Wednesday, July 11, 2018

Don't Blame Immigrants For Slow - Or No- Wage Growth!

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Graph showing average hourly earnings growth and  effect of one 'basket' of companies increase in labor costs since 2016, relative to a basket with high labor costs. (From The Wall Street Journal, yesterday, p. A1)

It is odd that the WSJ op-ed 'The Elites Feed Anti-Immigrant Bias' (July 10, p. A15) stands in stark contrast to the same day front page story ('Workers Welcome Wage Gains, But Companies Feel Squeeze').  In the op-ed we are asked to believe that it is hordes of Mexican immigrants getting hired and degrading white Americans' hourly wages.  In the second, we learn the real reason is that companies are simply reluctant to have shrinking profit margins via higher labor costs. (See graph)

The first piece gives an anecdote from a guy  whose fiancee earns $31 an hour and has worked at the same company for "21 years" while "Mexicans have been hired at $8 an hour".  The guy adds:

"I don't want to be racial but that's all they're hiring".

On which I call bollocks.  The fact is, no company or virtually none, is hiring Mexican immigrants at that quoted low wage rate to do quality work at a quality company. Where Mexican immigrants are working  now is where they're most needed, i.e. at landscaping jobs, construction, and agriculture - and even then not enough can be hired because of Dotard's immigration policies. Employers are having to partake in "lottos" to get the workers they need.

The anecdote above was preceded by this remark from the author (Prof. Joan C. Williams):

"Yet real wage growth for the working class has been abysmal for a generation, and for many native born blue collar workers the culprit seems obvious - immigration"   Adding:

"Today less than half of Americans born in the 1980s earn more than their parents did, according to a National Bureau of Economic Research study led by Harvard economist Raj Chetty'>

Yes, but WHY is this the case?  More to the point, why are the blue collars blaming immigrants instead of corporate America and the economic ideology that fuels its excesses?

As I first noted in my book, The Elements of the Corporatocracy, ordinary workers have suffered a 'death of thousand cuts' since Neoliberalism came into vogue during the Reagan years. Robert McChesney in his excellent book, The Problem of the Media, Monthly Review Press, 2004, p. 49, writes:

"With the election of Ronald Reagan, the neoliberal movement had commenced. Neoliberal ideology became hegemonic not only among Republicans but also in the Democratic Party of Bill Clinton, Al Gore, and Joseph Liebermann. Differences remained on timing and specifics, but on core issues both parties agreed that business was the rightful ruler over society"

The problem with the Neoliberal, pro -free market idiom is that it denies the most basic security for the majority of citizens. In this way it feeds economic inequality while it rewards the speculator and banker class. It also helps to corrupt the political class via unregulated campaign contributions.

Jay Bookman aptly noted('The New World Disorder Evident Here, Abroad', in The Baltimore Sun, December 15, 1997):

"The global economy has been constructed on the premise that government guarantees of security and protection must be avoided at all costs, because they discourage personal initiative.  In times of crisis, however, that premise cannot be sustained politically. In times of trouble it is human nature to seek security and protection and to be drawn toward those who promise to provide it. That is how men such as Adolf Hitler, and Vladimir Ilyich Lenin came to power, with disastrous consequences.""

In other words, the global Neoliberal dynamic inevitably paves the way for authoritarian populists like Trump and others to come to power.  Among the "thousand cut" insults sustained by U.S. workers compliments of corporations and the entrenched Neolib state:

(1) Cutting employee benefits, i.e. health plans - even after employees have retired with them.

(2) Eliminating defined benefits plans, such as provided standard corporate pensions - in favor or defined contribution plans (such as 401ks) in which workers are in it for themselves to accumulate adequate savings for retirement.

(3) Cutting wages - either de facto, or through eliminating the unions which protected them (much exacerbated after Reagan ascended to power)

(4) Firing/downsizing workers just before their retirement dates, so the company is free not to have to pay retirement plan benefits, or provide stock options, as per contract clauses.

(5) Re-engineering the workplace to increase its automation factor in order to dump workers, so increase profit margins by not having to pay benefits, etc.

(6) Shipping as many jobs as possible overseas, to places like Bangalore or Beijing, with labor costs barely 20% of what they are in the U.S. and no benefits to factor in.

(7) Firing - downsizing workers after mergers dictated by Wall Street interests, in order to enhance a company' profits through higher Wall Street share prices.

(8) Identifying older (over 50) workers as 'surplus' so that they can be replaced with younger workers for whom half the wages (or less) can be paid, with fewer benefits. (A recent 5-4 Supreme Court ruling a few years ago exacerbated this by asserting anyone claiming "age discrimination" could not file a suit in standing if that was the only charge)

(9) Eliminating nearly all permanent jobs which carry health and pension benefits, in favor of using 'temping', 'outsourcing' or some other device not requiring benefits. On the academic (university) front, using 'adjunct' professors, hired on a per hour, per course basis, without benefits., and with no possibility of 'tenure'.

