Thursday, March 24, 2016

Looking-glass economics

A few days ago the New York Times told the sad story of the closing of a Carrier air conditioner manufacturing plant in Indianapolis and the transfer of those 1,400 jobs to Monterrey, Mexico. The workers' fury over losing their jobs faithfully echoed the debate lines of both Donald Trump and Bernie Sanders whose wildly divergent politics appear to converge over worries that the bipartisan fascination with international free-trade agreements is fueling the migration of manufacturing jobs overseas and shafting American workers.

In this movement of labor, Mexico would seem to be at the winning end with its
competitive advantage being cheap labor, as is the case with most Third World countries.

Make that really cheap labor—in addition to loose environmental and safety rules and the absence of labor unions to erode profits. The manufacturing jobs eliminated in Indianapolis pay around $22 dollars an hour while the jobs relocated to Mexico will pay $19 dollars a day.
Cool profits and taco wages

Even allowing for considerably lower living costs—tortillas and beans are indeed cheaper than USDA hamburger—$19 dollars an hour or $95 dollars a week is still a very low wage, barely enough to sustain a family of four in Mexico or promise the workers' children a chance at a middle-class future. Most American expats in San Miguel pay their household help more than that, though foreign employers would reply that, hey, McWages are better than no wages at all.

In the Times article, the chief financial officer of Carrier said the decision to move the Indianapolis plant was "really tough" and not based on pressure from Wall Street, trade policy or "corporate greed." United Technologies, Carrier's parent company, faces pressure from investors to increase profit margins, the article said, and shipping jobs overseas is one ready way to do that.
All around us here in Mexico, industrial parks hosting foreign manufacturing firms in anonymous hangar-like, corrugated steel buildings are unexpectedly landing on the landscape like flying saucers. The economic spinoffs are equally visible, particularly in the nearby city of Querétaro: Shopping centers offering goodies from Crate & Barrel and Brooks Brothers, and a full menu of high-end new car dealers from Porsches to Range Rovers.

Though I have no specific economic databank on which to base my opinions—hey, it works for Trump—the visuals suggest a polarization of incomes in Mexico not unlike that already well established in the U.S. Carrier's tighter squeeze for profits benefits its American stockholders and other one-percenters but it doesn't help the company's soon-to-be former employees in Indianapolis.
In Mexico one could hope for the development of a class of upwardly mobile manufacturing workers, even as a result of foreign-owned plants. According to this paradigm, Mexican workers could gradually acquire skills and move up. Querétaro has established technical schools presumably to make that happen.

Except that what nurtured the creation and expansion of the middle class in the U.S. were high-paying jobs—those $25-dollar-and-up assembly line American jobs, with a full platter of benefits, that American manufactures are now trying to shed—in addition to strong labor unions and sympathetic government labor laws.

With its skimpy wages, bare-bones benefits, weak or non-existent unions and a government with a "we'll do whatever you want" attitude toward foreign investors, Mexican workers at the bottom may have long to wait for enough pesos to trickle down so they can switch from tacos to hamburger.

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4 comments:

  1. Bravo! Well said. It is amusing that Trump thinks those jobs are "coming back".

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  2. We have seen this over and over. You are correct until you use the term "American Investors." These companies are owned by investors all over the world. While the company may still be a US Corporation, the actual ownership could be anywhere. The product may look the same, still have the US sounding name but there is that little line down in the corner saying "Made in China." That should be your clue.

    Foreign investors buy US companies when they are in distress. They don't want to deal with self serving unions or onerous government regulations. No, they buy US corporations to gain access to markets, patents and technology. But overall, they want to bring jobs to their own countries.
    I don't know what the answer is, but I do know that we cannot have a whole nation on welfare and food stamps. I don't think Mr. Trump has the answers, but I sure wish someone did.

    Robert Gill
    Phoenix, Arizona

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  3. Gosh, we pay our Mexican gardener or our housekeeper more per hour than Carrier is going to pay their supposedly skilled workers.

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  4. Here in Puerto Escondido we pay 200 pesos a day for domestic help. Or about $12.00 usd a day. Skilled labor 300 pesos a day.

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