Middle Class Job Losses Batter Economy

Associated Press | January 2 2006 | Associated Press and Vicki Smith

[ventana]

AP Middle-Class Job Losses Batter Workforce Sunday January 1, 8:53 pm ET By Kathy Barks Hoffman, Associated Press Writer Middle-Class Job Losses Batter Workforce As Companies Slash Payrolls, Send Jobs Overseas

LANSING, Mich. (AP) -- Thirty years ago, Dan Fairbanks looked at the jobs he could get with his college degree and what he could make working the line at General Motors Corp., and decided the GM job looked better.

He still thinks he made the right choice. But with GM planning to end production of the Chevrolet SSR and shut down the Lansing Craft Centre where he works sometime in mid-2006, Fairbanks faces an uncertain future.

"Back when I hired in at General Motors 30 years ago, it seemed like a good, secure job," said Fairbanks, president since June of UAW Local 1618. Since then, "I've seen good times and I've seen bad times. This qualifies as a bad time, in more ways than one."

Many of the country's manufacturing workers are caught in a worldwide economic shift that is forcing companies to slash payrolls or send jobs elsewhere, leaving workers to wonder if their way of life is disappearing.

The trend in the manufacturing sector toward lower pay, fewer benefits and fewer jobs is alarming many of them.

"They end up paying more of their health care and they end up with lousier pensions -- if they keep one at all," says Michigan AFL-CIO President Mark Gaffney. As wages and benefits drop, "it's the working class that's paying the price."

West Virginia steelworkers are all too familiar with the problem. The former Weirton Steel Corp., which 20 years ago had some 13,000 employees, today has just 1,300 union workers left on the job.

The steel mill has changed hands twice in two years, and just last month, Mittal Steel Co. told the Independent Steelworkers Union it would permanently cut the jobs of 800 people who'd been laid off since summer.

Larry Keister, 50, of Weirton, W.Va., has 31 years in the mill that his father and brothers all joined. His son tried, but got laid off quickly.

"I'm too old to go back to school. I've worked there all my life," says Keister, who drives a buggy in the tin mill. "I went there straight out of high school. It's all I know."

Though Keister is safe for now from layoffs, he wonders what will happen to the hundreds of friends and co-workers who will be jobless by the end of January.M

Gary Colflesh, 56, of Bloomingdale, Ohio, said there are few jobs in nearby Ohio or Pennsylvania for workers to move to.

"They're destroying the working class. Why can't people see this?" asked the 38-year veteran. "Anybody who works in manufacturing has no future in this country, unless you want to work for wages they get in China."

Abby Abdo, 52, of Weirton, said workers once believed that if they accepted pay cuts and shunned strikes, they would keep their jobs. Not anymore.

"Once they get what they want, they kick us to the curb," he said. "There's no guarantee anymore. No pensions. No health care. No job security. We have none of those things anymore."

Fairbanks of the Lansing GM plant said the changes are going to force a lot of people to retrench to deal with the new economic reality. For some, it will make it harder to send their children to college or be able to retire when they want. For others, it will mean giving up some of the trappings a comfortable income can bring.

"You're going to see lake property, you're going to see boats, you're going to see motorcycles hit the market," he said. "People get rid of the toys."

Economists agree the outlook is changing for workers who moved from high school to good-paying factory jobs two and three decades ago, or for those seeking that lifestyle now.

"It was possible for people with a high school education to get a job that paid $75,000 to $100,000 and six weeks of paid vacation. Those jobs are disappearing," says Patrick Anderson of Anderson Economic Group in East Lansing, Mich. "The ... low-skill, upper-middle-class way of life is in danger."

General Motors Corp. has announced that it plans to cut 30,000 hourly jobs by 2008. Ford Motor Co. is scheduled to announce plant closings and layoffs in January that could affect at least 15,000 workers in the United States and Mexico, analysts say, and is cutting thousands from its white-collar work force.

GM and Ford have won concessions from the United Auto Workers that will require active and retired workers to pick up more of their health care costs, and DaimlerChrysler AG is seeking similar concessions.

Thomas Klier, senior economist with the Federal Reserve Bank of Chicago, says the transition for manufacturers toward leaner, lower-cost operations has been going on for some time. But the bankruptcy of the nation's largest auto supplier, Delphi Corp., pushed the issue into the headlines.

