Wednesday, April 20, 2016

Over the weekend, someone...

...told me it was unrealistic for a high school graduate to expect to make a living wage in this country. (At the same time, he and his wife argued that too many young people go to college.)

"Those days are never coming back," he said. "The General Motors' model of paying workers $30 an hour just wasn't sustainable -- they went bankrupt!"

But is that true? Did high wages kill the American auto industry?

From a 2014 article in Yes! Magazine, "If Unions Are Breaking Automakers, Why Are BMW and Mercedes So Rich? In Germany, auto workers get paid well and their companies still profit" (all emphasis mine):

Actually, Germany paid their autoworkers about $67 an hour (including wages and benefits). But the United States paid its average worker only $33 an hour (also including wages and benefits). On top of that, German car manufacturers were highly profitable, despite the comparatively large paychecks of their workers. BMW earned a before-tax profit of 3.8 billion euros, and Mercedes-Benz hauled in profits of 4.6 billion euros.

Now, I have to confess, I had never heard of Yes! Magazine before. From Wikipedia:

YES! Magazine is a non-profit, ad-free magazine that covers topics of social justice, environmental sustainability, alternative economics, and peace.

The magazine is printed on recycled paper...

Okay, okay, so it's a lefty publication.

Is there a more mainstream outlet to back up this argument? How about Forbes? Rich people love Forbes. From 2011 (granted, that was five years ago, but well after the auto bailout in 2009), "How Germany Builds Twice As Many Cars As The U.S. While Paying Its Workers Twice As Much":

In 2010, Germany produced more than 5.5 million automobiles; the U.S produced 2.7 million. At the same time, the average auto worker in Germany made $67.14 per hour in salary in benefits; the average one in the U.S. made $33.77 per hour. Yet Germany’s big three car companies—BMW, Daimler (Mercedes-Benz ), and Volkswagen—are very profitable.

How can that be? The question is explored in a new article from Remapping Debate, a public policy e-journal. Its author, Kevin C. Brown, writes that “the salient difference is that, in Germany, the automakers operate within an environment that precludes a race to the bottom; in the U.S., they operate within an environment that encourages such a race.”

The article’s author, Kevin C. Brown, asked Claude Barfield, a scholar with the American Enterprise Institute, why the German car companies behave so differently in the U.S. He answered, “Because they can get away with it so far.”

So, in other words: It's a choice, not a necessity.

Back in the 1980s and '90s, I was a big believer in free markets and free trade. I read all of Ayn Rand's books (even some of the non-fiction ones!) and bought into the Republican philosophy wholeheartedly. (I even voted for George H. W. Bush -- Reagan's third term -- in 1988.) After all, didn't Econ 101 teach us that free trade was good always and everywhere? So the U. S. wouldn't make cars anymore (or anything else, for that matter). Big deal! Comparative advantage would just free up those workers to do something else, like work in the service sector. And just think of all the cheap foreign-made stuff they could buy at Walmart!

But a funny thing (or a not-so-funny thing) happened in the meantime. Those manufacturing jobs did indeed go overseas and American workers embarked on new careers (if they were lucky) that paid quite a bit less than their old jobs. (Personally, I'd take a high-paying job over cheap crap at Walmart any day -- wouldn't you?) And now, after thirty years of falling behind, they've finally found someone whom (they think) will represent them. (You know, the guy with the funny hair.)

So what's going to happen now? I still think Hillary will win in the fall, but the people who have responded to Donald Trump and Bernie Sanders are not going away. All those high school graduates who are literally killing themselves and the young college graduates who owe a trillion dollars in student loans that can't get jobs good enough to pay them back won't just disappear after the election.

My son is fond of saying that "it's all made up." And he's right. (He usually is.) Laws, for example, were "made up" in someone's head and exist only so long as we say they exist. When the majority decides to change them, we change 'em.

Or take money. It's just an electronic line-item on a computer these days. (Unless you keep gold under your mattress.) It's only "yours" for as long as we all agree it's "yours." There's nothing carved on stone tablets, handed down from God on some mountaintop, that says the government can't tax wealth, for instance. Never mind your income, by the stroke of a pen, the feds could say they want one percent of your net worth. Or two percent. Or ten. Or . . . you get the idea. Remember, it's all made up. And it can all be remade.

I don't know how this whole thing plays out, but I do know that if the "system" no longer works for most people, it may be time to change the "system." (When Jean Valjean couldn't afford to buy bread he just took it.) And if the assault on the middle class continues in this country there could be a revolution. I don't mean the shooting kind, like France in 1789 or Russia in 1917 (or the U. S. in 1776), but the non-shooting kind, like the New Deal in the 1930s.

Something's got to give.

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