Abstract
Manufacturing wages vary sharply among states, both in individual industries and in the mix of industries. These 2 sources of wage variation have different implications for a state's competitive position and development prospects. High wages in individual industries, unless a reflection of high productivity or offset by low nonwage costs, place states at a competitive disadvantage. States are not at a disadvantage if the high average wage is due to a concentration of employment in industries that pay high wages everywhere. However, a state's economic prosperity does depend on the health of such high wage industries, since the high average wage tends to inhibit the development of lower wage industries. High wage, heavy manufacturing industries are not expected to regain prerecession employment levels anytime in the near future, if ever. New industries must be attracted to these areas, which will be difficult while overall wage levels remain far above the national average.