Archive for the ‘Labor’ Category

The claim that off-shoring lowers costs

May 20, 2015

Yves Smith wrote on her naked capitalism blog:

… … The claim that outsourcing and off-shoring lower costs is greatly exaggerated.

Off-shoring and outsourcing … … do lower direct factor and lower-level worker costs.

But they do so at the increase of greater coordination costs of much more highly-paid managers.  And they also increase shipping and financing costs, and downside risk.

Having people work at a distance, whether managerially or by virtue of being in an outside organization where the relationship is governed by contract, increases rigidity (harder to respond to changes in market demand) and the odds of screw-ups due to communication lapses.

And outsourcing also reduces an organization’s skills.  Those lower-level people have a lot of product know-how that you lose when you transfer activities to an outside operation.

It’s nice to think that you can hollow out your organization and just do all the sexy design and marketing stuff and dump the grunt work on other players.  But over time you are breeding future competitors.

Thus off-shoring is best understood as a device for transferring income from the rank and file to middle level and senior executives.

via naked capitalism.

In short, off-shoring lowers the wages of production workers, and raises the salaries and importance of managers.   And who makes the decision about off-shoring?  The managers!

This reminds me of America by Design and Forces of Production, books I read by an economic historian named David Noble.   He wrote that there was no evidence of an overall economic benefit in replacing skilled workers with automatic machinery.  The benefit was in increasing the power of managers and industrial engineers, and decreasing the power of workers.

There’s something called public choice theory, which is about how public officials, when making decisions, consider their own good as well as the public good.  I’d say this theory applies just as much to decisions within corporations or any other organization.

What it means is that when corporate officials say “the market” determines this or that, we the people are entitled to ask—the market for what and for whom?

Lean (and mean) production: VW in the USA

May 7, 2015

German manufacturing companies have a reputation for high wages and good labor relations.  That may be justified at home, when labor unions are strong and labor rights are established by law.  It doesn’t necessarily apply to their operations in the USA.

Chris Brooks, writing in Labor News, wrote about how Volkwagen manages its Tennessee plant on the theory that workers are most productive when pushed to their physical limits.

At the Chattanooga plant, permanent employees work alongside “temporary” workers, some of whom have actually worked there for years.  Pitted against one another, both groups fear to speak up.

vwWorkers are routinely pushed to their physical and emotional breaking points. From management’s point of view, this maximizes productivity.

“Every employee there busts their ass and is injured and is working through the pain because they don’t want their job taken by a temp,” Amanda says. “It is made clear to all of us that we are easy to replace.”

That’s lean production in a nutshell: ruthless efficiency, produced by a system of efficient ruthlessness.  Workers are deliberately stretched to their limits, by a combination of competitive pressure, inadequate training, repetitive stress, and rotating shifts—so that the weakest links can be identified and eliminated.

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As cities raise minimum wage, no big job loss

April 16, 2015

Conservatives have long portrayed minimum wage increases as a harbingers of economic doom, but their fears simply haven’t played out. San Francisco, Santa Fe, and Washington, DC, were among the first major cities to raise their minimum wages to substantially above state and national averages. The Center for Economic and Policy Research found that the increases had little effect on employment rates in traditionally low-wage sectors of their economies.

Economists with the Institute for Research on Labor and Employment at the University of California-Berkeley have found similar results in studies of the six other cities that have raised their minimum wages in the past decade, and in the 21 states with higher base pay than the federal minimum. Businesses, they found, absorbed the costs through lower job turnover, small price increases, and higher productivity.

via Mother Jones.

Why the minimum wage should be $15 an hour

April 15, 2015

CRminimumwage8dXSp

The key economic problem for the USA is that American wages are too low.

American consumer demand is the engine that has driven not only the U.S. economy, but much of the world economy, for the past 60 years.

If people don’t have enough money to buy things, there is no economic incentive to make things.

If there is no economic incentive to make things, the world’s wealth does not increase relative to the population.

If there is no economic incentive to make things, rich people and institutions invest in debt, which in the long run makes the problem worse.

If there is no economic incentive to make things, unemployment increases.

There is an economic theory that says that the way to cure unemployment is to allow wages.

