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THE REAL STATE OF THE UNION


A featured topic in the State of the Union address is expected to be "insourcing" — manufacturing jobs returning to the U.S.  The figure being quoted is 374,000 in the last two years.  Siemens, the German electrical giant, is given as an example.

There are two serious problems with this story.  First, high-paying manufacturing jobs have declined to the point where now only 9 percent of jobs fall in this category, and we will need to add 2 million just to get to where we were before the recent great recession; it also takes about a million new jobs each year just to keep up with the new entrants into the labor force without allowing for the unemployed.  Second, the major reason German companies (and others) are investing here is because the dollar and our unions have been weakened to the point where a German worker costs twice as much as an American.  For example, BMW pays $15 an hour on average at their facility in Greer, South Carolina – about half the cost in Germany.  The average hourly labor cost to BMW is also about half of what unionized auto workers were earning in the glory days of the Big Three. 

Somewhat of a surprise is the fact that an article by the author from 22 years ago on job loss in the US (at http://ofthisandthat.org/01072012zzz.html) holds true today; its recommendations on education and worker training remain valid.  Unfortunately not much was done then and not much is being done today.  

The second issue the Administration has been concentrating on recently is  inequality.  About time!  Some of us have been discussing it frequently for almost two years.  All kinds of figures are exploding on the internet:  the top one percent own as much as the bottom third; the top 10 percent own as much as the bottom 60 percent, and so on.

Here are some facts:  the Gini Index, a recognized indicator of inequality, as reported by the CIA for the most recent year is for Norway 25, Germany 27, Pakistan 30.6, India 36.8, China 41.5 and the USA 45.  It turns out then that the U.S. is almost twice as unequal as Norway and about one and one-half times worse than a Pakistan governed by an elite.  The ratio of the average income of the richest 10 percent to the poorest 10 % is for Norway 6, Germany 6.9, Pakistan 6.6, India 8.6, China 21.8 and the USA 15.  At least we beat China on the latter measure, but appalling that we are almost twice India's figure.

Jeffrey Sachs in a recent book, "The Price of Civilization", informs us that wealth is twice as concentrated in present day USA than it was in Imperial Rome which was a farmer and slave society.  One conclusion that may be drawn is that slaves in Rome were better off than our working poor.

The federal minimum wage of $7.25 an hour amounts to $290 per week or about $15,000 per year.  It explains why fully one-third of Americans are below, or hover just above the poverty line, and it is an insult to democracy.  Amy Glasmeier, head of the Department of Urban Studies and Planning at MIT has developed a Living Wage Calculator available on the web at livingwage.mit.edu.  In general, it is clear that the minimum wage keeps a single adult barely above poverty.  Add a child and a living wage is double the minimum.  One is left to wonder whatever happened to the Democratic Party of FDR who said famously that our nation should devise a way of "insuring to all our able bodied men and women, a fair day's pay for a fair day's work."

The second George Bush signed a bill raising the minimum wage $2.10 in three steps from $5.15 to $7.25, an increase of 41 percent.  Nothing comparable has emerged from this Democratic administration.  George Bush also introduced a tax cut skewed inordinately to the rich.  This could have been allowed to lapse last summer.  It would have done wonders to the deficit, and the Republicans could never have mustered a majority to pass an equivalent.  Instead the tax cuts have been extended and the working poor languish in abandonment.

Henry Ford paid his workers well forcing others to do the same.  He knew a consumer driven economy needs consumers.  The lesson seems to have been lost a century later where the quick buck takes precedence in the corporate boardroom, and the campaign donation in political preference — all legal of course.

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