Demising the American Living Wage

Are you worried about your children and grandchildren’s future in terms of a better life?  You should be!  Market forces will make it harder for individuals to make an honest wage.  American companies, once loyal to their employees, have abandoned the social contract with their employees.  

Leaving today’s workers vulnerable to the consequences of globalization.  Thomas Friedman, author of The World is Flat, notes ‘The best companies outsource to win, not to shrink. They outsource to innovate faster and more cheaply in order to grow larger, gain market share, and hire more and different specialists—not to save money by firing more people.”  

Sadly, most companies do not have this long-term perspective about globalization.  In hindsight, globalization may produce a more equitable average wage across the world, while reducing the earning power of developed countries and increasing the living wages for emerging countries.  These realities on living wages are a critical concern for most Americans.  

Since the recession in 2008, U.S. businesses have posted historical profits even while unemployment has risen.  Consequently, the market place is saturated with seasoned individuals who are willing to take massive pay cuts in order to obtain a secure job.  Employers understand that it is a buyer’s market where employers can be picky. This reality has bottlenecked millions of young college grads who must fight for entry level jobs with career veterans.  

According to a Manpower Group analysis, 52% of U.S. employers state they have a difficult time filing positions because of talent shortage.   Peter Cappelli, author of Why Good People Can’t Get Jobs, outlines the hypocrisy of most employers:  “With an abundance of workers to choose from, employers are demanding more of job candidates than ever before.…To get a job, you have to have that job already. It’s a Catch-22 situation for workers—and it hurting companies and the economy.”  Employers are setting unrealistic hiring expectations and offering low wages.  

People, from every country, seek to earn a living to sustain themselves, by taking care of their basic needs.  According to the United Nations’ Millennium Development Report, more than1 billion people on the globe live on less than $1 a day.  

Ironically, as most Americans have watched their wages decrease, most other workers across the globe sees a significant increase.  The world’s middle income class earns between $700 to $7,500 per family member. Consequently, individuals making more than $7,500 are considered part of the global affluent class.   

Some experts argue that globalization has eroded America’s standard of living, especially during the resurgence of manufacturing.  Economist Gordon Hanson notes, “The U.S. has held manufacturing wages in check while there has been strong wage growth in China and moderate wage growth in Mexico.  

With high unemployment and fierce global competition, manufacturing companies has used this fact to their advantage.  This reality has forced two-tier contracts with unions to pay new hires less than existing workers and reduce new hires’ benefits.  In 2010 and 2011, new hires (manufacturing of durable goods) who had three years or more of experience, were paid an average of .3% less than workers in 2007 and 2008. 

Today’s American workers are finding it difficult to make ends meet. According to the Pew Charity study, economic mobility will be more difficult for individuals, especially depending on where they live.  Economic mobility relates to the ability of a person to move up or down the economy ladder.  

The Pew study concluded that people living in Louisiana, Oklahoma, South Carolina, Alabama, Florida, Mississippi, North Carolina, and Texas would be less likely to improve their economic standing.  However, states such as Maryland, New York, and Pennsylvania would have a better chance of economic mobility due to higher wages in manufacturing and public jobs.  

While the poorest American class wouldn’t consider itself part of an affluent class, this relative inequality of incomes is a bitter pill from citizens of poorer countries.  According to an UN study, the poorest countries across the globe consume 14% of the planet’s resources while 20% of the richest countries with the industrialized nations (including the United States) consume 86% of resources.  

Due to globalization, economic mobility will produce a variety of winners and losers.  Consequently, social mobility becomes more difficult as Americans are forced into a caste system of unemployed or underemployed workers. 

What will happen to economic mobility in America? Will the inequality of wages for global workers create new problems for businesses and society at large?                                                                                              

 © 2012 by Daryl D. Green                                    

 


 

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Global Production Collision

Racing through the parking lot at work, I carry out my ritual of counting import versus domestic cars.  Like the Olympics, I hope that the home team would win.  During my ritual, domestic cars often lose to their foreign competitors in the number of cars. However, it would be difficult to identify what an American product is because of the transformation of the world due to globalization.

In June, the Dow Jones Industrial Average sank into the red for the year after a dismal U.S. job report. Stocks globally have been on a downward spiral since the beginning of May due to worries about Europe’s debt troubles and China’s economic engine which has begun to stall.  Many people hope that companies like General Motors can jumpstart the American economy.  

Like Detroit, Knoxville would embrace the return of the manufacturing industry.  According to a recent Brookings Institute report, “Locating American Manufacturing: Trends in the Geography of Production,” manufacturing jobs in the Knoxville Metropolitan area increased 9.9% from 2010 to 2011. 

