Since mankind’s very first attempt at commerce when Ogg traded five perch to Brux for two venison steaks, we’ve all known that as the demand for a good or service increases, the price increases until the supply meets the demand. Doesn’t usually matter what we are talking about: gold, real estate, water, or labor.

But somehow that rule has been totally negated here in Wisconsin when talking about manufacturing jobs. How could that have happened? I am not an economist so I certainly don’t understand it. But here’s what the news has been reporting:

Wisconsin’s manufacturers lost 3,784 jobs from December 2015 to December 2016, a drop of 0.8% in the state’s manufacturing headcount and a steeper decline than the national average in the sector, according to data released Wednesday.

Yet even as the number of manufacturing jobs has fallen, many companies say they’re having a hard time filling positions that increasingly call for advanced skills.

A quick search of the Department of Workforce Development’s website this week showed there were 5,990 job postings for production workers in the state, including 2,592 in northeast counties and 1,705 in the southeastern part of the state.

“I know of employers who are turning down work because they don’t have the manpower to do it,” said Jim Golembeski, executive director of the Bay Area Workforce Development Board in Green Bay.

So although manufacturing employment is down in Wisconsin, manufacturers are saying they can’t fill the job openings that they have and are turning down work. That would lead one to think that labor is in short supply and demand for labor is up relative to that supply. So wages should be increasing…right? Well no…

Average weekly wages fell 4.4% for state manufacturing workers last year, steeper than a 2.8% decline for equivalent national factory paychecks, Wednesday’s data show.

So essentially, haven’t we broken the base rule of supply and demand? If you want to fill your plant with additional skilled employees, shouldn’t you be raising wages until you start to see an influx of qualified applicants? Isn’t that how it is supposed to work? Well lets pursue this a bit more. In the original article an employer in Bay View is looking for a number of skilled employees. And besides the usual channels Milwaukee Drop Forge has even put signs in their front yard advertising the openings. And they changed their signs when they didn’t get the response that they had expected.

Seeking hired help, Milwaukee Forge affixed a banner in front of its factory on E. Oklahoma Ave. advertising jobs that paid $12 to $25 per hour.

It wasn’t getting much attention, though, so the company crossed out the $12 figure and replaced it with $15. That helped, said Todd Dunnum, human resource manager for the 104-year-old maker of gears, shafts, sprockets and more for a plethora of industries.

“We are seeing quite a bit of walk-in traffic as a result of the sign,” Dunnum said.

Although that may have helped, isn’t $15 an hour the base wage that a number of movements are suggesting as the minimum wage? Yes? And we think a skilled craftsman is going to jump at $15. I would think raising the top number on that wage range would have more effect if you want a skilled employee. And to prove the point, right here in Governor Walker’s Wisconsin, House Speaker Paul Ryan’s backyard and President Trump’s playground, this happened:

Kenneth Olsen lives in House Speaker Paul Ryan’s district in Wisconsin. He wishes Ryan had been there to see his wife of 42 years slump in her chair and cry when he told her the news: His GE factory job is being eliminated.

The entire GE factory is moving to Canada.

You would think that after reading the earlier parts of this article and the articles that I linked to that Mr. Olsen would easily find another job. And maybe he will, but here is where the rules of Econ 101 are broken in Wisconsin!

Olsen earns nearly $30 an hour as a dispatcher at the GE Power plant in Waukesha, Wisconsin. The factory churns out big industrial engines. Olsen is the maestro of the welding department, coordinating where workers and parts go.

“I’m very worried about losing my house,” Olsen says. Even if he finds another job, he knows there’s little chance he’ll earn anywhere near what he earns here. Most companies hiring in the area pay $15 or less.

The GE Power plant itself is located in Rep. Jim Sensenbrenner’s district. He’s a Republican who has been in Congress since 1979 and is a millionaire. But many of GE’s employees live in Speaker Ryan’s district next door.

Among the workers, there’s a feeling that Ryan and Sensenbrenner are out of touch with middle-class life.

“You can’t support a family on $17 an hour,” says Joe Acker, a military veteran who still wears a buzz cut and loves making things. The day he got the job at the GE engine factory over a decade ago, he went home and told his wife he was going to work on the “Superbowl of Engines.”

The GE jobs pay $30 an hour, almost double Wisconsin’s median wage of $17.50. These are the “good jobs” Trump talks about not wanting to lose.

So it would seem that right now there are 350 qualified manufacturing workers out there available to provide skilled labor almost immediately. But they won’t be able to make the wage they were making at GE nor a living wage at all in the current labor market. So if labor is in such short supply why haven’t wages gone up instead of down? Why can’t these 20 and 25 year labor veterans demand the wages they are used to making? How did the rules of labor supply and demand get so out of whack? And why can businesses get away with this and still whine about their fate? When they have created this little nightmare on their own? And these workers voted for and counted on President Trump to save their jobs…even though he was here in Wisconsin last week…not a peep out of him. So manufacturers: Pay Up!

So if any of you are taking an economics class next fall…and the instructor brings up the rules of supply and demand…here’s an example to prove that it isn’t written in stone.

photo: Ed Heinzelman

3 Responses to When Did We Break The Rules From Econ 101?

  1. GuyFromWI says:

    When these Republicans talk about the “lack of trained skilled workers” in our state, I always want to ask them, “Who used to train these people?” The answer is obvious, but one you won’t get from them.

    • Charles Kuehn says:

      I can’t think of a better illustration of the desperate need for a resurgence of organized labor in today’s economy. Unions are evil and must be checked or eliminated, say the Chamber of Commerce types at all levels. Yet one must ask, if not a form of union, exactly what are those very chambers of commerce and other business coalitions? One would be incredibly naive to think those very organizations don’t communicate and conspire to establish tacit wage ceilings for industry in general, while collectively pulling out all the stops to prevent workers from similarly organizing. That, my friends, is exactly how the supply/demand dynamic has been corrupted.

      There is not and has never been a real free market in the modern economy. The closest we’ve ever come was between the end of the Great Depression and about nineteen eighty, when there was some semblance of balance between capital and labor. At no other time in history has the economy done so well for everyone. Now, with the help of the best political class money can buy, the capitalists have again gotten their feet planted and regained the upper hand.

      • pplr says:

        I don’t know if you’re right in Wisconsin Charles but there is historical proof for what you are talking about from N. Carolina.

        Despite being competitors when 1 business owner faced a strike from unhappy workers-especially those who wanted a effective union-the other business owners in the same industry (his supposed competition) would supply the first business owner’s warehouses at night when people weren’t looking.

        That way the business owners would conspire collectively to undermine their workers.

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