The Changing Face of American Labor
01/14/2006
Paul Munnis
I have written before about the Labor situation in America and will extend my commentary to reflect upon the rate of business change and the implications of this rapid change on product cycles and the consequent impact upon American Labor.
We note that demographic predictions are now taking effect and are being manifested as the American workforce shrinks. Baby Boomers are starting to retire, those thirty-something workers who are left in the American workforce are well positioned for lifetime employment. With the looming worker shortage we can see the need to import labor and that means bringing into America foreign labor to get the nastier manual labor jobs accomplished. That has frequently been the case in America as laborers came from around the world as immigrants to lay rail lines, dig canals, harness rivers, build bridges and dams and to work in American industrial sweat shops. This worker shortage is leading to much political shouting to reform immigration laws and now during the transition phases there are still remnants of unemployment especially in parts of the South where a poorly educated workforce resides and thus the region demands the importation of better educated workers from the North. This newly manifested labor shortage is the first sign of hope for American workers in over three decades but it is bad news for Northern taxpayers who pay to educate workers for the South’s benefit. This will one day become a big issue with its own political agenda.
American corporations, facing the realities of the employment numbers, are cleaving work into three categories: physical labor, intellectual labor, and temporary labor that is founded in each of the preceding two categories. The American corporation is well tuned to a need for human capital and the fact that without it they cannot prosper. That gives rise to added rules of Labor:
- Intellectual labor will pay more than physical labor and it will be stratified and paid according to the value of the knowledge brought to the job;
- Physical labor is essential to the well being of society and will be paid for if the quality is there;
- Retired Baby Boomers will be able to provide intellectual and administrative labor over the Internet in support of the standing workforce. That will change the nature of retirement in America.
The American corporation requires a herd of cash cows. Some are in the marketplace, some are being slaughtered and some are grazing while waiting to be introduced to the marketplace, and still others are being born in laboratories and research centers. A corporation has a product mix that is analogous to this herd of cash cows and keeping a sufficient set of such cows producing for the corporation is what is necessary for continued existence. To produce a product, especially a physical product, requires manufacturing and so for American Labor, manufacturing is not dead at all regardless of any articles you may have read to the contrary. Thus things will be made but the bigger question is where will they be made? We can bet that things that require labor that can be off-shored will be sent to India and China accoding to Thomas Freidman, author of “The World Is Flat.” Don’t be so quick to answer “Yes.” There is some good news for workers as we will see below.
Offshoring is not all good news and it scares people in an economy with a worker surplus. But what happens in an economy of skilled worker shortage? The Indian service technician and telemarkers are not very welcomed in American household these days. They are not just resented over job losses but their linguistic and cultural skills smack of second class consideration by the corporation whom the consumer bought product from. Consumers are then hesitanat to buy from that company again. China goods, while welcomed for their cheap price are not all that differentiated to make them anything other than low cost attractive - something important in a society with a surplus of workers whose wages are being held down but a totally different story in one where workers are well paid and can afford quality. So it is not an axiom that offshoring is a good deal as Mr. Freidman would have us believe. Often the product quality is just not there or the quality factor is just plain awful. This puts foreign manufacturing into a position of only being able to handle mass produced goods. Products such as drugs made in China are highly suspect.
American companies are now looking to “in-homing,” the outsourcing of work to at home American retirees, moms, and those not seeking permanent 8 to 5 employment. This is good news for American workers and for retiring Baby Boomers because it creates at-home work options by a workforce trained in quality delivery.
It is stark reality that the rate at which the product cycle is changing in America tends to be shortening the time element from drawing board to marketplace. Indeed as quickly as a product arrives in the marketplace the replacement for it is already being announced by the press. That means rapid manufacturing, volume sales and distribution, and lightening fast profits. A good case in point was the Apple i-Pod. As quickly as they announced it, other companies were announcing a similar product. But Apple had it already in stores, met the initial demand, and thus made a lot of money as a result. To do that you have to manufacturer close to the point of consumption and in the marketplace where you are going to distribute and sell your product. The i-Pod could not have made it by being designed in India and produced in China, then imported and distributed through a chain of discount stores. I will not dwell on proprietary product security when it is in the development pipeline except to point out it is hard to assure it using offshore sites.