Its 34,000 hourly U.S. workers could see their pay cut from $27 an hour to less than half of that, although the company is still trying to work out a compromise unions will support. Workers also could have to pay health care deductibles for the first time and lose their dental and vision care coverage.

Delphi worker Michael Balls of Saginaw, Mich., hears the argument that U.S. companies' costs are too high to compete with plants that pay workers less overseas, but he doesn't buy it.

"I think if Delphi wins, they lose," he says. "If I'm making $9 an hour, I'm not making enough to buy vehicles."

Unfortunately for workers like Balls, the old rules no longer apply in the new global economy, says John Austin, a senior fellow with the Washington-based Brookings Institute.

"We're in a different ball game now," Austin says. "We're going to be shedding a lot of the low-education manufacturing jobs."

Some of those workers are likely to try to move into the growing service sector, Austin says. But he says the transition can be tough, even if the jobs pay as well as the ones they had -- and many don't.

"Pointing out a medical technician job is available if they go back and get a certificate doesn't solve the issue today for those 45-year-olds who are losing their jobs at Delphi," he said.

Dick Posthumus, a partner in an office furniture system manufacturing company in Grand Rapids, Mich., says that "basic, unskilled manufacturing is going to be done in China, India, places like that because we are in a global world, and there's nothing anyone can do about that."

His company, Compatico Inc., buys much of its basic parts from South Korea, Taiwan, Canada and China, where Posthumus has toured plants he says rival modern manufacturing plants in the U.S. But the company still saves its sophisticated parts-making and assembly for its Michigan plant.

"The manufacturing of tomorrow is going to look somewhat different from the manufacturing of yesterday," Posthumus says. "It doesn't mean that we no longer manufacture ... (But) it's going to be a painful adjustment."

Associated Press Writer Vicki Smith in Morgantown, W.Va., contributed to this story.

[grey_whiskers]

Try reading my vanity on outsourcing here.

It may help tie together some loose ends on things.

[Havoc]

Do "market rules" mean that a company should submit itself to countless frivolous lawsuits every time a customer is disappointed in a product?

Market rules means just that "market rules" - aka the laws of the land and of the system in which our economy exists - capitalism, supply and demand. But, if you want to allude to "regulation" as the bad kitty word for the day.. go ahead. We all love it when you start decrying laws against slavery, child labor, sweatshops and the like as the reasons for going overseas. Business breaks the law so we pass new laws and stricter enforcement to balance the lack of business ethics and business whines about being treated unfairly just because they have no ethics. Boohoo. Cry me a river and make me care. Sounds as bad as liberals. Beat up the other guy, slander them and then cry when busted for it... Even Whackamole isn't usually *this* easy.

Does it mean submitting itself to countless local, state, and federal "impact fee" laws -- thereby increasing startup and maintenance costs by hundreds of thousands if not millions of dollars?

Increasing startup fees that are paid by whom, exactly. When Chrysler built it's latest plant in My hometown, Guess who had to pay their taxes... Wasn't Chrysler, it was every property owner within 5 minutes of the plant - which would exclude most Chrysler workers who could afford to move outside of those bounds. I make 7 bucks an hour and subsidize guys making 25. Again, whine me a river and make me care.

Still, even with the extra burden to business in America, my son just got hired by a pharmecutical company (six figure salary). My best friend's son just got hired in a great job ($70,000/year)in the travel business.

Goody for them. Glad to hear some mythical person out there I've never seen is doing well. One day such circumstance might find the average american out here in flyover country that was shafted by the presidents trade policy and has had to work 2-3 jobs to keep eating. When you have money, things can be simple - you forget what it's like not having any and then you impute to others your care free attitudes like the rest of the treason lobby does - "just move" (on what), "Go back to school" (on what).. When people are complaining they can barely afford their bills and food, it somehow never connects with the treason lobby that people who don't have any money don't have any money. It may seem a trivial point; but, it's actually rather big and tough to miss - that is unless you're part of the treason lobby, then you can just gloss over it.. But I digress..

A local mid-sized business near my home (which makes Christmas decorations, of all things) is booming and hiring more people.

