The Future Of The American Factory Worker

by George Kennedy on January 4, 2012

 

The Future Of The American Factory Worker

“The U.S. Gains Factory Jobs, but Workers Give Ground on Wages” read the headline in the Business Day section of the Friday, December 30, 2011 edition of the New York Times. At first glance, there is no story. This has been the inevitable consequence of globalization. But, then, it gets interesting.

Some large manufacturers are rehiring, but here is the not-so-fine-print consequence. “For a new generation of blue-collar workers, even those protected by unions, the price of employment is likely to be lower wages stretching to retirement. That is a new development for American workers.

This outcome merits a moment of pause when you consider the dream of the average unemployed, underemployed, and newly employed worker, even today, is to work their way into this country’s middle class. When has this not been the goal of America’s blue-collar workers? So far, so good. But, middle class by what standard? Whose standard? That of our parent’s generation? Or, a new, but lower, standard accepted as the price of doing business by the same manufacturer that employed our parents, our neighbors, and, in some locations, the entire community?

Progressive income increases for workers in the manufacturing sector facilitated mobility to better neighborhoods, better schools for their children, more opportunity, and greater personal satisfaction. More prosperity reinforces the idea that we as Americans can transform ourselves. This is, and remains, the mindset of the average American worker. When the American worker flourished following WW11, the housing industry mushroomed. Domestic consumption rose across the board from personal care items to home appliances to automobiles. College educations became achievable dreams.

Moreover, a corollary benefit of greater worker prosperity was social stability here at home: citizens who accepted obligations of citizenship – paying their fair share of taxes and volunteering to secure the safety of the homeland. Increased prosperity deepened an individual’s bond to his community and to his country.

Americans also shared their resources with the less fortunate around the globe. We have always been the most generous nation in the world. Personal and family prosperity makes this possible. Does not a permanent two-tier wage structure tilted toward the lower second-tier create a new set of prospective challenges yet to be fully examined?

While the Times article highlights such global manufacturers as GE and Ford, other manufacturers with a global presence are adopting similar union-endorsed contracts. The wage concessions by labor unions in the cases of GE and Ford amount to establishing a permanent two-tier wage structure. The wages for new hires will be significantly less than the hourly rate for those already employed. New hires expect this but it is the next concession that creates a new paradigm for labor: new hires will not catch up in wages with their colleagues for the foreseeable future – if ever. GE and Ford managers – and their counterparts at “steel and tire companies, and at manufacturers of farm implements and other heavy equipment” – argue the real issue is competitiveness within a global marketplace. They demand wage and benefit concessions or more unemployment.

A two-tier wage scale with $10 to $14 dollars per hour wage differential among longtime workers effectively redefines what it means to earn a middle class income and be middle class in the manufacturing sector. Two longtime workers retiring, one at $32 per hour, the other at $20-$21 dollars per hour means a marked difference in lifestyle over a working career. A labor force confronting sustained levels of high unemployment now accepts this wage structure to create jobs at home. The choice is to earn less over the long term or nothing.

Employers today seek to narrow the unit labor costs between China and the U.S. as the incentive to bring jobs home. China’s labor costs have now become the new benchmark for American labor. “Ten years ago, it was a no-brainer to locate in China, and now it isn’t so clear whether China is the low-cost place to produce,” says Mark Zandi, chief economist for Moody’s Analytics.

Workers accepting this new two-tier wage structure wonder if they will ever “make it into the middle class.” Americans want jobs and are accepting the idea that entry into a second, or lower, tier job may not mean an eventual rise to the upper tier as they gain seniority. Should the rate of inflation spike in the future, relations between labor and management could worsen.

The idea of economic justice for ordinary Americans has a nice ring as a campaign theme. How real is economic justice as a political objective over the next several years with government by stalemate, and an economy increasingly distant from the real needs of workers? How much more will be demanded from American workers? Is it not a near certainty that the widening gap between the 1 percent and the 99 percent will produce an even larger under class than we have today?

Americans dream of working their way into the middle class. Historically, achieving a middle class lifestyle actually minimized class envy. We should consider as well that a two-tier wage system in manufacturing also lengthens the workers’ income gap from middle-to-upper, white-collar professionals. Is it not also likely we may be entering a period of continuous class conflict with income and consumption taxes falling heavily on those at the lower income levels since all of their income is derived from wages? Add to this inequitable outcome the likelihood of a weakened social safety net and the results could be increased social unrest. The Occupy Wall Street (OWS) movement could pale in comparison to larger, more organized protests across the country.

Conservatives and their corporate patrons appear comfortable with greater income inequality and two-tier wage structures than their Democratic counterparts. The sad truth is the Democrats cannot muster the political majorities or the political will to thwart what appears to be an inevitable end result: even more income inequality. This might explain labor’s recent growing disaffection with Democratic political leadership in the White House or with the Democratic National Committee in Washington. Studies confirm a marked decline in respect for and confidence in America’s political leadership. One inevitable casualty is the American worker.

There was a period in America’s not-too-distant past when the American worker and his middle class aspirations were the envy of most and the model for billions more around the globe. That is less so today when major manufacturers consider the American worker on a per unit cost basis as a competitive base of manufacturing with China. This is a new and disturbing social paradigm new American workers may have to adjust to. The definition of a “living wage” is being revised downward.

This new paradigm legitimizes the worst aspect of globalization: reducing the standard of living for the average American worker while increasing profits and lowering taxes for their corporate masters.

Therefore, when a contender for the White House or other national office campaigns on the theme economic justice for the average American, be sure to ask that candidate what this means.

Meanwhile, workers will continue to adapt to changes on the ground. Their aspirations will not shrink to accommodate their declining incomes. They will, of necessity, make more practical decisions that sustain life. Americans are industrious, creative, and disciplined. Above all, their dreams will again empower them to transcend their circumstances. What might that mean in 2012?

In 2012, although the overall unemployment rate may continue to hover above 8 percent, many Americans will find more ways to increase personal and household sources of income. Gene Zaino, president and chief executive of MBO Partners, says we will witness “the rise of the independent worker both by necessity and choice.” Workers will join the ranks of millions of others, myself included, who decided to go it alone.

Change and uncertainty are on everyone’s minds as we launch a new year. Noted business philosopher Jim Rohn reminds us he used to say, “I sure hope things will change. Then I learned that the only way things are going to change for me is when I change.”

The wisdom of Jim Rohn offers a way forward for American workers today. History proves over and over again that those who adjust their lives to change (and opportunity) are the one that prosper and thrive. Are you one of those?

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George Kennedy

George Kennedy was a business advisor to small technology companies in the Washington DC Metropolitan Area. Currently, he serves as the Chairman of the Economic Development Committee of the Marana, AZ Chamber of Commerce and is a board member of the United Way of Tucson organization. He also serves as an advisory board member to the School of Social and Behavioral Sciences at the University of Arizona in Tucson. Mr. Kennedy is a retired senior Foreign Service officer with extensive international experience. He holds a B.A. from the University of Oregon and two graduate degrees from the Johns Hopkins School of Advanced International Studies in Washington, D.C.

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