Hold the phone, Tom. Wages didn't drive automation. Competition drove automation. And if you want to see a perfect test-tube experiment that proved the point, look at the US car makers. Their wages went through the roof but they dragged their feet on automation for decades. Being an oligopoly (something like a monopoly, only with several players who have little real interest in competiting with each other, except at the margins), they weren't even trying hard to control labor costs as long as their supposed competitors weren't controlling labor costs, either. That's why they're in the fix they're in today. Ford put up little fight against giving the unions anything they wanted as long as Chrysler and GM got nailed the same way.
It wasn't until the Japanese started to give them real competition in the late 1970s that they got serious about cutting costs, which included serious automation. Until that time the unions and the big three had established an equilibrium that produced a healthy car industry, well-paid workers, and customers who kept buying more cars along with more houses, educations, Bahamas vacations and so on.
The US car industry operated in a hermetically sealed sub-economy, with little foreign competition. The deals they made with the unions set the basic cost parameters. As long as the customers kept buying cars at prices that were profitable to the car makers, the sub-economy of the automobile industry was on cruise control and everybody was pretty damned well-off.
What global competition did was to re-set the equilibrium. And because most of the countries that gave us high-volume competition in core industries were low-wage developing countries, the new equilibrium compelled the car makers to squeeze labor costs first. That was one big bite they could take without additional investment. They bit as much as they could but contracts for long-term benefits, and the resistance of labor to rollbacks and layoffs, limited how much they could bite. So the next path was a combination of rationalizing manufacturing organization (zero-defects, the Toyota system, etc., etc.) and automating.
When I hear people complain about how high labor costs, and unions, make us uncompetitive, I wonder what kind of competition they have in mind. You seem to accept the idea without question that we have to compete with companies in low-wage countries that pay their workers $0.80/hour, that we have no choice in the matter. That may be true, if globalization is to be left in the saddle to ride mankind, but I would expect you to at least question it. I don't hear a peep. Everyone seems to accept the fact that, in terms of wages, we're doomed to what Alan Tonelson calls "the race to the bottom."
And the discussion breaks down because we mix up and confuse macro effects with micro effects. The US Commerce Dept. tells us how wonderful globalization is for our GDP. It may be -- that's one argument. But then labor points out that we're losing high-paying jobs, and that the people who are benefitting are those in the ultra-thin slice of top income earners. GM and Ford workers are in relatively worse shape than they were 30 years ago.
Both are true, apparently. Macro effects don't determine micro effects. Unions are frustrated because we had a system that worked and it's broken down. That tells them that globalization and union-busting are wrecking their lives. They're quite right about that, at the micro level -- and the micro level means at the level of individual human beings, working for individual companies.
Are you so willing to let low-wage competition sit in the saddle and ride the rest of us? Don't you have some objection? When the next wave of low-wage competition comes along (Africa? Outer Mongolia? The huge number of peasants in China's interior, who are hardly a factor yet in the Chinese miracle?), how much more will you be willing to squeeze labor to meet the competition?
I'm surprised NOT that you resent what labor wants -- most business owners seem to resent that, now as always -- but that you don't even mention the fact that we've knuckled under to the interests that are driving globalization. And their interests are not your interests, or my interests, or Ron's interests, except in the abstract of GDP and the delusion of trickle-down economics. All that's trickling down is a lot of debt, longer work hours, and fewer benefits. Some trickle-down, eh?
Or do you see us getting on top of it somehow, and restoring wages and benefits at some future time? If so, how do you think that's going to happen? Meantime, just how much do you want labor to give up, in order to play the globalization game that we've been told is so good for us?
-- Ed Huntress