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Working Hard—or Hardly Working?

Posted by The Curmudgeon on January 16, 2010

How greed hastened our decline

I happened to catch a recently-aired news piece that immediately seemed all too familiar.  A company that manufactures sports equipment had decided to shut down its operation in favor of moving the whole works to another country—where labor costs were considerably lower.  The workers interviewed exhibited the usual degree of concern over their futures, a company spokesman explained the market forces involved, and we were treated to a sneak-peek at the new operation.

“Nothing new,” you might say?

Not quite.

The operation marked for termination was in Mexico; the newer, cheaper operation was in China.  The company itself was a long-established firm that had years before closed its U.S. operation in favor of cheaper labor in Mexico.  Moreover, this was not the first such Mexican plant to close—nor is it likely to be the last.

I relate that story as a lead-in, of course.  As such stories often do, this set my fertile (some would say “fecund”…or even “fetid”—and I’m nowhere near being out of “F” words, yet) mind to wondering.  And wandering.

At the close of World War II, the U.S.—the place that then-President Franklin D. Roosevelt had characterized as “the arsenal of democracy” (ironically, he was actually referring specifically to Detroit)—was the unquestioned world leader in virtually every manufacturing field.  From stoves to steel to guns to shoes to ships to airplanes to pretty much everything, we were It, the dominant power without peer owing both to the wartime industrial build-up and the simple fact that all the other nations’ manufacturing bases had been decimated by several years of aerial bombardment or hostile occupation.

We all know by now, of course, what’s transpired in the interim.  Countless U.S. factories have closed, thousands of workers have been thrown-out of what were once secure jobs, and even entire industries all but disappeared.

What happened?  How did we go from being the world’s leading producer of so much to being the producer of…well, basically reality-based television shows and corporate mergers?

This decline isn’t completely attributable to any single cause.  While it may seem to some a convenient diagnosis to cite a combination of greed and laziness on the part of the average worker, it’s important also to consider what some view as the indefensibly lavish—even scandalous—levels to which executive compensation soared.  In recent years we’ve been stunned by revelations of astronomical salaries and bonuses, extravagant lifestyles, and outrageous “perks” bestowed upon high-ranking corporate officials—many of whom presided over firms reeling from staggering losses.  Government regulation and environmental policy have also played key roles, gradually creating an ever less-hospitable business environment—elevating both production costs and exposure to litigation.  Unfair trade practices affecting foreign markets have posed ongoing woes, largely through protective barriers.  Automation has also dramatically reduced the number of workers required.  And of course the very nature of our economic base has undergone dramatic change.

That said, the one factor looming largest is labor cost; it simply costs less now to produce many goods outside the U.S.  As domestic labor costs have risen, foreign-based manufacturing facilities have flourished owing to the availability of cheaper labor.

Here’s a thought: We know the effect of rising domestic labor costs, and we’ve heard the condemnations of organized labor for effectively pricing many workforces out of their respective markets—but does that tell the entire story?  Yes, unions typically press for higher pay and benefits (arguably, sometimes unreasonably so), but…why?  Certainly, some of this effort is genuinely intended just to improve the workers’ lot.  Still other demands seem intended merely to maintain a union’s own viability and relevance (i.e., unions must continually secure something for their members in order to justify their own existence—and to retain the member support vital to the unions’ survival).  In some areas, however (the auto industry comes immediately to mind), wages not only adversely impacted industry viability, but shocked the rest of the nation.  Added to this were the demands for more lucrative benefit packages that inflated overall compensation even more.  How does one justify paying an assembly-line worker more than six figures per year?  For that matter, how does one justify the audacity of demanding that kind of compensation in the first place?  What about those guarantees of wages being paid during periods of seasonal layoffs—effectively requiring the employer to pay people for not working?

Let’s go back to the aforementioned new factory in China.  What were the workers there doing before the factory opened?  Were they employed?  Were they among the lowest-paid unskilled labor?  Maybe eking-out an existence on a family-operated farm?

In turn, what were the workers in Mexico doing for a living before the (now) soon-to-close plant first opened?

In general, operations relocated to countries offering reduced labor costs have proved a boon to the local economies where they were introduced.  Though low by prevailing U.S. standards, compensation for local workers generally brought a substantial improvement in standard of living at the time the plants were established—just as they initially provided opportunities for U.S. workers more than a century ago as the domestic economy transitioned from its largely agrarian base.