It is true that, in a generally prosperous economy, an individual employer might hire more workers if they were available at a lower wage.  But that wouldn’t work for the economy as a whole because workers are customers.  Without mass prosperity, economic activity is devoted to serving the desires of a tiny economic elite.

One way to wage raises is to raise the minimum wage.  This is good for all working people, not just those earning minimum wage or slightly above.  It pushes up the general wage level and increases the market for goods and services.

And aside from all these other considerations, do we really want to live in a rich nation in which millions of hard-working people are poor?

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Can fast food afford a $15 minimum wage?

April 15, 2015

Answer to the question: Yes.

An individual fast food restaurant manager might not be able to pay $15 an hour minimum wage and still compete with other restaurants paying $7.25 an hour.  But there would be no competitive disadvantage if there was a floor under all wages.

Can a $10 minimum wage end working poverty?

April 15, 2015

Answer to the question: No.

What could a new kind of labor movement be?

April 10, 2015

Sam Seder’s interview of Thomas Geoghegan is about 45 minutes long. 

The rest of the running time is a repeat.

∞∞∞∞∞∞∞∞∞∞∞∞∞∞∞∞∞∞∞∞

Thomas Geoghegan says American labor needs a new strategy, which would include the following.

  • The right to join a labor union or engage in labor action should be a civil right.
  • Workers should have the right to form unions that represent only their members, instead of a government-determined bargaining unit.
  • On the other hand, unions should strive for works councils in big organizations, which would represent all the employees and not just the union members.

American labor unions have been unable to stop “right to work” laws from being enacted in state after state—even in Michigan.

only_one_thing_can_save_us_finalThese laws forbid labor-management contracts in which an employer hires only labor union members, or requires new employees to pay dues to a union.  Yet, by law, the union contract must cover all the employees in the bargaining unit, regardless of whether they join or pay dues.

Thomas Geoghegan wrote in Only One Thing Can Save Us that it may not be possible to stop right-to-work from becoming national law.  To the average person, it doesn’t seem right that they should be forced to join an organization or make payments to it against their will.  And as fewer and fewer people have any experience with unions, the counter-argument becomes harder to make.

But if unions lose that battle, as well they might, all is not lost.  It is much easier to make the case for the right to join a labor union if there never are any circumstances in which union membership is compulsory.

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College for all is an economic red herring

April 9, 2015

wages-productivity-educationSource: The Atlantic.

SDT-higher-education-02-11-2014-0-06Senator Rick Santorum was right, or at least partly right.  Only a snob would think that you have to be a college graduate to be a success in life.

Now President Obama didn’t exactly say that in the 2012 campaign, not in so many words, but the focus of his policy is that high schools should make their graduates “college-ready” and that a college diploma is a key to economic success.

This is a red herring.  It is a diversion from the real economic problems, especially the erosion of the wage-earning middle class.

Thomas Geoghegan pointed out in his new book, Only One Thing Can Save Us, that when the President says lack of higher education is the cause of economic inequality, he is writing off the 68 percent of Americans age 24 to 64 who don’t have college diplomas and never will.

Suppose, he asked, that Obama and the Democrats succeed in pushing the college graduation rate up to 35 percent or even 40 percent, which would be hard to do.   Obama is still writing off the majority of working-age Americans.

The President is in effect telling high school graduates that the reason it is so hard for them to find decent-paying jobs is that they didn’t go to college.  And as for the the one in five male college graduates and one in seven women graduates whose income is less than that of the average high school graduate, it is because they attended the wrong college or majored in the wrong subject.

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Germany as a good example for the USA

April 8, 2015

I grew up with a stereotype of the Germans as prisoners of hierarchy, bureaucracy and rules, who would never be a match for us democratic, freedom-loving practical Americans.

But if that ever was true, our two countries have since traded places.

Were-You-Born-on-the-Wrong-Continent1Thomas Geoghegan, a Chicago labor lawyer whose writings I admire, wrote a book in 2010 entitled WERE YOU BORN ON THE WRONG CONTINENT? How the European Model Can Help You Get a Life about how Germany is an economic role model for the United States.

