. introduced to China last spring because the Buick Velite. Hybrids such as the Volt operate on both electric batteries and gasoline.

“We possess a philosophy, from your overall perspective, that people build where we sell,” Mr. Tsien stated.

Ford stated that it might adhere to all Chinese rules on joint ventures which its new pact with China’s Zotye Auto is preliminary. Renault-Nissan stated that it is new partnership with China’s Dongfeng Motor, known as eGT, will design a brand new electric vehicle that’ll be created in a Dongfeng factory within the Chinese town of Shiyan. Honda Motor is intending to make an electrical vehicle in China the coming year, while Toyota plans to create a plug-in hybrid vehicle in the united states.

The joint ventures alone might not make China an innovator in planet. G.M., Volkswagen along with other major automakers make regular cars with Chinese partners for many years, and China had wished its automakers would learn to make their very own worldbeating brands. Rather, Chinese automakers increased comfortable making Chevrolets and Volkswagens for local motorists. Only lately have foreign automakers begun conveying Chinese-made cars to buyers home.

Still, China has various ways it may stay ahead within the electric vehicle race.

Gao Feng Advisory, a Beijing-based talking to firm, estimates that China may have spent about $15 billion by 2020 installing charging stations for planet. China spent greater than $1 billion subsidizing development and research by 2015, with increased still coming.

Generous subsidies for vehicle buyers that may achieve $9,000 also have helped pique interest, though China intends to phase them out by 2020. Sales of battery-powered cars in China could top 400,000 by 2019, based on LMC Automotive, a worldwide talking to company, accumulated to around two-fifths from the world’s sales of these cars.

Wang Panpan, a migrant worker in Shanghai from central China, stated he rented a in your area built electric JAC iEV5 in Shanghai because electricity was less expensive than gasoline. The only real nuisance: managing a lengthy extension cord from his Shanghai apartment to wherever he were able to park his vehicle.

Graphic Careful About Plugging In

Now he really wants to replace his gasoline-powered Nissan Cedric in the hometown. “If I have the cash, I’ll switch to an electrical one,” he stated. “It saves money, which is eco-friendly.”

More broadly, global automakers feel that they have to grow in a nation that is just about the world’s largest vehicle market, one almost as large as the American and European markets combined.

“Why don’t the automakers refer to this as out?” stated Michael Dunne, an old president of G.M.’s Indonesia operations and longtime consultant around the Chinese auto market. “Well, the people at risk are reluctant.”

Auto executives say they have no choice but to help keep doubling lower on their own big bets on planet in China. In the Shanghai auto show last spring, greater than 190 different types of electrical cars were displayed, although most of them were concept cars that will need refinements before they might get into mass production.

“We increases it also further — we’re honestly not so worried about the tech transfer,” stated Hubertus Troska, the chairman and leader of greater China at Daimler, making Mercedes and Smart cars. “This may be the coolest, most engaging vehicle market on the planet at this time.Inches

Vehicle recalls 800,000 trucks worldwide over steering defect

Vehicle Co is recalling nearly 800,000 Chevrolet Silverado 1500 and GMC Sierra 1500 pickups worldwide that may lose power steering, based on documents published on Friday.

The biggest US automaker stated the 2014 model year trucks could suffer a brief lack of electrical power steering, especially during low-speed turning manoeuvres, based on the National Highway Traffic Safety Administration.

The recall includes about 690,000 vehicles in america, 80,000 in Canada contributing to 25,000 in other markets. GM dealers will overwrite the vehicle’s software to deal with the defect.

GM spokesman Tom Wilkinson was without any information on whether crashes or injuries are attached to the recall.

The organization told regulators that prior to the 2015 model year it made a number of changes to deal with potential causes of temporary low current problems that disable the ability steering.

GM hasn’t stated when dealers will start repairing vehicles.