Which brings us back to why the U.S. plants closed in the first place.  Why did labor costs rise?  More to the point: Why were (perceived) excessive demands made by the labor force—the very demands that contributed, at least, to their own demise by making foreign labor more attractive?

For generations, this country offered virtually limitless opportunity—to those willing to work for it.  Family histories abound with tales of great-great-great grandfathers who uprooted their families from other countries to come here seeking their fortunes.  Many (though certainly not all) succeeded.  They set their sights on a goal, achieved it, and rested on the fruits of their labors and risks.  Quite a few entrepreneurs along the way established businesses and built factories, boosting the local economies where they were situated.  Vast numbers of unskilled (and to no small degree unemployed) workers learned in-demand trades and secured good jobs.  They went on to live relatively comfortable, secure lives—not as comfortable as the entrepreneurs, of course (who had, after all, made the initial investment making it all possible, assuming all the risk)—but the lives they ultimately led were measurably better than the lives that had seemingly awaited them.  Consequently, this also led to the rise of what have come to be called “the working class” and “blue-collar” workers.  Again, in many ways this domestic experience presaged  that of the Chinese and Mexican workers of recent years.  (Keep in mind that this emergence was related to the spread of the Industrial Revolution, and became a world-wide phenomenon—and note that neither “working class” nor “blue-collar” is synonymous with “unskilled”.)

Now, let’s revisit the U.S. industrial capacity at its zenith: post-World War II.  Notwithstanding the legions of returning soldiers who took advantage of the G.I. Bill to obtain college educations, many servicemen returned to their pre-war jobs or found similar employment.  A great many were wage-earners, whether skilled and unskilled labor; truly blue-collar.  They generally earned a decent paycheck.  They would typically live in a modest—but respectable—home.  They weren’t rich, but they provided well for their families.  Most could manage at least one family vacation per year, drove late-model (though not necessarily new) cars, and could even manage to put a little into savings.  With some creative financial management and judicious spending, they could even send their kids off to college.  For most, life wasn’t so bad.

Except for two things.

With the growth of the “white collar” workforce, there appeared a growing tendency to look down on those of the working class…as though actually working—like with their hands—was something about which to feel somehow inadequate.  As the armies of white shirts, ties, and suits grew, so did the gulf between the two classes—in both pay and in prestige.  Well-appointed offices and desks seemed somehow superior to punching time clocks and getting dirty, and the paychecks of the respective classes generally reflected this.  (Some white collar positions did lag behind, though; indeed, there even appeared a movement around 1980 calling for equity in “comparable worth”, with its agenda being advanced most prominently on behalf of female office workers annoyed that they were paid less than some labor-intensive working-class jobs would typically pay—though there don’t seem to be many accounts of secretaries and clerks trading their air-conditioned offices and business attire for coveralls and heavy manual labor in brutal weather conditions.)  At a time when image gained importance, white collar professions (and the trappings thereof) loomed larger in stature.

And then there’s Man’s basic nature to always want more.  As our happy wage-earners surveyed the difference between their standard of living and that of the “suits,” they wondered why they weren’t more equitably compensated.  Their skills were certainly essential (do you think that most purchasers of a brand-new Mercedes or Cadillac are likely to maintain or repair their own vehicles—or pump-out their own septic tanks?).  Perhaps they were initially justified in demanding a larger slice of the pie—and with increased income came the ability to afford more of the extravagances that would also serve the dual purpose of equalizing the prestige enjoyed by the white collar workforce.  But how much more would be enough?   Should our assembly line worker be able to afford the twenty-acre estate that a board chairman commands?  Are we all entitled to our own private jet?  More importantly…when does “enough” become “too much”?  Where should the line(s) be drawn?

Economists assert that such lines are determined for us by market forces.  Simply put: If you demand more than you’re worth (what the market will bear), your job disappears.  Knowing what that limit is, however, is often difficult; it goes without saying, then, that any negotiation becomes something of a gamble—and the greater the demand, the greater the risk.  With the advent of “outsourcing” and “moving offshore” during the latter part of the twentieth century, the stakes were raised even higher as another dimension was added to an already-competitive business environment.