He still says so in his newest book, ONLY ONE THING CAN SAVE US: Why America Needs a New Kind of Labor Movement.

In Germany, Geoghegan wrote, the laws, strong labor unions, worker representatives in management make it difficult to fire anybody.  So layoffs are a last resort, not a first resort.

German management is forced to concentrate on figuring out how to get the most out of the work force, not on making workers powerless and replaceable.   The result is that German corporations invest in lifelong learning for their workers, on the justified assumption that they’re going to remain with the same employer and become permanent assets to the firm.

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Replaceable workers or productive workers?

April 7, 2015

CEOs of American companies complain of a lack of skilled workers and the lack of job training.

But if you look at what most of them do, and not what they say, they don’t really want productive workers.  They want replaceable workers.

only_one_thing_can_save_us_finalSo argues Thomas Geoghegan, a Chicago labor lawyer, in his outstanding new book, ONLY ONE THING CAN SAVE US: Why America Needs a New Kind of Labor Movement.

One obvious example of this is Boeing’s decision to have its new Dreamliner made by inexperienced, low-paid workers in South Carolina rather than members of the International Association of Machinists in Seattle.   They had production and quality problems in South Carolina, but their priority evidently was to get away from the union.

Now the same management philosophy is being applied to public schools, universities and hospitals.   Well-trained, well-paid professionals are harassed, laid off and replaced with inexperienced newcomers.

If you define efficiency as that which is most convenient for managers, there is something to be said for this.  An ignorant subordinate is less likely to give you an argument than an experienced and skilled subordinate.  It is easier to treat people as replaceable parts if they lack knowledge and opinions.

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Freedom of contract or corporate Big Brother?

March 30, 2015

Freedom of contract begins where equality of bargaining power begins.
    ==Oliver Wendell Holmes Jr.

No contract that requires someone to give up a basic right should be legally enforceable.

A contract to sell yourself into slavery is not legally enforceable.  A yellow-dog contract, which requires you to give up your right to join a labor union, is not legally enforceable.

So what about Amazon’s practice of requiring even temporary employees to sign 18-month non-compete agreements as a condition for employment?

Noncompete_CartoonThe Verge obtained a copy of the contract that forbids Amazon workers, for 18 months after leaving Amazon employment, from going to work for any company that “directly or indirectly” supplies any good or service they helped support at Amazon.

Such non-complete agreements are required even for temporary warehouse workers, who typically work for three months during the Christmas season, The Verge reported.  In return for that short stint of work, they’re asked to give up any chance of working for an Amazon competitor—and, since Amazon is “the everything store,” that would mean virtually any job in retailing anywhere in the world.

In other words, Amazon workers are asked to give up a basic right that they supposedly have in a free enterprise system—the right to freely seek work from any employer willing to hire them.

A study, based on an on-line survey of 10,000 American workers conducted by the University of Illinois at Urbana-Champagne and the University of Michigan, determined that 12 percent are covered by non-complete agreements,  The Verge reported.  This includes 9 percent of warehouse and transportation workers.

Evan Starr, co-author of the study, told The Verge that the percentages are probably underestimated because workers sign non-compete agreements without realizing what they’ve signed.

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How to give American workers a pay raise

March 24, 2015

incomegrowthdistributionThe majority of American workers are getting less and less benefit from the growth of the American economy.

The pro-labor Economic Policy Institute notes that, since 1979, the U.S. economy (gross domestic product) has grown by 149 percent and productivity has grown 64 percent, but actual wages of most American workers, adjusted for inflation, are flat or declining.

Recently the EPI published an 11-point program for boosting American wages.   Here it is, with my comments.

1. Raise the minimum wage.

2. Update overtime pay rules.

3. Strengthen collective bargaining rights.

Stronger labor unions give workers power over their wages and working conditions independently of laws and regulations.  This is the most important change and a key to all the other changes.

4. Regularize undocumented workers.

Hiring unauthorized immigrants and relocating business activities to low-wage countries are two ways of doing the same thing—escaping the requirements of American labor law.   It is almost like competing with slave labor.  Since it is not feasible to deport the millions of unauthorized immigrants now in the United States, the only choice is to bring them under protection of the law.