(10) Tying health insurance to employment, so that when let go or fired, workers are waylaid again by having to do without critical protection

All of these in concert, have forced a massive marginalization of the workforce. It was so odious and extensive  - even by 1996-  that it prompted these powerful words of Charles Reich in his book, Opposing the System,p. 22:

"We have built a machine for dehumanization of such force and destructive power, thorough its accumulated assaults on human dignity, that we are creating kinds and degrees of damage to human beings beyond anything ever known, with totally unforeseeable consequences "

And as  Barbara Ehrenreich observed in her book, 'This Land is THEIR Land', p. 61:

"Market forces ensure that a volunteer army will necessarily be an army of the poor. The trouble is that enlistment doesn't do a lot to brighten one's economic future"

Probably no truer supporting statement ever appeared than barely 20 years ago, in an issue of Psychology Today  (July/August 1998, p. 10. Includes graph):

"Starting in the mid-1970s, the nation's quality of life parted company with its wealth, and the gap between social health, and GDP is now bigger than it's ever been."

A graph of 'quality life indices' vs. GDP (ibid.) shows the measured divergence. It also suggests that we devolved to a much sicker society than anyone imagined. The marginalization of the workforce, is surely one major barometer of that. The GINI coefficient, and research disclosing how it portends social and economic disintegration, is another. (The U.S. Gini coefficient is now at nearly 42.  Readers can track the Gini index increase at this St. Louis Federal Reserve site:

So how and when did the pre-eminence of market forces over human needs and welfare come about? It was actually brewing for dozens of years, perhaps since the collapse of LBJ's  "Great Society" in the mid to late 60s. From then on the real "elites" (which Prof. Douglas mentions) set out to render labor as cheap as feasible and hostage to Wall Street dictates and decisions.  Part of this was also based on twisted economic reasoning, e.g. as embodied in the Pareto distribution, e.g.

whereby the dollars from the affluent and the poor - or labor class - are treated differently.  This built in economic prejudice drives the Neoliberal machine and causes it to value affluent populations over ordinary workers, even as it tries to discourage the latter from enhancing their own welfare, say to do with health care.

Example:. Economist Marty Feldstein once suggested it makes more sense to give the ordinary worker with health insurance $1,499 NOT to get the colonoscopy, than to let her get the test and consume valuable specialist time and resources via a $2,000 "subsidy".  See also:

In other words, capital is opted for over labor, and  profit margins trump higher wages, this was the topic of The Judas Economy: The Triumph of Capital and the Betrayal of Work, by William Wolman and Anne Colamosca.

The point is then, that labor is devalued precisely because we live in a "Judas Economy" where capital is revered over it. One of the most disgusting aspects is that productivity in relation to GDP has increased more than 40% yet isn't registered because of the skewed way GDP is computed.

All of this is eminently proven by the front page WSJ story cited above,  with the graph) in which we learn:

"Rising wages are beginning to eat into the profits of some U.S. companies. Businesses from dollar stores to hotel operators to fast food chains have warned that higher labor costs have been a drag on their profits - a potential headwind for the nine year stock rally as it struggles for momentum ahead of the second quarter earnings season."


"This is good news for U.S. workers ...but the higher costs pose a threat to some U.S. companies"

And we should also dispel the myth that this higher labor cost factor just impinges "some" companies. That's plain blarney and understatement because in fact all corporations have higher labor costs on their radar. I already noted (Jan. 10 post),

According to Paula Harvey, VP of Human Resources at Schulte Building Systems in Houston:

"Companies are really hesitant to give raises. When you give a raise, it's stuck in the pay system. It is something you're guaranteeing: it's becoming a fixed cost. "

She insisted it's much better for companies to preserve "flexibility" so instead companies enact "variable pay". This can come in the form of one off bonuses - say on a per year basis- or if you are a stellar performer you can get a "bigger bump". Say equal to a half year's wage increase of 3 percent. (If you are a super star performer you have the optimal chance of getting a permanent good raise.)

Of particular relevance was the question asked her: Why, if the labor market is so tight (such low unemployment), do wages remain stagnant?   She responded that  "You can blame a combination of factors including the globalization of the work force, job automation and the decline of unions.".

Meanwhile. managing director of Aspen Advisors, Andrew Gadomski (from a WSJ piece), admitted that when companies lament they can't find workers to fill key openings, that is code for: "I can find talent, I just don't want to pay them as much as they cost."

Nowhere are immigrants mentioned, nor should they have been, since they aren't grabbing good paying jobs nor are they the source of wage deterioration. Vastly bigger threats  include corporations too cheap to pay decent wages and AI robots.

In the realm of manual labor, columnist Jim  Hightower cites the example of "SAM" a robotic bricklayer that "lays three times as many bricks in a day as a human can". Hence, it has the potential to displace three times the number of human workers. Immigrants? Not a factor at all compared to 'SAM'.

What about higher level jobs? They're also at risk from bots, not immigrants.  Hightower points out the jobs of "accountants, bank loan officers, and insurance claims adjustors are "falling to the bots".   Why? Because they can calculate more rapidly and more accurately than humans- oh, and they don't require 401ks or health care plans!

It shouldn't take a rocket scientist or astrophysicist to figure out the ultimate goal of the Neoliberals and all economic "efficiency" (i.e. Pareto distribution)  fetishists is to eliminate human labor and its costs as far as possible. That includes immigrants, as well as homegrown American workers - of whatever class.

See also: 'Oil's Technology Spells End Of Roughneck Boom' - Artificial Intelligence and Automation Replace Oil Industry's Blue Collar Jobs'


"Technology has already upended labor needs in most of the world's manufacturing. It's now upending the energy business  foretelling the end for one of the last sectors in America where blue collar workers could hold jobs paying six figure salaries. ....The energy sector has found it can use new technologies, to do the work better and cheaper and with few people. They have invested billions of dollars on what the industry calls 'digital oil fields', embracing artificial intelligence, automation and other technologies"


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