Pricing power and the right to work!

Over this past week, the state of Michigan became the latest governmental unit to pass a right to work law that prohibits private sector labor unions from forcing their workers to pay union dues. Michigan is perhaps the Mecca and birthplace of the labor union movement because of the activities of unions in and around Detroit during the first half of the twentieth century in their fight with the automobile industry over workers rights. Henry Ford set up the first modern auto company, and, for that matter, the first modern industrial assembly plant in the world in the first decade of the twentieth century right there in Detroit. Most all corporate creations of this type have been modeled after Henry Ford and what he did. We once worked at Sears, Roebuck and Company and they, in their corporate literature, have long bragged about how Richard Sears, the founder of the company that bears his name, came to Detroit to see what Ford had done when he prepared to open his far advanced for its time merchandise storage and distribution center--fully automated and all the rest of it.

Unions struggled and succeeded and, whether one belonged to union or not, one eventually got the benefits and increased salary gains that labor unions had fought for. Corporations would pay those benefits in efforts to avoid further unionization. We remember that some of the corporations that we worked for giving non union workers the benefits of union struggles long before the union workers got them, making the union workers wait until contract time to achieve what their non union workers were already enjoying. It was a bit of a perversion but was true none the less.

The turn for labor unions began when Ronald Wilson Reagan was inaugurated president of the United States in January of 1981. Although Reagan had been a union man and a former leader in the union movement in California in prior years, he had completely divorced himself from those beliefs by the time that he had embraced the rugged individualism of the very wealthy in the late sixties and early seventies when he was elected governor of California for the first of two terms in 1966. Reagan, early in 1981, saw an opportunity to wound the labor union movement when the Air Traffic Controllers union went out on strike in violation of federal labor law as it pertained to public employees. Reagan fired them all and began the long and not always so slow decline of the labor movement in the United States. For a long period of time, the benefits that accrued because of the labor movements activities continued to pile up. However, with the rise of the neoconservative Republicans in both the federal and state and local governments across the last thirty years, the labor movements gains became liabilities to a national and world wide corporate economy that had found benefit in the need to ship higher wage jobs out of the United States to places like Mexico and China where labor unions did not exist.

The driving forces behind both the neocons and the world economy were many and diverse. A period of relative world peace and rising prosperity led the workers of other nations, particularly China, to acquire the skills to do the jobs that only the American workers once did when the United States was the manufacturing supplier to the world. And, these Chinese workers would work for a fraction of what the American worker required. As a consequence of that development, a government security report released just this week has projected that the entire Asian section of the world will pass both the United States and Europe as economic powerhouses by the year 2030. Supposedly, the American economic hegemony will be over. It was expected that there would be some leveling of the inequalities between the United States and the rest of the world in worker pay as we receded from the post World War Two heights, but what has occurred has come faster and with more ferocity than anyone could have imagined.

As we have discussed in ramblings previously, the rise of the discounters such as Wal-Mart have led to a situation where people are able to buy the same or even superior goods for less money than they were able to before such enterprises came along. As an offset to that proposition however, the American workers wages have gone stagnant over the last number of years. What has mainly suffered as a result of this is the average American workers ability to save for his retirement. Instead of the gains that the union movement had acquired for the average worker in defined pension plans which paid and set monthly income for the rest of the workers life, we have found that these have been replaced by things such as thrift plans such as 401k’s that do not begin to replace the income lost from the old pension plans. One study has found that the average person eligible for a 401k in the United States has about fourteen thousand dollars invested there. A study done by one of the major sellers of thrift plans has found that the average worker there has about seventy six thousand dollars in their account. Although there is disparity in these numbers, neither figure is enough to generate a satisfactory life income to sustain both the worker and this economy in the manner in which it has become accustomed over the past few decades as we face the coming retiring generations. A great deal of this economy’s spending power is invested in seniors over sixty with good pensions and disposable income and as that power disappears, pricing power is going to disappear with it!