5. Provide earned sick leave and paid family leave.

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Stockholders gain at the expense of the rest of us

March 13, 2015
wagesinfographic1200px

Unemployment is now officially below 6%, but the point is still valid.

Large businesses such as General Motors earmark less money for workers’ pay and for investment, research and technology compared to earlier eras.

They do this in order to be able to hand over more money to stockholders in the form of dividends and stock buybacks.

The reason is that stockholders have leverage and workers don’t, and stockholders no longer take the long view. In 1960, the average stockholder owned a stock for eight years, Harold Meyerson reported in the Washington Post.  Now they sell their stocks after four months, and, when high-frequency trading is factored in, it’s 22 seconds.[1]

Passive, short-term stockholders, unlike the original investors, contribute little or nothing to the value of a company.  Why should their interests be paramount?

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Why doesn’t technology make us all better off?

March 11, 2015

epi2

We Americans long enjoyed the world’s highest material standard of living, and we were told that was because of the superior productivity of American industry.  That sounds like common sense.  If you want more, you need to produce more.  Obviously.

Click to enlarge.

Click to enlarge.

But about 30 or so years ago, this changed.  Our productivity continued to increase, but our wages and salaries didn’t increase along with it.

Why?

Some say that the problem is technology.   Automation means that fewer wage-earners are needed, and our work had less value.   So naturally there are fewer jobs, and employers generally don’t have to pay as much to find people to take these jobs.

Fewer wage earners are needed.  Needed by whom?  Our work has less value.  Value to whom?

They are less needed, and of less value, to the corporate boards and wealthy stockholders who own the technology.  Or, to put it another way:  Capitalists, not workers, own the means of production.

Click to enlarge.

Click to enlarge.

It’s true that the average factory worker or retail clerk did not personally create the technological innovations that made it possible for them to do more with the same amount of work.  But neither did the average corporate executive or corporate stockholder.

If technology is owned and controlled by a small financial elite, then the applications of technology will be such to benefit that elite.

It is possible that, in acting in their own interest, the elite will do things that are good for society as a whole.  It also is possible that they will do things that are bad for society as a whole.

Click to enlarge.

Click to enlarge.

When that happens, we the people need to understand that their power and ownership is not based on divine right or impersonal economic laws.   It is the result of corporate structures and legal rights established by law, and laws can be changed.

Some radical thinkers, such as Stanley Aronowitz, David Graeber, Richard D. Wolff and Gar Alperovitz, are reviving the idea of worker ownership and public ownership of the means of production, which is not the same thing as government ownership.

More moderate reformers think it is just necessary to change the balance of power within society.

The important thing, as I see it, is to stop letting priorities be determined by the “job creators,” the ones who own the machinery, the research laboratories and the so-called intellectual property.   The question is not whether they need us.  The question is whether we need them.

LINKS

Of Flying Cars and the Declining Rate of Profit by David Graeber for The Baffler.

Why Wages Won’t Rise by Robert Reich.

The Great Decoupling of the U.S. Economy by Andrew McAfee on his blog.

Global lessons on inclusive growth by Jason Furman for Policy Network.

The Most Important Economic Chart by Atif Mian and Amir Sufi for House of Debt.

The wedges between productivity and median compensation growth by Lawrence Mishel for the Economic Policy Institute.

 

 

The American middle class is still struggling

March 9, 2015

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casselman-feature-income-3

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Americans historically have thought of ourselves as a middle class nation, a nation in which the majority of people were neither poor nor rich.  That is becoming less true.

The median level of income—that is, the dividing line between the top and bottom 50 percent of income earners—has been falling for 15 years.  This is not a good thing.

At the same time the middle tier of income earners is shrinking.  The middle tier are those who earn more than two-thirds of the median income and less than double the median income.  This is not a good thing.

I think the causes of this trend are the de-industrialization of the U.S. economy, the financialization of the U.S. economy and the upward redistribution of income to a small elite of financiers and corporate executives.

LINK

The American Middle Class Hasn’t Gotten a Raise in Fifteen Years by Ben Casselman for FiveThirtyEight.

 


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