21 February 2012
Our “Hourglass” Economy
In these most recent economic times, it is clear to see that the rift between the extremely rich and the extremely poor is expanding, with those in the middle being stretched to one extreme or the other. There seems to be no reconciliations for this ever-growing disparity, as the corporations that used to comprise solely our economy lose national borders. Robert B. Reich discussed this issue in his work, Why the Rich Are Getting Richer and the Poor, Poorer. There are many reasons that go into play and many factors that sway each reason, but the major factors that influence our so-called “hourglass” economy are (but are not limited to) seniority, the increasing automation/mechanization of the workforce, outsourcing, and by the “secession of the rich.”
A major player in the rift of the rich becoming richer while the poor are becoming poorer is seniority, namely in labor unions. Routine production jobs have vanished fastest in traditional unionized industries, where average wages have kept up with inflation. This is because the jobs of older workers in such industries are protected by seniority; the youngest workers are the first to be laid off. Faced with a decision of cutting wages or cutting the number of jobs, a majority of union members (secured by seniority) often voted for the latter (Reich 426).
Another major factor of our “hourglass” economy is the increased automation/mechanization of the workforce. Technology nowadays seems to advance at an ever-increasing rate. As more and more “labor-saving” machines and robots are “employed” to do the jobs of hard-working people, more and more jobs seem to shrivel up and become a casualty of our ever more modern society. In the late 1980s, Nippon Steel joined with America’s ailing Inland Steel to build a new $400 million cold-rolling mill fifty miles west of Gary, Indiana. The mill was celebrated for its state-of-the-art technology, which cut the time to produce a coil of steel from twelve days to about one hour! In fact, the entire plant could be run by a small team of technicians, which became clear when Inland subsequently closed two of its old cold-rolling mills, laying off hundreds of routine workers. Foreign-owned companies, such as Phillips, Sony, and Toyota, are highly automated and will become far more so in years to come. Routine production jobs account for a small fraction of the cost of producing most items in the United States and other advanced countries, and this fraction will continue to decline sharply as computer-integrated robots take over (Reich 427).
A third reason why the rich are getting richer and the poor poorer is outsourcing. As companies expand their workforce into the global web of workers available, the competition of unskilled/routine workers also expands from their fellow Americans to any able-bodied person on the planet that is willing to do that same job. This is especially dangerous because the standard of living in most (if not all) of the countries that are now being hired to do the work is much lower than that of ours in America, and these countries are usually impoverished, so the people there are willing to do the same work their American “counterpart” was to do for a much smaller wage. This means that most of these unskilled/routine jobs are shipped overseas for good. Until the late 1970s, AT&T had depended on routine producers in Shreveport, Louisiana to assemble standard telephones. In the early 1980s they stopped hiring routine producers in Shreveport and began hiring cheaper routine producers in Singapore, discovering that Singaporeans would produce the same telephones for a much smaller cost. In 1989, AT&T stopped hiring Singaporeans to make telephones and began hiring even cheaper routine producers in Thailand for the same reason (Reich 423). As corporations lose national borders, another phenomenon occurs. The bond between...