Tuesday, April 12, 2005

Wages Whither

The perception of the average American worker getting smashed against the rocks by economic forces is statistically born out according to both the NYTs and the LA Times. Yesterday, the LA Times put it this way:
For now, workers' wallets are being pummeled by something of a perfect storm of economic forces: a weak job market, rising health insurance premiums and inflationary pressures.
Many point the finger at business, considering corporate profits have risen to "record highs." Yet the LA Times article goes on to say that benefit costs have risen by 7%, therefore eating up the cash set aside for raises. When benefits are added in, employee compensation did outrun inflation. (Don't worry about corporate CEOs though, they did just fine with the typical CEO receiving $9.3 million in 2004 according the Center for American Progress.)

The NYTs article gets a bit more into the nitty-gritty though. Sure, increasing benefit costs are hurting wages, but so is the Wal-Mart effect as well as foreign competition.
Laurie Piazza, a Safeway cashier in Santa Clara, Calif., said she reluctantly voted to approve a pay freeze in the first two years of her union's three-year contract because Safeway insisted that it needed to hold down costs to compete with Wal-Mart. Her take-home pay will fall $20 a week because the contract reduces the premium for working on Sundays to 33 percent of regular pay, from 50 percent.

"We tried to get weekly pay increases, but the company wouldn't do it," said Ms. Piazza, who earns $19 an hour after 18 years on the job. "I think Wal-Mart has a lot to do with this. They're setting the model."

With Wal-Mart moving aggressively into California with supercenters, Safeway officials say they need to clamp down on what they consider high labor costs to meet the challenge.
Increasing foreign competition from lower wage India and China (which I wrote about yesterday) is also putting the screws into American workers as the NYTs article relates.
...Richard B. Freeman, a Harvard economist, predicted that new competition in the form of millions of skilled Chinese, Indian and other Asian workers entering the global labor market will increasingly pull down American wages.

"Globalization is going to make it harder for American workers to have the wage increases and the benefits that we might have expected," he said.

Facing intense foreign competition, Delphi, the auto parts manufacturer, has decided against any merit raises this year for its salaried workers. And at its air bag and door panel factory in Vandalia, Ohio, it persuaded unionized workers to accept a three-year pay freeze, warning that the plant would be closed otherwise.
At the cost of sounding archaic and a bit flaccid, the labor movement along with fellow travelers in civil society - whether it be here or in India or in China - needs to make overtures to each other and truly internationalize unions. An international framework needs to be created, so that multinational corporations, investors, and national governments can't manipulate wage differentials and currency fluctuations to impoverish the many to the benefit of the few. Sure, this sounds like pseudo-Marxian rhetoric, but call me less than novel, I can't think of anything better than multitudes organized democratically exerting force in the market.