America As Low-Wage, Low-Cost Manufacturing Center

From Nathaniel Popper’s account of labor unrest at Ikea’s newish factory in Virginia:

Laborers in Swedwood plants in Sweden produce bookcases and tables similar to those manufactured in Danville. The big difference is that the Europeans enjoy a minimum wage of about $19 an hour and a government-mandated five weeks of paid vacation. Full-time employees in Danville start at $8 an hour with 12 vacation days — eight of them on dates determined by the company.

What’s more, as many as one-third of the workers at the Danville plant have been drawn from local temporary-staffing agencies. These workers receive even lower wages and no benefits, employees said.

Swedwood’s [Ingrid] Steen said the company is reducing the number of temps, but she acknowledged the pay gap between factories in Europe and the U.S. “That is related to the standard of living and general conditions in the different countries,” Steen said.


It’s always worth keeping in mind that in the richer countries of northern Europe, hourly productivity is generally higher than in the United States. US per capita GDP is generally higher (especially if you apply a PPP adjustment rather than looking at market exchange rates) because Americans work longer hours, thus allowing us to buy more stuff.