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Many American workers are feeling the effect of outsourcing as jobs are being transferred to cheaper labor markets abroad. How can we, as a nation, address the inequities that globalization imposes on American workers?
"There are two economies out there," Charles Cook, a political analyst, said in a recent New York Times article*. "One has been just white hot, going great guns. Those are the people who have benefited from globalization, technology, greater productivity and higher corporate earnings. And then there's the working stiffs, who just don't feel like they're getting ahead despite the fact that they're working very hard. And there are a lot more people in that group than the other group."
Our system of management and labor, which has developed over generations, is in a period of major realignment. Management, which historically has searched for the cheapest labor to gain the highest profits, has now linked with the new phenomenon of globalization, finding easy access to cheap labor markets around the world. How can we make the period of adjustment as fair as possible for our workers here at home?
We can begin to approach the problem by first breaking it down into its component parts, then examining each for possible improvement. But ultimately, we must take a holonomous approach, examining the total fabric of the market system to see where the roots of the problems lie, and to find the points of entry for making a meaningful difference.
First, as the system has developed, labor and management are in essence adversaries, Labor seeks to keep wages as high as possible, while management is drawn to the cheapest labor to maximize profit.
This system managed to work relatively well for both management and labor when it was a closed market. But when cheap labor around the globe became accessible, the balance shifted toward management and labor was left at a great disadvantage. This has now been further compounded by the importation (legally or illegally) of cheap labor into this country.
"If I had to sum it up," said Jared Bernstein, a senior economist at the Economic Policy Institute, in the recent NYT article, "it comes down to bargaining power and the lack of ability of many in the work force to claim their fair share of growth."
While the drive to increase profit is a central part of the system, the system mandates no comparable responsibility to workers, or to society at large. State laws require corporate management to first serve the interests of the shareholders, those who invest money in the business in exchange for an opportunity to make a profit, not the interests of the workers who create value for the business by exchanging labor for wages. If a for-profit corporation does not maximize profit for the shareholders, the shareholders can sue the board of directors for breach of duty.
In another recent report on the boom in profits, economists at Goldman Sachs wrote, "The most important contributor to higher profit margins over the past five years has been a decline in labor's share of national income."
*Steven Greenhouse and David Leonhardt, "Real Wages Fail to Match a Rise in Productivity," www.NYTimes.com, August 28, 2006, pg. 1.
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