Globalization and the Politics of Pay

Policy Choices in the American States

Susan B. Hansen

"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."
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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.

Table of Contents

List of Tables and Figures

1. Globalization, Interstate Competition, and Labor
Labor Costs and State Competitiveness
Theoretical Foundations
Labor Costs: Why So Low in the United States?
The Impact of Competitive Federalism on Labor Costs
Plan of the Book

2. The State Role in Labor Costs
States and Labor Costs Before the New Deal
New Deal Efforts to Nationalize Labor Markets
Taft-Hartley and State Right-to-Work Laws
Contemporary State Efforts to Restrain Labor Costs
Measuring State and Federal Labor Costs
What Matters

3.Explaining State Differences in Labor Cost Trends
Convergence or Divergence in State Labor Costs?
States in the International Economy
Economic and Demographic Trends and State Labor Costs
State Labor Costs, Labor Unions, and Partisan Trends
Public Preferences and Ideology
Voter Turnout and Trends in State Labor Costs
Comparing Economic, International, and Political Factors
What Matters

4.The Economic Effects of Cutting Labor Costs
Previous Research on State Labor Costs and Economic Development
State/Local Taxes and State Economies
State Economies and Federal Policies
Hypotheses, Data, and Measures
The Economic Effects of State Labor Costs
Exports, FDI, and State Economic Trends
What Matters

5. The Social and Political Consequences of Declining Labor Costs
Possible Consequences of Reducing Labor Costs
Testing for the Consequences of Trends in State Labor Costs
Economic Consequences of Declining Labor Costs
Social Consequences of Declining Labor Costs
Labor Costs and Population Trends
Trends in Voter Turnout and State Labor Costs
Policy Consequences and Declining State Labor Costs
Testing for the Independent Effects of Declining Labor Costs
What Matters

6. Conclusion: Lessons Learned and Policy Options for the States
The Economists' Preferred Alternative: Investment in Human Capital
A New Role for Organized Labor?
Changing Health Care
Increasing Workers' Wages
Creating Better Jobs
European Alternatives to the Low-Wage Strategy
The Triumph of the Low-Wage Strategy?
What Matters: Policy Recommendations for the States

A. Explaining State Differences in Labor Costs
B. Time-Series Analysis of State Economic Outcomes, 1970-2000
C. Analysis of Social Consequences of Declining Labor Costs
D. Data and Sources



"The United States finds itself in the midst of a momentous transition to lower wages and living standards for millions of its workers. Susan Hansen's work addresses critical questions about what follows from an American economy in the midst of such a historic development. As the nation struggles to adjust to the forces of globalization, this book reminds us that these economic changes have undeniable consequences for state and local politics and policymaking."—James G. Gimpel, professor, Department of Government and Politics, University of Maryland and editor, American Politics Research

"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


Supplemental Materials


About the Author

Susan B. Hansen is a professor of political science and women's studies at the University of Pittsburgh and author of The Politics of Taxation: Revenue without Representation.

248 pp., 5.5 x 8.5

May 2006

248 pp., 5.5 x 8.5

ISBN: 978-1-58901-088-8
May 2006

248 pp.

ISBN: 978-1-58901-329-2
May 2006

American Governance and Public Policy series
Gerard W. Boychuk, Karen Mossberger, and Mark C. Rom, Series Editors

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