Changing Rules of Global Competition: The Segue for Low-Skill, Low-Wage Workers to Poverty…

Is capitalism failing the low-wage workers? According to Nick Hanauer; fundamental law of capitalism is that– if workers have no money, businesses have no customers… Seeing the economy as Henry Ford did would redirect the country toward a high-growth future that works for all…

That’s why the extreme and widening wealth gap presents not just a moral challenge but an economic one, too… In capitalist system, rising inequality creates a death spiral of falling demand that ultimately takes everyone down… Low-wage jobs are fast replacing middle-class ones in the U.S. economy…

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Sixty percent of jobs lost in the last recession were middle-income, while 59% of new positions during past two years of recovery were in low-wage industries that continue to expand, such as; retail, food services, cleaning, health-care support… and by 2020, 48% of jobs will continue to be in those service sectors… It’s a changing world order in the global economy, which is not only due to changes in technology, but is also due to the changing rules enforced by multinational corporations…

The global economy today is characterized by ferocious competition between multinational corporations to find the lowest possible production costs; and by millions of low-skill, low- wage workers who are both customers and value producers…

In the article Global Economy by Garrett Brown writes: Multinational corporations represent 51 of the largest 100 ‘economies’ in the world… The 500 largest multinationals control 70% of world trade, one-third of all manufacturing exports, three-fourths of all commodities trade, four-fifths of all technical and management services… Multinationals control two-thirds of capital used for economic development in developing countries…

There is a profound shift in the production of goods, especially, consumer goods from a relatively well-regulated, high wage, often unionized workplaces in developed world to basically; unregulated, very low-wage, non-union workplaces in the developing world… All the world’s workplaces are competing with one another to offer multinationals lowest production costs for maximum competitive advantage…

Today 100% of television, 80% of other electronics, 75% of toys, and two-thirds of the $180 billion worth of clothes sold in the U. S. are made outside of the U.S.  But its key to understand that this is the result of deliberate corporate policy– 50% of all U.S.-owned manufacturing is done outside U.S. to exploit low wages in other parts of the world… More than 40% of all ‘imports’ from Mexico, 55% of all ‘imports’ from China are nothing more than internal transfers from one division of a multinational corporation to another division.  The multinational buys raw materials in one country, sends them for processing and assembly in another country, and then ships the product to U.S. for sale…

And this worldwide ‘race to the bottom-line’ in wages and working conditions is bleeding over to other sectors of the global economy: Rapidly increasing amounts of business services, including ‘high technology’ jobs, are being ‘outsourced’ and ‘off-shored’ to low-wage, no-regulation countries. Almost anything done electronically is now at risk to being transferred to the lowest paid, least protected workforce…

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In the article Income Inequality Globally is Falling by Tyler Cowen writes: Income inequality has surged as a political and economic issue, but the numbers don’t show that inequality is rising from a ‘global’ perspective. Yes, the problem is more acute within many nations, yet income inequality for the ‘world as a whole’ has been falling for most of the last 20 years… The economic surges of China, India and other nations is among the most egalitarian developments in history. Although some policies, such as; global trade… will  increase inequality in some nations, but it has an uplifting effect on the world, overall: It’s a better place, globally, with decreasing poverty…

However, contrary to what many economists suggest, there is good evidence that the rise of China and other developing countries through trade is holding down wages of the developed countries middle-class, particularly those with low-skills. Hence, increase global trade suggests the following; 1. Increase growth, profit, influence of multinational corporations; 2. Decrease work opportunities for low-skilled wage workers in developed countries; 3. Increase work opportunities for workers in developing countries; 4. Increase prosperity and reduced poverty for most workers, globally; 5. Increase wealth of top 1% through their investment in multinational corporations’ stock shares…

Low-Wage Workers Poverty in the U. S.; According to U. S. Census Bureau:

  • In 2013, there were 45.3 million people in poverty. This is up from 37.3 million in 2007.  The number of poor people is near the largest number in the 52 years for which poverty statistics have been published…
  • The 2013 poverty rate was 14.5%, down only slightly from the 2010 poverty rate of 15.1% and still up from 12.5% in 1997…
  • The 2013 poverty rate for Blacks was 27.2%, for  Hispanics 23.5%,  for Asians 10.5% and for non-Hispanic whites 9.6%…
  • The poverty rate for children under 18 fell from 21.8% in 2012 to 19.9% in 2013. The number of children in poverty fell from 16.1 million to 14.7 million. Children are 23.5% of the total population and 32.3% of people in poverty…
  • 19.9 million live in extreme poverty. This means a family’s cash income is less than half of the poverty line, or about $10,000 a year for a family of four. They represented 6.3% of all people and 43.8% of those in poverty…

