Wednesday, July 22, 2015

Slavery returns to the American South

The Alternet website has posted an interesting article on the spread of low wages in the US

For global manufacturers, the United States—more precisely, the American South—has become the low-wage alternative to China.

In 2011, the Boston Consulting Group made a bold prediction: Manufacturing, which had been fleeing American shores for years, particularly to China, was going to come back. “China’s rising manufacturing costs will significantly erode the savings” that U.S. companies had realized by having their products assembled there, three of the firm’s partners wrote in a widely publicized study. The advantages of offshoring would wane, and American manufacturing would rise again.

The numbers that the authors adduced certainly made their claim seem plausible. As their wages continued to increase, Chinese factory workers, whose pay, adjusted for the productivity differences between China and the United States, came to just 23 percent of their American counterparts’ in 2000, had already seen that figure grow to 31 percent in 2010, and it would likely increase to 44 percent in 2015. More revealing still, however, was the authors’ comparison between factory workers in one particular region of China and one particular region of the U.S. In 2000, they showed, factory workers in and around Shanghai already made 36 percent of the productivity-adjusted pay of workers in Mississippi—a figure that rose to 48 percent in 2010 and that they projected to grow to 69 percent in 2015.

By contrast to the more rigid European economies, with their safeguards of workers’ rights, America’s was perfectly positioned to take advantage of China’s growing labor costs. “America is so robust and so flexible compared to all economies but China,” said Harold Sirkin, BCG senior partner and the study’s primary author. “Getting the work rules right, getting the wage scales right—the U.S. economy can flex in ways that people wouldn’t believe!...When all costs are taken into account,” the authors wrote, “certain U.S. states, such as South Carolina, Alabama, and Tennessee, will turn out to be among the least expensive production sites in the industrialized world.”

The key to an American manufacturing renaissance was, as the study put it, “an increasingly flexible workforce”? “Flexible” has a distinct economic meaning: being paid less than what had been the standard for American manufacturing workers. It had a distinct geographic meaning, too: the American South.

It’s been four years since BCG made its predictions, and they’ve proved lamentably accurate. The American economy has “flexed” just as the study’s authors said it would: Manufacturing has continued to move to the South, and factory workers’ wages have gone south as well. Between 1980 and 2013, The Wall Street Journal has reported, the number of auto industry jobs in the Midwest fell by 33 percent, while those in the South increased by 52 percent. Alabama saw a rise in manufacturing jobs of 196 percent, South Carolina of 121 percent, and Tennessee of 103 percent; while Ohio saw a decline of 36 percent, Wisconsin of 43 percent, and Michigan of 49 percent. Even as auto factories were opening all across the South, however, autoworkers’ earnings were falling. From 2001 to 2013, workers at auto-parts plants in Alabama—the state with the highest growth rate—saw their earnings decline by 24 percent, and those in Mississippi by 13.6 percent. The newer the hire, the bleaker the picture, even though by 2013 the industry was recovering, and in the South, booming. New hires’ pay was 24 percent lower than all auto-parts workers in South Carolina and 17 percent lower in Alabama.

One reason wages continued to fall throughout the Deep South, despite the influx of jobs, is the region’s distinctive absence of legislation and institutions that protect workers’ interests. The five states that have no minimum-wage laws are Mississippi, Alabama, Louisiana, Tennessee, and South Carolina. Georgia is one of the two states (the other is Wyoming) that have set minimum wages below the level of the federal standard. (In all these states, of course, employers are required to pay the federal minimum wage.) Likewise, the rates of unionization of Southern states’ workforces are among the lowest in the land: 4.3 percent in Georgia, 3.7 percent in Mississippi, 2.2 percent in South Carolina, 1.9 percent in North Carolina. The extensive use of workers employed by temporary staffing agencies in Southern factories—one former Nissan official has said such workers constitute more than half the workers in Nissan’s Southern plants—has lowered workers’ incomes even more, and created one more obstacle to unionization.

The South’s aversion to both minimum-wage standards and unions is rooted deep within the DNA of white Southern elites, whose primary impulse has always been to keep African Americans down. To those elites, the prospect of biracial unions threatened not just their profits but the legitimacy of their social order. To counter the biracial Southern populist movement that emerged in the 1890s, those elites created Jim Crow laws that legitimated and promoted white racism, and it was largely by manipulating that racism that they were able to thwart almost all the Southern organizing campaigns that unions have waged since the 1930s. Most of the largest factories that have arisen in the South in recent years belong to European and Asian firms that, in their home countries, pay high wages and are entirely and harmoniously unionized. In going to the South, however, they go native, paying wages and providing benefits well beneath those that such firms as General Motors and Ford offer their employees, and blocking workers’ attempts to unionize. (The one exception to this rule is Volkswagen, whose corporate board—controlled by worker representatives and public officials—has not opposed the unionization of its Chattanooga plant. In that city, state and local public officials have led anti-union campaigns.) Nissan has plants in Tennessee and Mississippi; Mercedes has one in Alabama and will open one next year in South Carolina; BMW has one in South Carolina, where Volvo recently decided to build a new plant; Airbus plans to open one in Alabama. They come to sell to the American market and they come because the labor is cheap.

