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.

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.

"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."

List of Tables and Figures Preface

1. Globalization, Interstate Competition, and LaborLabor Costs and State CompetitivenessTheoretical FoundationsLabor Costs: Why So Low in the United States?The Impact of Competitive Federalism on Labor CostsPlan of the Book

2. The State Role in Labor CostsStates and Labor Costs Before the New DealNew Deal Efforts to Nationalize Labor MarketsTaft-Hartley and State Right-to-Work LawsContemporary State Efforts to Restrain Labor CostsMeasuring State and Federal Labor CostsWhat Matters

3.Explaining State Differences in Labor Cost TrendsConvergence or Divergence in State Labor Costs?States in the International EconomyEconomic and Demographic Trends and State Labor CostsState Labor Costs, Labor Unions, and Partisan TrendsPublic Preferences and IdeologyVoter Turnout and Trends in State Labor CostsComparing Economic, International, and Political FactorsConclusionWhat Matters

4.The Economic Effects of Cutting Labor CostsPrevious Research on State Labor Costs and Economic DevelopmentState/Local Taxes and State EconomiesState Economies and Federal PoliciesHypotheses, Data, and MeasuresThe Economic Effects of State Labor CostsExports, FDI, and State Economic TrendsConclusionWhat Matters

5. The Social and Political Consequences of Declining Labor CostsPossible Consequences of Reducing Labor CostsTesting for the Consequences of Trends in State Labor CostsEconomic Consequences of Declining Labor CostsSocial Consequences of Declining Labor CostsLabor Costs and Population TrendsTrends in Voter Turnout and State Labor CostsPolicy Consequences and Declining State Labor CostsTesting for the Independent Effects of Declining Labor CostsConclusionWhat Matters

6. Conclusion: Lessons Learned and Policy Options for the StatesThe Economists' Preferred Alternative: Investment in Human Capital A New Role for Organized Labor?Changing Health CareIncreasing Workers' WagesCreating Better JobsEuropean Alternatives to the Low-Wage StrategyThe Triumph of the Low-Wage Strategy?What Matters: Policy Recommendations for the States

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

Notes Reference Index