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Myths About Low-Wage Workers:

  • MYTH: Low-wage jobs are the ones in neighborhood McDonald… FACT: Fast food jobs constitute less than 5% of all low-end jobs. Low-wage, low-reward jobs are all around and include: security guards, nurse’s aides and home health-care aides, child-care workers and educational assistants, maids and porters, call-center workers, bank tellers, data-entry keyers, cooks, food preparation workers, waiters and waitresses, cashiers and pharmacy assistants, hair dressers and manicurists, parking-lot attendants, hotel receptionists and clerks, ambulance drivers, poultry, fish and meat processors, sewing-machine operators, laundry and dry-cleaning operators, agricultural workers…
  • MYTH: Low-wage jobs are unskilled... FACT: In the public view, low-wage jobs tend to be lumped together and referred to as ‘hamburger flipper’, insinuating both a lack of real skill and social value. Policy analysts and public officials refer to ‘low–wage, low-skilled’ jobs as if the two terms were inseparable. This mistakenly assumes that if a job pays poorly, it must be because it does not call for many skills. In fact, these jobs require knowledge, patience, care, communication… Most of them require constant interaction with people, such as; patient in health-care setting, child in day-care center, guest in hotel, tenant in commercial office building, customer in department store…
  • MYTH: Most low-wage workers are teenagers, illegal immigrants, high school dropouts... FACT: U.S’s low-wage workers are mostly (nearly two-thirds) white, female, high school educated and have family responsibilities. Teenagers comprise only 7% of the low-wage workforce. Minorities and women are disproportionately found in low-wage jobs and occupy the lower rungs of the ladder in this workforce…
  • MYTH: Low-wage jobs are usually only temporary; since they are a stepping-stone to better paying jobs... FACT: Mobility will not bring significant advancement to most low-wage workers. Even after a 25 year period, half of those in the lowest 20% of wage earners had not moved above that group and of those that moved half had only moved to the next highest wage group, still below the median wage. Low-wage jobs, historically have had few career ladders. Today, they offer even fewer…
  • MYTH: Re-skill will solve the problem FACT: Of course, better education and fluency in new technologies are essential to improve job options of this and the next generation of workers. Yet, these labor intensive industries will continue to demand large numbers of workers regardless of individual mobility and these are the growing sectors of the economy. In the next ten years, the low-end of the job market will account for more than 30% of the workforce. Employers will hire nearly twice as many food-service workers as software engineers, hire as many cashiers as they do computer-support specialists and hire more than twice the number of customer-service representatives as they do computer systems analysts. The re-skill approach will do little to improve the lives of most workers in these low-wage jobs, jobs that will continue to grow as a proportion of our economy. What these workers need is to be adequately rewarded for the skills they already possess…
  • MYTH: Globalization is the problem... FACT: As profound as the impact of global trade has been on the economy, it does not preclude improving the wages and working conditions for lower-wage workers. Only a small portion of low-wage jobs are actually in industries that compete globally. Most lower-wage jobs are and will continue to be in the non-tradable service and retail sectors, e.g.; checking out groceries, waiting on tables, servicing office equipment, caring for children, tending the sick, cleaning-up… However, some industrialized countries have made political and business choices to ensure that workers in similar jobs are far better than U.S. workers… Low-income American have living standards that are 13% below that of low-income Germans, 17% below low-income Belgians and 24% below  average income of the bottom 20% of Swedes. This is despite the fact that the median U.S. standard of living is far above the median German, Belgian, Swede…

Research shows that structural changes to developed economies over past 20 years from; globalization, industry deregulation, computerization… of the workforce has resulted in fewer opportunities for low-skill, low-wage workers… There is a basic concept in trade economics that states– wages in rich countries will tend to go down while increasing in poorer countries through trade…

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So does that mean that multinational corporations exploit workers in poor countries at the expense of workers in rich countries? According to Drusilla Brown, Alan Deardorff, and Robert Stern; it’s a resounding ‘no’; there is no careful and systematic evidence demonstrating that multinationals adversely affect their workers, or provide incentives to worsen working conditions, or pay lower wages than in alternative employment, or repress worker rights, in fact they argue, the opposite is true…

Multinationals’ use of developing nations for production is substantial and growing, yet most trade economists, including; Paul Krugman, William Cline, Robert Lawrence– maintain that global trade takes place largely on the basis of ‘comparative advantage’…

Comparative advantage theory says; some groups will benefit at expense of others, and for developed countries the demand for high-skill labor and high-tech equipment will increase while demand for less-skill labor will fall. This will raise wages of the high-skill and the profits of multinationals, while lowering wages of less-skill workers… The result: greater inequality…