So there will always be manufacturing labor in America but it is increasingly dependent upon two other things consisting of an affluent consumer group to buy the products and increasing productivity gains by the workforce to produce the product. These two things determine domestic demand and hence determine the rate of new product introduction. The American middle class is shrinking and that hurts the first condition but that will change with a worker shortage while the American workforce has been delivering on the produtivity gain thus assuring the second condition.
That is the next piece of news for American Labor: America needs a well educated workforce to sustain productivity gain. What is meant by this is that we need a workforce that is educated enough in math and science so that they can understand the principles of what high tech work even consists of. Much has been written about this and much hand wringing is going on in America over educational attainment as high-schools despair over math and science teacher hiring and even as math and science itself lack popularity among the lazier students. Yet at the same time public education is gradually being stretched from 12 to 14 years as the first two years of college are given over to polish writing skills, solidify math understanding, and to concentrate on science, physics, and for training people in advanced chemistry and physics plus in the production techniques that they render. Such skills as an understanding of computers are now a basic skill expected of eighth grade students. That leads to another Labor axiom for new millennium employment: “Uneducated or lazy workers need not apply.” Of course the lazy or low IQ student will be culled from the grade 12 - 14 educational experience over training cost issues and so the future middle class will be born right at that point in time that educational culling occurs.
We also note that products being fabricated by American Labor are quite different from the past. We are seeing an increasing application of chemistry and biology to such areas as electronics although some will argue that has always been the case. Yet as we move into genetic mapping then the corollary becomes genetic engineering. That in turn produces products for the marketplace such as medicines, drugs and treatments for the application of genetic alteration. It is so in other fields as well. Thus the ratio of staff to doctorial degreed workers is climbing and we are seeing many people employed from the labor of just one person with a doctorate degree. Their intellectual labor feeds the corporate product cycle and the demand for skilled workers is then born.
Patent and copyright law is also changing and we won’t delve into this now but we will note that reverse engineering of a product is a technical science, taught at schools of engineering and that whatever one man can build can be decoded by another man in rapid order. This means that the horizontal growth of product offerings is also possible and that means mass manufacturing is easily performed offshore for all except those products needing the most rapid production and distribution cycles or that require product specification secrecy. The future of American manufacturing is thus custom onshore secure manufacturing with rapid build up and use of power marketing.
If you have read this far then we have to ask what happens as artificial intelligence progress is made? Some pooh-pooh this area but they are badly mistaken. A good AI system that can learn needs to know very little to start with, but because it is heuristic and learns from prior experience then its knowledge base grows exponentially. So far the knowledge bases have been specialized but we must ask what happens when they are combined? In the knowledge field such integration produces more than the sum of the parts. Today workers are using machines that are very advanced in terms of their abilities and we point for example at CAD/CAM systems where a designer lays out a part and the Computer Assisted Manufacturing System then takes over and produces the molds that allow mass production of that part. We also look at automated manufacturing lines where as few as a dozen workers turn out huge amounts of volume product. This is the stuff that value added labor is made from and such machines and the people who can run them are in high demand while the outlook is for increasing demand as the number of short cycle products made in America climbs. Even an economic depression in America would not supress these trends for very long as other sectors such as the military will increase demand and force economic recovery.
America would be in really good shape for exports if we didn’t have to buy so much high priced foreign oil. It is this commodity that is goofing up our balance of payments account and causing our economic system to be badly distorted. That cash flow loss is hurting the availability of investment capital. That leads us to the next Labor axiom: “it takes energy to run a society and there is an increasing demand for fossil fuel thus forcing American workers to demand of government that alternative and renewable fuel sources be developed in order to displace the manufacturing energy costs and also as a pre-requisite to higher wages.” If we don’t produce regular productivity gains then the standard of living of American workers will rapidly decline. The key to that is abundant low cost energy.
We will now shift to the subject of the social compact between Labor and Government for indeed this is undergoing rapid change too. Pensions and health insurance are two social needs of Americans that are in serious jeopardy.