Labor simply demanded too much—and several foreign economies became the beneficiaries of this miscalculation.

Significantly, some view this international redistribution as a normal occurrence, in keeping with economic evolution as undeveloped (and emerging) nations claw their way onto the global stage—either filling voids left as other nations expanded their “service-oriented” economies viewed as preferable to emphasis on manufacturing, or by simply undercutting competition.  However, this stance ignores both the unfavorable balance of trade that results and the hazard of becoming overly-reliant on foreign sources for a reliable flow of essential goods—and the results of having that flow disrupted.

Look around you.  Start with your feet—or, more correctly, your shoes.  Chances are that they were made overseas—and the odds are that they came from China.  Check the labels on your clothes.  Sri Lanka?  Malaysia?  Dominican Republic?  How about all your gadgets?  You may think your computer, at least, was produced domestically—but were its components imported?  Even a call to tech support frequently goes to India or Pakistan.

Now consider the impact of these (and many, many more) items suddenly becoming unavailable owing to a brewing conflict in some far-flung corner of the world, catastrophic natural disaster, or insufficient fuel reserves to transport these goods to domestic markets; the seemingly unrelated issue of labor costs abruptly becomes very much a national-security concern.

…largely because we devalued the virtue and integrity of real work and let our growing desire for extravagance become an unquenchable thirst.

Yes, we’d all like to have a vacation home, a yacht, and other trappings of wealth; unfortunately, that lifestyle simply isn’t in the cards for most of us.  We won’t all be able to send our kids to Ivy League schools, either.  And our personal wealth isn’t likely to rival Donald Trump’s.

What we once had, though, was a respectable job, a comfortable living, and a stable future—much of which we gambled away in an ill-fated quest for perceived stature and unjustifiable wealth.

 

 

________

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5 Responses to “Working Hard—or Hardly Working?”

  1. GrannyLin said

    You are so funny. You obviously never worked in a factory. I was lucky enough to enjoy working for GM in a Cadillac plant, until they moved it to Texas to be nearer to the Mexican parts they used. Saved money. Yes I earned a whopping $12 and hour and the Texans would work for $8, with no union protection which means a person can be fired “at will” like in the old days before Detroit had unions it was common for women to be fired for not being “friendly” or men to be fired because Cousin Joe needed a job. Something else that union and the $12/hour it won could do, let me afford a new car (not a Cadillac but at least a Saturn), and I became a nice little economic boon to the governments that got my taxes and the companies that I bought from. I was healthier because I had a good health plan, and I worked so hard (like all the others)that I actually used the jar of Muscle Rub we each got when hired in. It was very very hard work. But fun, too. There is a rhythm to the line. A great spirit of working together to build something. A great satisfaction in knowing I had earned my dollar that day. When auto workers made more then YOU THINK they deserve, you are looking at the man who has to work two shifts a day because the company is too greedy to hire the workers they need. That man doesn’t see his family for weeks and weeks. And he certainly doesn’t have time to sit on blogs trashing others. One more point. A factory worker’s supervisor used to make twice as much as he did, and the execs made 10 times as much. Now, the execs make 10,000 times as much! It isn’t the workers pricing the cars out of the market. Don’t be fooled by their propaganda. They just want more, and more and more.

  2. Jim Seeber said

    To: GrannyLin—

    That was quite a rant. A lot to reply to. Allow me to give it a shot.

    >> You are so funny.

    Thank-you; I’ve been told that I certainly have my moments.

    >> You obviously never worked in a factory.

    Correctamundo. I had other career plans.

    >> I was lucky enough to enjoy working for GM in a Cadillac plant, until they moved it to Texas to be nearer to the Mexican parts they used. Saved money.

    Did you ever wonder why those parts were produced in Mexico? Maybe because it was cheaper? Maybe because the U.S. plants that formerly produced those parts effectively priced themselves out of the market? (I’m just sayin’…you know…speculating.)

    >> Yes I earned a whopping $12 and hour and the Texans would work for $8, with no union protection which means a person can be fired “at will” like in the old days before Detroit had unions it was common for women to be fired for not being “friendly” or men to be fired because Cousin Joe needed a job.