Again, wonderful. Glad to hear of another mythical enterprise I've not seen out here where it'd do me and countless others good. Instead, what we're seeing here is businesses packing their bags for China, India, Mexico, Brazil, etc.

And home repair contractors are so busy they are backed up two, three and four months in advance.

Ah, yes, the allusion I've been waiting for to everyone on the planet can be a construction worker, HVAC, etc. In an already glutted market where guys in my town are making peanuts for what should be well paying building jobs, we can all go into construction as the last refuge in this grand economy. Or small engine repair..

All this gripe about not being able to get a job usually comes from people who worked at one job for 20 years, and now they want to get the exact same job again.

In my experience, it comes from people needing work - and something that pays the bills. If you want some whining condescending opinions, I can give you plenty. I'd rather stick to the facts on the ground.. I've had enough of condescending treason lobby opinions.

[Mr. Bird]

They refuse to see that our nation was founded on the trade ideology of tariffs

Opposing trade with China because of their reliance on slave labor while invoking the Founders is high art....

[Havoc]

Yeah, I certainly would - because Reagan bet on the same thing and won. People who presume to think Americans are harmless sheep are stupid and deluded and usually end up the worse off for it.

[grey_whiskers]

Placemarker at #72 for later read.

Even skimming it's really well done.

Cheers!

[Paul Ross]

...working an assembly line does not require a great deal of skill or training.

That's not been true for decades. Have you ever worked in any of the numerous fields of manufacturing? First, our production plants are highly automated, which requires a tremendous degree of 'labor' skill to maintain and often even just operate these machines. Second, you have heard of SPC, Arthur Deming's statistical process control, haven't you?

As implemented here and in Japan, The workers on the line are incorporated into the quality assurance process, and are carefully to guage the production tolerances. And if they deviate unacceptably, to stop all production until finding a fix.

It is often these same workers who come up with the fix. Not management. This is highly skilled in most manufacturing, and requires a deeper understanding of things than you seem to appreciate.

And then on the macro-economic level, you have to realize that nothing has repealed THIS:

Chart Source: U.S. Commerce Dept.

Manufacturing’s use of intermediate goods and services in its production process means that it generates substantial economic activity at the intermediate level. This is called the multiplier effect, and it turns out that manufacturing’s multiplier effect is stronger than other sectors.

Specifically, every $1 of a manufacturing product sold to a final user generates an additional $1.43 of intermediate economic output, more than half in sectors outside manufacturing. Manufacturing’s multiplier effect is greater than any other sector and far greater than that of the service sector, which generates only 71 cents of intermediate activity for $1 of final sales—half of the additional intermediate output generated by $1 of manufacturing final sales.

[Jrabbit]

Did you go to college? If so, what is your degree in?

[tillacum]

FEAR is the best word for the unions to use to their members. Fear of pay decrease, but keep the job, fear of pay cut for health care, but keep the job, fear of less pension money to live on, how about the employee saving for itself, but keep the job. But the unions keep increasing the dues on these members.

[RFEngineer]

"The fact is, we don't have to go along for the ride. We don't have to live with the death of retirement, the death of benefits, the death of the 40 hour workweek, etc. I mean, I don't think I slept through the years of my life where I learned that market forces in the US are what produced these things.. and that those market forces would be what saw them out."

The fact is we DO have to go along for the ride, unless you want to nationalize industries that are outsourcing in order to decouple costs and profits.

You are obviously hurting, and I'm truly sorry for that.

Businesses HAVE to make money. The objective figures I've seen are $130,000 per worker in pay, benefits, and payroll taxes. Add on top of that tax rates for business, environmental regulations, energy costs, automation technology, raw materials, transportation, etc. etc.....

What would you make that you could sell and support those wages and cover all the other costs?

You'll see that most everything else is a fixed cost....

If you look at it from the business perspective, lowering the labor cost (usually the single biggest line item) successfully means they get to stay in business.

It's tough to keep high paying jobs and make commodity items, unless you dramatically increase productivity per worker (read: fewer workers) or move the manufacturing somewhere where your fixed costs allow the activity to be done profitably.

It's really mind-boggling when you consider the costs/risks of moving a manufacturing facility - that it could be cheaper than keeping an existing, operating one open. Such is the burden of operating a manufacturing business in the US. Mind-boggling numbers for taxes and regulations. An uncertain risk that these figures will increase. An uncertain risk of lawsuits. An uncertain risk that you will be faced with a strike that interrupts your or a critical suppliers production.

