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                                    

 


 

Social Mobility in America

Economic turbulence has overtaken the American way of life.  In Europe and Asia, investors stand uncertain of their next moves.  Even America is part of an economic casualty. 

Yet, these problems are very personal to the average citizen. Higher gas prices and costs of living; the housing bust; and the financial crisis cause most people to worry about their future. With a weak job growth, many U.S. jobs continue to be shipped abroad. 

Global competition continues to cause Fortune 500 companies to search for cheap labor to increase profitability.  This reality often places developed countries like the United States at a clear disadvantage.  Consequently, there has been an increasing gap between the wealthiest people and the poorest people in this country.  The reality has become the shrinking or disintegrating of the middle class.

America is a shining symbol for social mobility across the world.  Social mobility can be defined as “the passage of individuals from one social class to another.” Most people feel that if they work hard, they can achieve a better life, regardless of their social standing. 

In some countries, a person is stuck in an economic class with no hope of further advancement.  If your parents are uneducated and work a low paying occupation, the children will grow up in this same status.

Marketing expert Michael Solomon argues the natural progression of social mobility: “People do improve their positions over time, but these increases are not usually dramatic to catapult them from one social class to another.”  The current economic picture makes social mobility more difficult.

Michael Snyder, editor of theeconomiccollapseblog.com, argues the systematic destruction of the middle class: “The rich are getting richer and the poor are getting poorer at a staggering rate. Once upon a time, the United States had the largest and most prosperous middle class in the history of the world, but now that is changing at a blinding pace.” 

Snyder supported his claims with 22 statistical facts.  Below is a sample of his analysis:

  • Eighty three percent of all U.S. stocks are in the hands of one percent of the people.
  • American workers now must compete against situations like China where a garment worker makes approximately 86 cents an hour and in Cambodia a garment worker makes approximately 22 cents an hour.
  •  Sixty one percent of Americans “always or usually” live paycheck to paycheck, which was up from 49% in 2008 and 43% in 2007.
  • Average Wall Street bonuses for 2009 were up 17% when compared with 2008.
  • More than 40% of Americans who actually are employed are now working in service jobs, which are often very low paying.
  • Sixty six percent of the income growth between 2001 and 2007 went to the top one percent of all Americans.
  • Only the top 5% of U.S. households have earned enough additional income to match the rise in housing costs since 1975.
  • In 1950, the ratio of the average executive’s paycheck to the average worker’s paycheck was about 30 to 1. Since the year 2000, that ratio has exploded to between 300-500 to 1.
  • As of 2007, the bottom 80% of American households held about 7% of the liquid financial assets.
  • The bottom 50% of income earners in the United States now collectively own less than 1% of the nation’s wealth.

Many people hold that a political change will rescue the middle class.  As we have witnessed in the 2012 Presidential Election, petty politics are more important than solving the economic crisis.  Therefore, all families are held hostages. Any rescue will not be soon. 

Snyder doubts there is any hopeful solution for the stale social mobility occurring today: “The reality is that no matter how smart, how strong, how educated or how hard working American workers are, they just cannot compete with people who are desperate to put in 10 to 12 hour days at less than a dollar an hour on the other side of the world.”  Many people hope that America can compete in the future without sacrificing her core values related to social mobility.  Others have given up this hope.

 Do you feel social mobility is unsustainable in the U.S. , given global competition?

 © 2012 by Daryl D. Green