    Geez. When was this? One guy I know who currently works for GM (assembly line, not supervisory or management) is paid $27/hour and has a good benefit package. He started back in the late-’70’s or early-’80’s at $16/hour. (The other three auto plants in the area pay comparably.) Some fifteen years ago, I worked with two other air traffic controllers whose spouses both worked at a nearby GM plant (in Alabama…a place not noted for the generally higher wages paid in northern industrial states)—and both earned less than their respective spouses. (They also enjoyed pretty cushy benefit packages, and received substantial discounts for GM vehicles they purchased.) In doing some research this morning, I found a press release from 2007 reporting that Delphi Steering and UAW had negotiated an agreement that included a substantial cash payment in return for a reduction in pay to $18.50/hour as part of a restructuring effort.

    >> I was healthier because I had a good health plan…

    Unions have long bargained for health benefits in lieu of pay increases—a point recently re-emphasized by labor leaders when the Obama regime targeted their “Cadillac” health care plan.

    >> It was very very hard work.

    Well, duh…what did you expect?

    >> But fun, too. There is a rhythm to the line. A great spirit of working together to build something. A great satisfaction in knowing I had earned my dollar that day.

    Thanks for reiterating one of my points.

    >> When auto workers made more then YOU THINK they deserve, you are looking at the man who has to work two shifts a day because the company is too greedy to hire the workers they need. That man doesn’t see his family for weeks and weeks.

    There’s a word for that: “overtime”—and it’s usually much sought-after by those trying to earn more money. It’s typically a two-edged sword for employers. On the one hand, they have to pay overtime wages (typically time-and-a-half) ; on the other hand, yes…it’s usually cheaper than adding employees. It’s been my experience, though, that there are usually enough employees who want to work overtime that those who don’t wish to can generally find someone else to take the extra work for them.

    Out of curiosity…what was the longest period you went without seeing your family? Weeks and weeks?

    >> And he certainly doesn’t have time to sit on blogs trashing others.

    Hey, I worked a lot of years to earn that privilege. I should point out, though, that “trashing others” isn’t my raison d’être, anyway; I reserve that distinction only for those who richly deserve it.

    >> A factory worker’s supervisor used to make twice as much as he did, and the execs made 10 times as much. Now, the execs make 10,000 times as much!

    Okay. First of all, what positions are categorized as “exec”? Are you referring only to upper-level management? Anybody who wears a necktie and works in an office? Which “factory workers” are you referring to? All industries?

    You’ll recall that I was also critical of management for the lavish compensation packages they’ve enjoyed—and it certainly didn’t strengthen the auto industry’s case when the corporate bigwigs flew by private jet to beg for congressional alms (I sorta think they got the message on that one).

    >> It isn’t the workers pricing the cars out of the market.

    Nor did I say they were; I identified “labor costs” as the predominant cause. Workers don’t price themselves out of anything—but their unions certainly can.

    You characterized yourself as “lucky enough to enjoy working for GM”—yet you’ve mostly complained about the pay and working conditions. If things were so bad, why didn’t you seek other employment?

    When the Cadillac plant closed, did you have the option of relocating? Did you receive a severance package? As a skilled auto worker, why didn’t you seek employment in another area plant?

    >> Don’t be fooled by their propaganda.

    I’ve learned that propaganda is a tool employed by both sides—and I can’t believe you’re foolish enough to not realize that organized labor spreads its own share.

    >> They just want more, and more and more.

    Once again, you’ve reiterated one of my points. The only question is: To which “they” do you refer?

    ________

  3. Larry Z said

    So many variables to consider!!! The main ones, simply put: In this corner…GREED In the other corner…
    ENTITLEMENT…in between the shifting sands of time and political intrusion.
    THANK YOU FOR YOUR SUPPORT…Larry Z

  4. Ed Zielinski said

    Wonder why she hadn’t thought about building a factory, designing a car of her own, hiring people herself. That way, she could have paid them more, reduce their working hours, improved their benefits, making a payroll,as the CEO. She could’ve shown by example by paying herself a modest income.

  5. Dick Norcross said

    At one time America was the biggest consumer market in the world. While I think that corporate executives making millions of dollars per year is obscene, I also think that our government not protecting American workers from low priced imports is equally obscene.

    Unions can serve a worthwhile purpose up to a point, but state right to work laws are necessary to control the union abuses.

    And lastly, we don’t need free trade, but rather fair trade.

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