Businesses die on risk, and they live on profit. I'm sure if you ran the numbers, you'd come to the very same conclusion. They really do have little choice, and therefore you and lots of other people truly are along for the ride.

[Steady Earl]

"Offshoring is a relatively new thing???" Uh... you may want to read up on some history. "Offshoring" is just a conjured-up epithet for trade, and foreign trade in both goods and services -- and therefore jobs -- goes back nearly to the dawn of civilization. Check out the first volume of Will Durant's history of everything.

Of course, trade and its concomitant creative destruction will always result in individual dislocations. My current hometown used to be an industrial powerhouse, and the local news is chock full of complaints like yours. The union mentality (which matches your rhetoric perfectly) persists, but it was that mentality that made this town into a shuttered-up post-industrial nightmare. But my former hometown down near Atlanta is a NEW industrial powerhouse, because the folks there compete in the new economy. And fooey on all these arguments that you can't make money at manufacturing -- everyone at my old plant was making a killing at base-level manufacturing. We just did it really, really well. My company transferred me to try to manage the plant I'm in now into this new mindset, but as you show very well, the entitlement mentality is a tough thing to uproot, and I doubt very much my current plant will be around much longer. It can't compete because of the old-school ways of our local employee base.

Manufacturing output is pretty constant in the US -- but it employs fewer people as we get better and better at it, and it's less of our economy because we as a nation can afford more and more services as we get richer and richer.

Your fairy world where a country can put up trade barriers and pay its people wages far beyond what the world market will bear doesn't exist, never has existed, and never will exist. Europe today is a good example of what happens when you try it -- you wind up with 30% of your "working" population doing nothing, and the rest headed that way, while your economic "growth" becomes nil.

We can either compete with the world, or whine about "unfairness" while we wither and die. Our economic figures say we're competing like gangbusters. God bless America, and God bless the invisible hand of the world market in everything.

[BfloGuy]

Wages are typically 15% of a company's expenses -- taxes in the US on the other hand are over double that. The politicians in Washington are content to have us all worrying over foreign wages. That way there's no pressure on them to cut corporate income taxes to levels that can compete with foreigners.

If they did, a lot of this debate would be over.

[ClaireSolt]

I am very disappointed in the lack of imagination and vision of union leadership. It seems to me that there should be much expertise in the workforce that could and should be stepping forward to be bosses and owners of restructured businesses to meet the demand. both Wqalmart and Microsoft have profit sharing plans that make these 19th century unions seem intransigent in theiur demands to keep the status quo or let the businesses go overseas. The overemphasis on politics in this discussion is symptomatic of mistakes unions have made. Finally, this so-called middle class has none of the virtues that traditionally characterized the American middle class. they are middle income, but not middle class.

[PhilipFreneau]

>>>Opposing trade with China because of their reliance on slave labor while invoking the Founders is high art....<<<

So we should support slave labor in other nations to punish America for its past, right?

[Paul Ross]

Who are these people who can elect to drop out?

Just because the BLS artificially expels them from the counted labor market, doesn't mean these unemployeds are 'unattached' or uninterested in working. They are probably on welfare, however, so you're notion that these disruptions are without cost to you, is likely mistaken.

And the impact of inflation, despite glowing claims for its taming by propagandists for the deficits, is becoming unavoidable even in the skewed BLS statistics, as reported by the most recent U.S. News:

12/26/05

Pity your paycheck

Despite good economic news, wages don't keep pace

By Nisha Ramachandran, U.S. News & World Report

For the past three years, salary increases at Shawnee, Kan., ink company Nazdar have hovered around 3.5 percent. This year may be no different. Industry trends for 2006 suggest only a slight uptick in pay, from 3.6 to 3.8 percent. While the 445-employee company has yet to finalize its own merit-increase pool, rising healthcare and energy costs are weighing heavily on its decision. "We realize that employees are taking on more expenses," says Anissa Elsey, vice president of human resources. "But so is the company."