“Airbus is a global manufacturer,” Jürgen Bühl, who heads the treasurer’s office of IG Metall, the German metal-workers union, and is the primary staffer for the union’s representative on Airbus’s board of directors, told me in April. “When we go abroad, we have the high-value work, the research and development, done in Germany. We [workers in German factories] supply the high-value parts. The workers who assemble the parts in the Airbus factory in Tianjin, China, produce 3 to 5 percent of the total value. But given the 6-to-1 productivity advantage that the United States has over China, it’s cheaper to do the final assembly in the U.S.” And a lot cheaper than in high-value-added Germany, where the average hourly compensation for manufacturing workers in 2011 (the last time the Bureau of Labor Statistics performed an international comparison) was a third higher than their U.S. counterparts’ ($47.38 there; $35.53 here).

In 2012, General Electric re-shored its production of refrigerators and water heaters from Mexico and China to its Appliance Park factories in Kentucky, nearly doubling the park’s workforce in the process. Unlike the vast majority of Southern factories, Appliance Park was unionized, but in recent years, the union there was compelled to agree to a two-tier contract, in which the lower tier of workers (70 percent of them) make far less than the more senior workers: Their starting hourly pay is just over $13.50, almost $8 less than what new workers at Appliance Park used to receive. The American South has become the low-wage anchor of a global production process.

Confronted not only with the financial collapse of 2008 and the ensuing Great Recession, but also with the double whammy of the two Souths, the median wage of all U.S. manufacturing workers fell by 4.4 percent between 2003 and 2013. Facing the possible collapse of the unionized auto industry, the United Auto Workers was compelled to institute two-tier contracts, bringing their less-senior members’ pay down to the levels that workers in the non-union Southern plants make. Newer hires at General Motors, Ford, and Chrysler are paid roughly half ($14 to $19 an hour) of what more senior workers make, and can’t make more no matter how long they work there. (Now that the industry has recovered, removing that ceiling from those workers’ pay has become, not surprisingly, a UAW priority.)

The decline of Northern wages to Southern levels hasn’t been confined to manufacturing. The expansion of Walmart from its Southern base into the North and West has had a profound effect on the incomes of retail workers and of workers all along its supply chain. Ferociously anti-union (when butchers at one Texas Walmart sought to unionize, company executives responded by eliminating the meat departments from every store in Texas and six neighboring states), Walmart directs its managers to keep payroll expenses between 5.5 percent and 8 percent of sales, though the norm in retail marketing is between 8 percent and 12 percent. Wages in counties where a Walmart has been operating for eight years, economist David Neumark has found, are 2.5 percent to 4.8 percent lower than those in comparable counties with no Walmart outlets.

But Walmart—America’s largest private-sector employer, with 1.4 million U.S. employees—is in lots of counties. In tandem with Southern manufacturers and with the spread of Southern economic norms, it has brought Northern wages closer to Southern levels. In 2008, the wage gap between states of the industrial Midwest and those of the South—for all workers, not just those in manufacturing—was nearly $7, according to Moody’s Analytics. By the end of 2011, it had fallen to $3.34.

THE SPREAD OF SOUTHERN earning levels northward has been accompanied and abetted by the concomitant spread of Southern values. Just as Northern bankers and textile mill owners such as Massachusetts’s Abbott Lawrence profited from and supported the antebellum South, today’s business and financial leaders from all parts of the nation profit from the low-wage production of the global and domestic souths, and support the suppression of unions in the North as well as the South. What’s new is the spread of historically white Southern values to Northern Republican politicians—the latest development in the 50-year Southernization (and nearly complete racial whitening) of the Republican Party.

In the last three years, the Republican governors and legislatures of such onetime union bastions as Michigan, Indiana, and Wisconsin have joined the South in enacting “right to work” laws intended to reduce union membership. Since these laws cover only private-sector unions, and thus have no effect on the labor costs of government employees, the Republicans’ initial motivation was almost entirely political: Diminishing unions weakened institutions that generally campaigned for Democrats. But in recent months, bills to lower wages for construction workers on public projects have been moving through the legislatures in those three states, and the Michigan legislature has passed a bill forbidding cities from setting their own minimum-wage standards—all measures designed to hit workers’ pocketbooks. Moreover, laws designed to depress minority, millennial, and Democratic voting by requiring voters to present particular kinds of photo identification have been enacted not only by eight of the eleven once-Confederate states, but by Indiana, Michigan, and Wisconsin as well. Like the pre-1861 slaveholding elites, today’s Republicans appear increasingly dedicated to Southernizing the North.

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