Allegheny Technologies, Inc.

Allegheny Technologies specializes in exotic metal alloys and stainless steel. Still headquartered in Pittsburgh long after many of the other major steel manufacturers left town, the company has a proud history stretching back to Revolutionary times.

While centered in Pittsburgh, the company has recognized the realities of globalized production of steel and has opened plants in China and Europe. The corporate concentration on more exotic metals is intended to partially shield the company from international competition, but rapidly developing international competitors with significant government backing are a fact of life in the industry.

Allegheny Technologies is in the awkward position of asking for large government subsidies or protection from international competition in order to make its business more tenable. While a Democratic Congress will quite certainly be more amenable to worker-friendly trade restrictions, labor unions have reached their nadir in recent years. Without political favoritism, big steel may simply no longer be economically feasible in an environment of significantly higher labor costs.

The Labor Market Effects of Immigration

Immigration in the world today is largely an economic phenomenon. Despite the numerous differences in the structure and function of governments throughout the western world, the world's people are overwhelmingly migrating to the United States, Canada, and Western Europe at the expense of Mexico, Central and South America, Eastern Europe, Asia, and Africa. Indeed, looking at world immigration flows on a purely national basis paints a picture of migrants that move unerringly straight toward the largest concentration of wealth in their immediate proximity. The United States is the destination for well over 95% of Mexican migrants and Western Europe has a similar monopoly on Eastern Europeans.

Given the obvious economic incentives for the immigrants themselves to go wherever their lives will be most quickly improved, the only worthwhile area of study is on the populations already in the destination country and those remaining behind.

For those communities that send a significant portion of their population abroad, immigration is a mixed blessing. The local economy is likely to swell dramatically with remittances from abroad, but the workforce will be decimated by the loss of many of the best workers who receive the greatest potential benefit from moving away. So-called "brain drain" is a very real possibility, but wildly overpopulated countries like China or India are likely to receive competing benefits that overwhelm that force.

Communities that welcome numerous migrants, either explicitly willingly or not, are likely to feel a palpable sense of anger toward those migrants when they add to the labor market and drive down prevailing wages. But immigrants don't join the workforce solely as a source of cheap labor. If the immigrants have any degree of higher education, they are significantly more likely than the native population to start their own small businesses. In a modern service economy, of the type that dominates many of the world's immigration magnets, small businesses that employ fewer than 100 workers are actually one of the greatest sources of job creation. While most immigrants will not likely immediately start a new business upon their arrival, over the course of their lifetimes they are more likely than the general population to choose this path.

The ultimate labor market influence of immigration is likely to be a steep decline in the value of the goods and services that immigrants can produce, and a concomitant rise in the living standards of everyone else in society that is only a consumer of those goods and services.

Eastern Europe's Cheap Labor Disappearing

Speigel Online reports that Eastern Europe's dramatic economic boom is starting to drive calls for higher wages that would make the region uncompetitive with other "low wage countries". Most Americans would probably point to Singapore and Mexico as places where exactly the same phenomenon has already occurred and advise Eastern Europeans to enjoy their higher wages.

Growth in median hourly earnings has been tremendous since 2002. The Czechs have 45% higher wages, the Hungarians have 70% higher wages, and the Latvians have 168% higher wages. Obviously these trends cannot continue forever, but the average worker in Eastern Europe has witnessed a great increase in earnings and overall quality of life. Indeed, considering that entry into the European Union caused a migration of many of these countries best workers to higher paying jobs in France, England, and the Nordic countries, this broad-based rise is all the more impressive.

One of Eastern Europe's best selling points has been its highly educated workforce. If labor productivity continues to grow, the possibility for organic growth in living standards seems much higher for the region than the rest of the world in general.

Spiegel Online considers autoworkers at a Skoda plant that are demanding wages that approach those of Volkswagen in Germany. Skoda can certainly afford the 12% wage increase that the workers are proposing for now, but consider that Volkswagen workers are some of the highest paid in the world. One plant in Germany reduced the work week from 35 hours per week to only 32 in order to maintain wages that approach $70 per hour.

Not bad work if you can get it.