THE BELIEF that American manufacturers have moved much of their production overseas solely to take advantage of low wages is false, according to a study released this week by the Economic Policy Institute.
Economist Thomas Karier, author of the study, finds that two-thirds of U.S. foreign investments have been made in countries such as Japan, Canada, Britain and Germany, where wages are higher or nearly as high as wages in this country and where workers are more heavily unionized than in the United States.
Karier's study, entitled, "Trade Deficits and Labor Unions: Myths and Realities," undercuts arguments that blame unions for the export of U.S. jobs to other nations.
The study was underwritten by the Economic Policy Institute, a liberal think tank. Thirty percent of its funding comes from unions, with the remainder from corporations, foundations and private individuals.
The study also erodes contentions by union leaders that the major motive for moving production abroad is to take advantage of the low wages paid in such Third World nations as Mexico, Hong Kong and Taiwan. That's true only in 30 percent of the cases -- still a significant percentage -- the study's figures show.
Karier finds that the vast majority of U.S. companies shifting production to foreign countries are attempting to increase their share of world markets. By far, most of the products made overseas by U.S. firms are sold overseas, the study reports. In 1984, only 7 percent of the value of U.S. goods produced abroad was shipped to the United States.
Even in the cases where companies, such as Trico Products, have moved production to low-wage countries, Karier says it would have happened regardless of whether the company's employees were union or not.
Why? Because, he continues, the wages in Third World countries are as little as a tenth of those in the United States. Only by accepting pay of a dollar an hour or less, can U.S. workers compete on the basis of wages.
The study's main aim is to show that unions are not to blame for the deindustrialization of much of this country.
The U.S. unionization rate, now about 12 percent in the private sector, is the lowest in all industrial nations of the world. It is far lower than the 30 percent rate in Japan, the 36 percent rate in Canada and Germany, the 42 percent rate in Britain and the 90 percent rate in Sweden.
"If unionization is a disadvantage," argues the professor, "then it is one that should have had a larger effect on Japan, Canada and West Germany, the three countries which account for 63 percent of the U.S. trade deficit."
Unions are not to blame, says Karier, not even in the U.S. steel industry where some business leaders and media commentators have confidently asserted that high union wages and restrictive work rules led to the end of basic steelmaking in the Buffalo area in the early 1980s.
In 1983, the year that Bethlehem Steel Corp.'s Lackawanna plant poured its last steel, unionization rates and wages in the industry were among the highest in the country. But in the early 1980s more than 200,000 production jobs were lost and 20 percent of the U.S. market went to imports.
Karier says no more than 3 percent of the loss was due to rising wages.
Much of the loss was tied to a lower demand for steel and the failure of the U.S. companies to invest sufficiently in new technologies, he finds. Where imports were a factor, he says, the monetary exchange rates that bolstered the value of the dollar abroad did more to harm domestic producers.
The auto industry, now the major manufacturing industry in Western New York, is another sector in which high union wages have been blamed for imports capturing nearly a third of the domestic market.
"Unions and high wages have not been responsible for the competitive disadvantage of the U.S. auto industry," writes Karier, currently is serving as a research fellow at the Jerome Levy Economics Institute in New York and is a visiting professor at Bard College.
Karier makes readers aware that U.S. auto companies continued to lose their market share to the Japanese in the 1980s, even though the total hourly compensation of Japanese auto workers rose from 44 percent of their American counterparts' paycheck in 1980 to 86 percent currently.
"The fact that U.S. auto workers are well compensated for their labor can largely be attributed to the strength of the United Auto Workers union," Karier says.
"If there had not been a UAW, there is little reason to expect that prices would have been significantly lower or production more efficient," he contends. "The historic monopoly position of the auto industry has allowed it to maintain prices, regardless of production costs."
Contending that the U.S. automakers failed to engage the Japanese in a price war during the late 1980s, when a falling dollar made imports more expensive and U.S. exports cheaper, Karier asserts that, without the UAW, U.S. auto companies would be more likely to collect higher profits than to reduce prices.
He concludes that unions were not responsible for the growth in auto import sales, but he accepts feels the imports do provide an additional weapon by management in getting rid of unions. "Under import pressure," he says, "union plants were often selected for closure because they were the oldest, most technologically backward and, in some cases, simply because they were union."