Pensions are no longer given by corporations except to the intellectual class and even there it is not the preferred form of recruiting or compensation. We see a two edged sword swinging these days on health insurance. On the forward stroke workers are cut off by rising health insurance costs while on the backwards stroke the sword cuts anyone who is sick or acquires a disease by kicking them off of their health insurance thus making it useless for any real catastrophic protection. Indeed, it is no longer insurance – it’s just a form of crap-shoot unlikely to pay out for any extended illness. America is being left with no choice but to solve these two problems as corporate America disconnects and leaves our government units to pick up the slack. The GOP is in denial about this as they shout about a need to end entitlement programs yet they are wrong, we need more entitlement programs to stay competitive. The real issue is how to pay for them. The government checkbook is actually you and me so we will end up paying for our own health insurance and pensions. If we band together we can buy it at wholesale prices. If we don’t then we will pay retail prices and be kicked off our insurance at the whim of the insurer and the employer.
The mechanisms for a soution are in place and they consist of Social Security, Medicare, and Medicaid programs. They need to be retrofitted to face the changing nature of the social compact with American workers. Americans need to enter the dialog on what our future needs will be, what structural changes are needed, and then demand the needed changes from our politicians. Thus the social contract will evolve over time. This leads to yet another set of Labor axioms: “get involved in government and local elections if you want a decent social contract.” It holds a corollary for Unions too: “help the social contract evolve through the political process and then reap the rewards of increased Union membership as a by-product of involved law-making.”
How does the American Labor movement fare in all of this? Certainly at a time of much societal change the American worker needs spokes-people on behalf of all workers even as some workers are in denial of this. Unions are fulfilling that role. The American Labor movement is sometimes unable to resist changes that are already in motion. They have too much force behind them. But Unions do force a critical examination of the American workers role in the corporate equation and they do demand a fair shake for their employees by attempting to maximize the social contract. On some of these things they are succeeding and in some of these things they are losing.
Unions are not an anachronism of the 1920’s as many would assert and indeed as they are often stereotyped as being as such. Unions have matured and they are hanging in there representing airline workers, communications workers, electrical workers, plumbers, and others who are at the cutting edge of operating the American infrastructure including our very government itself. Where we are headed in America is to a legal demand that Labor be given a place on the Board of Directors of the corporation and in the halls of government where they will be a partner. As labor becomes more and more constrained this will happen because the leverage will be there to assure it. This is so compelling a need that the American Bill of Rights may be revised to reflect the place of essential Labor within our society.
As for government, the Department of Labor, under G.W. Bush, and Elaine Chao, has become a hall of shame presided over by people who do not champion either Labor or the rights of workers. They provide little to no social contract input. They sponsor no useful legislation for workers. They do not advocate for Labor. This Department of the government could go away today and American workers and taxpayer would be better off for it.
Democrats and Unions are challenged to lead a labor movement renaissance in America and to provide counterweight to management and investor demands even while modernizing our institutions and our laws reflecting the need for change and for fair representation of Labor.
We Democrats will do that job if we want to win in the polls and it is clear that Republicans are not interested in Labor except to view workers as a class of servants for the benefit of investors. They are stroking the investor class and the management class to the exclusion of the working people of America. That is why the strength of the Democratic Party will soon manifest itself again as American workers - including intellectual workers - realize that they need to vote for a Party that will deal with the bread and butter issues of America. Such workers far out number managers and investors and may be more important to the corporation than either of those as demographic shifts occur and labor shortages happen.
Labor Unions will in due time realize that they need to become the suppliers of labor, running employment agencies for example and that the finishing training of workers at Union trade schools gives them an edge in producing needed workers. Once that happens the corporation will lust for Union trained workers obtained from local Union halls.
I judge the long-term future of American workers to be good once the GOP neo-con movement is removed from the scene. As I see it they are now the problem. The GOP Social Contract has failed because it has left the American worker out of the list of beneficiaries. The neo-con movement cannot fare well as a worker shortage materializes and as workers realize that their interests are not a part of the neo-con equation.