Tag Archives: wage

Making It in America TL;DR Version

What follows are a few select paragraphs from Adam Davidsons article, ‘Making It In America’. In it, he uses Standard Motor Products (an aftermarket auto parts manufacturer) as a representative example of the current state of manufacturing in the United States. Then he compares the stories of Maddie and Luke, representative of low-skilled and high-skilled labor respectively.

…all assembly workers have roughly the same pay grade—known as Level 1—and are seen by management as largely interchangeable and fairly easy to replace. A Level 1 worker makes about $13 an hour, which is a little more than the average wage in this part of the country. The next category, Level 2, is defined by Standard as a worker who knows the machines well enough to set up the equipment and adjust it when things go wrong. The skilled machinists like Luke are Level 2s, and make about 50 percent more than Maddie does.

For Maddie to achieve her dreams—to own her own home, to take her family on vacation to the coast, to have enough saved up so her children can go to college—she’d need to become one of the advanced Level 2s. A decade ago, a smart, hard-working Level 1 might have persuaded management to provide on-the-job training in Level-2 skills. But these days, the gap between a Level 1 and a 2 is so wide that it doesn’t make financial sense for Standard to spend years training someone who might not be able to pick up the skills or might take that training to a competing factory.

After six semesters studying machine tooling, including endless hours cutting metal in the school workshop, Luke, like almost everyone who graduates, got a job at a nearby factory, where he ran machines similar to the Gildemeisters. When Luke got hired at Standard, he had two years of technical schoolwork and five years of on-the-job experience, and it took one more month of training before he could be trusted alone with the Gildemeisters. All of which is to say that running an advanced, computer-controlled machine is extremely hard. Luke now works the weekend night shift, 6 p.m. to 6 a.m., Friday, Saturday, and Sunday.

I never heard Maddie blame others for her situation; she talked, often, about the bad choices she made as a teenager and how those have limited her future. I came to realize, though, that Maddie represents a large population: people who, for whatever reason, are not going to be able to leave the workforce long enough to get the skills they need. Luke doesn’t have children, and his parents could afford to support him while he was in school. Those with the right ability and circumstances will, most likely, make the right adjustments, get the right skills, and eventually thrive. But I fear that those who are challenged now will only fall further behind.

The Atlantic: Making It In America (Jan/Feb 2012)

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Filed under Economics, Zeitgeist

Re: China Swallows Obama Stimulus…

A few thoughts in response to Andy Xie’s opinion piece on Bloomberg (via The Third Rail):

I disagree with his statement at the end, that “The Smiths and the Gonzalezes have wealth and won’t accept Third World wages.”

Just as a company doesn’t price its products according to its market cap, individuals don’t price their labor according to their wealth. Wages are determined by costs – rent, education, transportation, food – in the short term I must make enough to cover these and then some. These have all increased in price due to policy decisions. It isn’t the absolute level of wealth but the attendant arrogance that led us to enact ‘progressive’ policies.

The first alarm bells should have gone off when people claimed that domestic labor was ‘above’ performing any type of work. What was implied in those claims is that fixed foundational costs priced domestic labor out of the market.

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Filed under Consumer, Economics, Zeitgeist

Is America, a Cowardly Nation?

Through a fundamental discomfort with certain kinds of inequality within our society, we created the economic realities that made international labor arbitrage a necessary factor of production of many if not most goods enjoyed in American households. Illegal immigrants are simply another component of this labor arbitrage; filling the void for local, low-cost labor – often in industries where government intervention has created the need for it. (They work on our subsidized farms, and beside unionized labor in construction, etc.)

There are transaction, transportation, and other costs associated with this worldsourcing, which increases the overall price level. The terrible irony is that it is now virtually impossible to be truly poor, and live in America. Take this excerpt from the Wikipedia article

Poverty in the United States:

A typical American categorized as poor has good condition housing. Most have at least two rooms per person and more space than middle-class people in Paris, London, Vienna, Athens, and other cities throughout Europe. Over three quarters have a car and a third of poor Americans have two cars. Poor Americans have air conditioning, a refrigerator, a stove, a clothes washer and dryer, and a microwave oven, two color televisions, cable or satellite TV reception, a VCR or DVD player, and a stereo. Most poor Americans report zero financial or material problems.

Two categories of people would otherwise be employed locally with this arbitraged labor: those with fewer gifts/abilities, and those born to a low station. However, we are uncomfortable with members of these sets living among us (although Democrats sometimes assert that Republicans, without access to education and living in lower cost areas of the country compose most of the first category). The concept that through public education we pay enough to eliminate or reduce the probability of inequality brought about by birth to a low station holds enough weight to support the endurance of that institution. The reality is that many people know it doesn’t, but while still trapped by that hope, instead argue for greater funding and perhaps changing the rules. Again, the affect is an increase in labor cost, outsourcing, and the general price level.

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. – Declaration of Independence

A friend recently posted this humorous article from NY Magazine, What the Hotness of Your Waitress Says About the Economy. In summary, attractiveness has elastic demand, and duration a recession, those possessing attractive qualities must meet other demands, such as waiting tables. But there is another economic metric, ‘What the Whiteness of Your Fast Food Worker Says About the Economy’. Based on my observations, white people who formerly might have had other job prospects have settled for lower wages working at jobs formerly filled by immigrant workers. Perhaps some of you have had similar observations?

I suggest that America is a cowardly nation because we lack the courage to both accept and endure the unpleasant truths about society, ability, station, and equality. The most explicit form of this cowardice exists in minimum wage laws, which are simply (legal) labor price floors – through these we increase the market for illegal workers, while tacitly acknowledging the high level of general prices. The irony here is that the largest employers often have greater access to capital, and are able to replace higher cost labor with capital. As an example, consider grocery store checkouts – as many as four self-service checkout stations are now monitored by one employee where the previous standard was one or two employees per register (one to work the register, and one to bag groceries).

Finally, I’d like to be clear to avoid potential offense or misdirection. I’m not contending that education is irrelevant, that immigration is bad, or that people can and should improve themselves unaided. The material implication I’m making is that the prevailing theology has been insufficient to accept a broad enough understanding of God’s sovereignty that would allow us to accept certain inequalities and simultaneously work to change them.

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