Airbus, Alabama, and Minimum Wage Legislation

posted by Nima

July 3, 2012 · Posted in Business, General Economics 

The WSJ writes Airbus’s New Push: Made in the U.S.A.:

Airbus announced plans to start assembling passenger jets in the U.S. starting in 2015, a move likely to affect labor and trade relations on both sides of the Atlantic.

Airbus outlined the plan Monday at an event in Mobile attended by U.S. suppliers, airlines and politicians, carefully stage-managed amid potential negative reaction on both sides of the Atlantic. EADS shares rose 2% Monday in Paris.

The company said it would create 1,000 jobs at its Brookley Aeroplex in Mobile, doubling the company’s U.S. workforce. One assembly-plant job typically supports up to four at suppliers, Airbus said. Parts for the aircraft will be shipped to Mobile from Hamburg, the site of an existing single-aisle Airbus assembly plant.

“We go where the talent is,” Airbus Chief Executive Fabrice Bregier said in Mobile ahead of a parade of local politicians welcoming the $600 million investment. He didn’t respond directly when asked whether the move would shift employment to the U.S. from Europe. The company’s European unions have voiced concern about production moving overseas, according to French media reports.

He said labor flexibility afforded by a union-free facility in right-to-work Alabama helped drive the plan. So, too, did the opportunity to change the balance of dollar-generated revenue with costs that are generated mainly in euros.

Remember that Alabama has no state imposed minimum wage:

Clickable map of America

About 3 years ago I wrote about The Effects of Different Minimum Wages in Different States:

Expect those states with minimum wages above the federal level (green) to experience problems with their minimum wage legislation sooner or later. That portion of unemployment which is to be imputed upon minimum wage laws will be significantly higher there. Thus overall unemployment is likely to be sustained at much higher levels there. We may see a noticeable exodus of workers from those green states to some of the red, blue, or yellow states over time.

That concept applies globally as much as it does nationally.

On How Minimum Wage Laws Create Unemployment:

States and the federal government have to pay serious attention to this issue. If market wages across the country fall below the minimum wage, long-term mass unemployment will ensue and not go away anytime soon. Lots of people will of course seek refuge on the black market, get paid in cash, and pay no taxes. But to the extent that governments actually enforce those minimum wages that are fixed above market wages, I see nothing but trouble ahead on the employment market.

Recent events in Wisconsin and a general trend towards Right to Work legislation in several states suggests that even politicians are beginning to recognize the necessity of clawing back on the aggression and threats that are inherent in so called “pro-labor” legislation, if their tax livestock and with that their tax farms are to generate enough output moving forward.

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