In fact, this manufacturing gain was more than 3 times the national average, ranking Knoxville 6th in the nation.  However, many globalization critics argue that weak international trade agreements destroy manufacturing jobs in developed countries like the United States.  The net results are American businesses move operations to countries with cheaper labor.  

Charles Hills, author of International Business, argues, “In the past few years, the same fears have been applied to services, which have increasingly been outsourced to nations with lower labor costs.” Most businesses attempt to stimulate growth through a variety of efforts, including technology investments, acquisitions, and major market campaigns. Companies hope that customers will purchase their products and services due to the value component. 

Robert Jacobs, Richard Chase, and Nicholas Aquilano, authors of Operations & Supply Management remark, “Companies today have found how essential great operations and supply management are to the success of the firm.” 

However, globalization has further linked the financial welfare of each country’s constituents.  In May of 2012, HP announced it would slash more than 27,000 jobs, which is 8% of its worldwide workforce by 2014 in hopes of saving billions of dollars against fierce competition.  

It is the largest restructuring campaign in HP’s 73 year old history. At the time, former HP CEO Meg Whitman stated restructuring was “absolutely critical for the long-term success of the company.”  The downsizing of HP’s workforce was the third largest in tech history.  However, other high tech companies have also been impacted.  IBM downsized 60,000 jobs and AT&T downsized 40,000 employees in the mid-90s. 

At the same time of dealing with global production, each country seeks to increase exports of goods while spearheading job creation in their own markets.

With globalization upon us, can domestic products be considered American when some components are made abroad? Please share your opinion on this topic. 

© 2012 by Daryl D. Green

Sustaining Creativity and Innovation

 When I arrived at Southern University A&M, I looked forward to my new engineering journey. I had envisioned myself being like Scotty on Star Trek, providing Captain Kirk with life-saving innovative solutions for any galactic jam.  However, I was quickly awakened to the systematic and predictable sides of engineering. 

In fact, faculty advisors would frown upon us deviating from the engineering catalog to take business or non-traditional courses.  Sadly, it wasn’t until my senior year that I was allowed to use creativity. Yet, this reality was not out of the norm for most engineering schools. 

Today, U.S. engineers are fighting to maintain dominance as engineering tasks are now being outsourced to countries all over the world.  In fact, America is increasingly losing its pioneering edge because it lacks the human capital resources necessary for success.

Several key factors illuminate the downturn of America’s competitiveness across the globe: (1) several key agencies for U.S. scientific research and development will face a retirement crisis in the near future; (2) less than 6% of high school seniors are pursuing engineering degrees, down 36% from a decade ago; (3) the number of China’s undergraduate degrees in the hard sciences were 56% compared to 17% for the United States in 2000; and (4) in the next several years, China will likely produce six times the number of engineers as the United States. 

Currently, there is a national loss of between 40% and 60% of undergraduates from science, mathematics, and engineering majors into non-science disciplines. Traditionally, engineering schools have taught engineers to build their skills in a linear fashion over time. Sometimes organizations can be too rigid in their organizational design; they lose their mission.

Therefore, the consequences of overly emphasizing structure can be dangerous. Universities cannot afford the same old strategies. An environment needs to be created where these working parts can co-exist in an information era.

Today’s engineering organizations, including academic institutions, must instill students and employees with innovation and creativity for a competitive advantage.  Twenty-first century engineering and science departments must address the needs of students as they relate to globalization and future opportunities in an international market. In 2004, the United States graduated roughly 70,000 undergraduate engineers while other countries such as China (600,000) and India (350,000) are graduating far more engineers. 

Creativity can provide this economic weapon. Creativity is defined as the “generation of novel ideas that may be converted into opportunities.” Gareth Morgan, author of Imagination, argues that empowering people in organizations stimulates imagination and innovation.  James Gibson, John Ivancevich, James Donnelly, and Robert Konopaske,  authors of Organizations: Behavior, Structure, and Processes, suggest that organizations can foster creativity in the following ways: (a) managers can look for ways to absorb the risks of creative decisions made by their employees; (b) organizations can give people time off to work on a problem and allow them to think through them; (c) managers can give half-baked or unsophisticated ideas a chance; (d) organizations can encourage everyone to think of ways to solve problems; and (e) organizations can let employees see and interact with many managers and mentors. New strategies like these need to be utilized to turn today’s engineering organizations into global innovators.

Describe how traditional organizations such as engineering organizations can infuse creativity into their organization and how to sustain these activities.

 © 2011 by Daryl D. Green