If we, as a nation, think that the top one or two percent can sustain this economy with their spending habits, much of which occur outside of the United States in their jet set life styles, we are deluding ourselves at best.

I live in a modest economic setting here in southern Illinois! However, I do live in the hottest economy in that economic setting--Marion, Illinois. The newest store to come into this setting is something called a “Family Dollar Store� which sells merchandise at savings that embarrass even the Wal-Mart’s of this world. We went into one of these places the other day and bought some cleaning supplies, one of which cost us only a one dollar bill. One cannot find these prices at Wal-Mart! As we exited the place with our purchases, all of which cost less than a ten dollar bill, we were reminded that this may be the future of the American economy. The place reminded us of an old five and ten cent store back in the 1940’s or the early fifties when we were a child and frequented placed like these in search of small toys or ten cent comic books. Our choices were very limited back then but we knew nothing else and were satisfied with what we had. There was no real pricing power nor nearly the competition that we have today and prices had been set as they were for a very long period of time. In essence, there was no money and nothing to buy with it!

As we look about us now, we see the higher end retailers such as J.C. Penny and Sears struggling to survive. Outfits like these need pricing power to offer us the things that we have become accustomed to having in our world. Instead of living in an increasing pricing power world with all of the options and choices that it offers to us with the research and development which that pricing power affords, we are apparently, at least for large segments of the population, moving back to a more basic world with fewer choices that cost less money for those who no longer have the income to afford any thing else. What the unions did for the American economy was to create a virtuous circle that benefited everyone as the pie increased and there was a larger serving for all. That circle is now broken and the best that we can hope for is some sort of a soft landing where not too many are horribly affected as we return to the world of the first half of the twentieth century that the neocons would like for us to inhabit. In their quest for a purer world filled with their morality and ethics, they have forgotten all of the benefits that have come with the economic expansion over the last fifty years. And, they have also forgotten how questionable their ethics always were. And, that their morality also excluded women and blacks and minorities!

We were in Williamsburg, Virginia at the colonial village, a depiction of 1770 America some time back and we were taught a lesson there by a gunsmith that we have never forgotten. He told us that as long as a worker had a craft they would never be unemployed. This worker had served a long apprenticeship to learn that craft. What unions did was bring to the average assembly line worker the kind of wages that used to be reserved for the craftsman class. No long apprenticeship or special talent was needed to work on an assembly line. That world is now long gone as the greed and quest for efficiency that dominates our current corporate dominated society has asked the average worker to work for less and less as more and more of them are born and need jobs of some kind or another. And, the paradox to it all is the fact that with computerization, it now requires more skills than ever before to take a job in this new economy. In the United States today, close to two million jobs lie unfilled because the workers with the skills to take them simply do not exist! So, now, we require more skill sets and do not wish to pay full price for them! It is also interesting to note that the gunsmith we just described lost his job when the last recession occurred as Colonial Williamsburg had to downsize as the number of tourists dropped off. He was very bitter about the whole thing when we saw him again in 2008 at Christmas as he ended his career of over twenty years. If we are not all careful that bitterness may become pervasive across our whole society if it has not already done so. There is a great fear and loathing going on among American workers today, particularly those in corporations, as they work longer and longer hours, many for the same pay regardless of the hours put in, knowing that if they object, there are others waiting in line to take their place. It may be the fertile ground for the beginnings of the revival of the union movement but, lets face it, we may be a while hitting bottom yet. And, there is always the opportunity that this greed and efficiency may bring this whole system down in a pile that may make the Great Depression look like a Sunday picnic. And, if it does, the prices in those Family Dollar stores may come to look unaffordable to most of us. During the heights of the great Depression and before, many people worked for a dollar or two a day.

That is what right to work (for nearly nothing) laws and loss of pricing power will do for you!

IOVHO,

Regards,

Joe

To say that "God exists" is the greatest understatement ever made across space and time.