The Alger Market Review offered an interesting insight last week about why workers’ wages haven’t kept up now that business and industry are posting profits — even record profits.
Summarizing four solid pages of text in three paragraphs is chancy, but here’s the Alger take concerning this unusual disconnect:
Facing intense competition from overseas and south of the border, much of American industry followed the rubric that if you can’t beat ’em, join ’em. Being unable to compete by paying $12 an hour for relatively simple assembly work, for instance, Electrolux decided to move operations to Mexico where labor of equal quality costs far less.
Likewise, many other American companies — including West Michigan firms — farm out some or all of their production to Lower Wageovia. Together with the upturn stemming from sharply reduced domestic taxes, this kind of corporate mobility certainly has spurred corporate profits.
Unfortunately, global commerce — now favoring Pusan and Penang over Peoria — is pushing Joe Assembler and Suszanne Spotwelder into closer competition with lower-cost overseas workers. Hence, Alger believes, low-tier American wages will lag for a long time.
But let’s consider that some American firms have successfully scrambled to stay ahead of the Pacific Rim. They invest in the latest technology so they can produce more with and pay more to the same people. These firms work like dogs to stay so efficient and agile that they can turn on a dime to leap from market niche to market niche among the super trains of global commerce.
While this kind of agility and stamina can keep some American manufacturers internationally competitive, we don’t see those characteristics in the broad mass of American workers. Thanks to indifferent preparation, many American workers seem bewildered and fatalistic. We cite some unfortunately accurate phrases from the preamble of the Nation At Risk report released 21 years ago.
Our once unchallenged pre-eminence in commerce, industry, science, and technological innovation is being overtaken … the educational foundations of our society are presently being eroded by a rising tide of mediocrity … others are matching and surpassing our educational attainments.
Two decades haven’t improved things.
Our secondary institutions — perhaps for lack of parental urgency, push and input — impart little sense of urgency to the coming generation. Many youngsters seem to have no expectations about the world they’re entering. Some have vague thoughts about “get a job” or “raise a family,” but their gray matter seems flabby. Russian and Indian school children take more English than American children, and as a very recent survey indicates, most young Americans either don’t or can’t read.
In regard to the current generation of unskilled labor at risk in this new economy, Fred Keller of Cascade Engineering this year made the obvious suggestion to the governor. He said that given tax incentives, successful manufacturers — who know exactly what skills are needed where and when — could be the best educational institutions available.
The governor, disappointingly, decided instead to send re-training funds to college and university tech centers, inserting a middleman in the re-training effort.
Worse, her decision retards assistance for the very businesses the state says it wants to help — especially with regard to the re-training incentive in exchange for curbing Michigan’s tax burden.