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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