For all the good news of late on the economy, there has been a noticeable exception and one that might explain why many consumers express less-than-sunny sentiments: Wages continue to lag behind inflation. Year-to-year hourly and weekly earnings for November were up only 3.2 percent, while inflation has hovered around 3.5 percent. Two recent surveys indicate that wages will rise only moderately in the coming months, if at all. And, says a survey by compensation data firm Salary.com, just a third of companies are budgeting more for salaries in 2006.

Lagging indicator. Why aren't workers seeing fatter paychecks? Experts say that wage increases typically lag behind the growth of the economy. "Companies want to make sure that they are going into a period that is as good or better than this year before they start spending money," says Bill Coleman, senior vice president of Salary.com. As a result, many companies are maintaining the fiscal prudence adopted in tougher times.

A key concern for companies is the price of healthcare. Firms face significant increases averaging 9.9 percent in 2006, up from 9.2 percent. "As long as we are going to pay more and more on the benefits side, then wages are not going to go up," says Bill Dunkelberg, an economist with the National Federation of Independent Business. That's especially true for employees, who may end up using any salary gains to pay rising healthcare contributions and out-of-pocket expenses. Consulting firm Hewitt Associates estimates that an employee making $40,000 a year will use 23 percent of an average salary increase of $1,440 for increased 2006 healthcare costs.

Foreign threat. Employees may also feel the pinch from abroad. Many economists point to factors like offshoring that could keep American wages depressed for some time. "It's a basic supply-and-demand story," says Jared Bernstein of the Economic Policy Institute. "Your employer now faces more labor low-cost options than . . . before." That most affects those with a high school education or less; already, the manufacturing sector has struggled to keep wages up at home. Even white-collar workers may not be immune; a 2005 study by the institute found that salaries for college grads had dropped by 1 percent.

The contradictions are plainly felt at Mark IV, a general contractor in Nashville. Business at the nine-employee firm is booming, and the help-wanted sign is out front. But owner Tonya Jones has no intention of raising salaries soon. "Things are still a little rough and rugged," she says. The company lost its healthcare plan almost two years ago, and prices on the open market have proved prohibitive. To compensate, Jones reimburses those covered under individual plans for their healthcare expenses in lieu of a salary increase. Jones implemented a bonus structure five years ago to reward employees who stay at the company for an entire year. "We are tying compensation to performance standards and giving bonuses to the entire company if certain goals are met," she says.

That's a trend catching on among more employers: In a survey by Mercer Human Resource Consulting this summer, 55 percent of companies said they planned to offer cash awards and signing bonuses. "Companies are very reticent about pay increases," says Steven Gross, a consultant with Mercer. "But they are more comfortable with incentives." Now that's something we can all take to the bank.

REVERSAL OF FORTUNE

After outpacing inflation, wages have lost ground compared with consumer prices since 2004.

[labels]

CONSUMER PRICE INDEX

AVERAGE HOURLY EARNINGS*

ANNUAL PERCENTAGE CHANGE

2000 3.4 3.9 +0.5 pct.

2001 2.8 3.8 +1 pct.

2002 1.6 2.9 +1.3 pct.

2003 2.3 2.7 +0.4 pct.

2004 2.7 2.1 -0.6 pct.

2005 3.4 2.8 -0.6 pct.

*For workers in nonsupervisory positions; 2005 figures averaged over 11 months.

Source: Bureau of Labor Statistics

[cinives]

You get my vote for the most insightful of the thread. When the government takes over 50% of your income for taxes, fees and the like, American workers work for less, net, than many would think.

Not to mention, all the makework jobs companies have to keep compliance with government regulations - the IRS, OSHA, Dept of Labor, EPA, government at the state and local level, and on and on and on. Think of all the accounting jobs now avaialable because of Sarbanes-Oxley, and all the money all types of businesses are spending to comply with that monstrosity, for example.

[lewislynn]

If your work isn't worth any more than the pay the Chinese worker gets, upon what basis should I and others pay you more?

Define "work".

If a Communist Chinese factory can build your product and you sell it here at great profit what do they need you for?....What goes around comes around.

[Havoc]

Yes and no. I went to school and dropped out. After one semester, I could not afford to continue and dropped out. I had to find another way to the bucks - I taught myself and learned what I could from others in the community. I taught myself programming basics in Pascal in less than six months and published a dozen pieces of minor shareware in that time. I built on that and learned C and some assmebler over the next 6, then went on to C++ and started writing conversions between higher level languages. At the same time, I soaked up everything I could get my hands on with regard to tech journals and hacker tutorials - everything from how a hard drive works to interrupt driven communications, and so on. At six months of owning my first PC, I'd rebuilt it from the ground up, knew it inside out, the concepts behind how everything worked, what could make it fail, etc. So, I began freelancing as a tech, troubleshooting software and hardware problems for the local scene. Within a year, I expanded and started tutoring people in programming languages and communications. My job, all along, was sales; but, eventually went to PC sales so that I was looking at the market from just about every angle. I was building, troubleshooting and repairing pcs in my offtime, tutoring people, etc.. And selling pcs and pc related material at my day job. After better than 10 years of that, I got my foot in the door at EDS.

When you don't have money, you do what you have to. It took a long time to get there and I'm just an average joe like most people. When I graduated from Highschool, you were lucky if you could afford college. I came from a home where both parents worked for GM; but, both had also been through several nasty divorces and had little to show for their years of hard work. In short, there was no money.. amazing how that works. No money really means no money. They are words with actual meaning. But apparently and presumably, you'll tell me that guys like me just need to go back to school - with no money. I make 7.00 an hour and gave up my 2nd job due to health concerns. I pulled in the belt and am barely getting by so long as no emergency ever comes my way. I'm sorry to say, that is how many of the people I work with are dealing with life right now as well. We appreciate that some have it better and are glad for them. On the other hand, we're also fed up to our eyeballs at listening to people who haven't a clue tell us about how easy it is to find or do better. It isn't. It may be in comparison to living under Stalin; but, we aren't interested in relativism. We're interested in reality. Reality is that there are no Good jobs here. The good jobs are leaving. There really aren't even any decent jobs here. If there were, we wouldn't be working for 7.00 an hour at the job we are working at. Nor would our manager who earns not much more than we do. She hates it that there are no jobs here as much as we do. On the other hand, she gets us for a bargain price because all the good jobs are gone - that's the benefit of the treason lobby wrecking the market.. And that's why it's being done - so that businesses don't have to work inside of supply and demand within the market to accomplish what they wish, instead they subvert the market like cheating at a computer game, if you will, tweaking the numbers so they get their desired result without having to play by the rules.. at least the rules as they used to be - ones where any person with morals or ethics would know better... When you amputate morals and ethics, treason is easy to commit.. but it's usually profitable, which is why we normally execute traitors or put them in jail for life or something like that. Selling out your neighbors for money is pretty skanky and frowned upon. Amazing how people tend to get all whiny about such petty things, ain't it..

[Iscool]

All while Japanese, and Korean car builders are building new plants in the USA, another liberal myth that manuf.

No myth to it...When these 30,000 employees go, that will include scores of thousands of supply workers...Many, many non union people will be out of work...And this is just from the G.M. re-alignment...

If I understand it correctly, the Japanese car plants are mostly just assembly...The parts mostly come from Japan...As well as replacement parts...

Maybe we can all just sell chinese trinkets and junk tools to each other, or start an illegal alien construction/lawn business...We already have to buy weapons from other countries to go to war...Thanks to you guys...

[Paul Ross]

The 2006 Mustang

is a vastly more sophisticated and...expensive to build...machine than the comparatively lame 1968 model...

Your asserted cost calculation, merely using 'published' inflation numbers instead of the 'real' inflation numbers, thus understates the actual projected impact by about the entire difference of $11,000.00.

Granted, the unions have been gouging in the UAW. But automation has more than made up for the costs with cost-savings. And then with foreign competition that didn't exist in 1968, it has also acted to check the company from passing along all the costs that you might otherwise be paying.

Assuming you are actually buying an American vehicle at all...

[chas1776]

Don't blame the unions, they are going to be out of workers before its all over. I lost my job when the first Bush cut the Sea-wolf submarine program. During this transition GE sold it business to Martin-Mariette. I had a choice of retiring or going with the new company where the benefits were not has good. I retired to my trailer in Fl. The companies that were in the nuclear business are gone and so are there unions. I remember one overhead rate for a tape control horizontal boring machine. The operator made $17.50 per hour and the overhead rate was $927.00 per hour.