The Louisville Eccentric Observer - Dirty Big Secret

Dirty Big Secret (11.30.2005)

By John Yarmuth

Sometimes it is critical that we stop to connect the dots, and now is one of those times. All at once, it seems, a series of events, considered together, has illuminated one of this country's big dirty secrets: the growing dependence of the American economy on a low-cost labor pool.

This week President Bush focused his severely limited attention on immigration policy reform, delivering a major speech in which he said that we have to enforce our immigration laws and secure our borders, but also must accommodate all the illegal workers already in the United States. This is the dilemma faced by Republicans; they must be for law and order and security, but they also must serve their agribusiness supporters by facilitating a readily available supply of low-cost workers for jobs Americans won't do.

Simultaneously, we have continuing focus on the issue of Wal-Mart and its huge workforce of low-wage employees — average pay of $9.68 an hour, or $20,134 a year based on 52 40-hour weeks — many of whom rely on Medicaid for their health care, because the company provides minimal or no benefits.

Advocates for Wal-Mart support its labor policies by arguing that the company's wage structure allows it to provide low-cost merchandise, thereby saving consumers loads of money. Of course, they conveniently ignore the company's huge profits ($7.6 billion in the first nine months of this year) that allow it to pay the CEO roughly $660,000 every two weeks, or as much as the average Wal-Mart employee would earn in a lifetime.

And then there is the sad tale of New Orleans, dealt a virtual death blow by Hurricane Katrina. One of the many Katrina horror stories not widely discussed is the disappearance of most of the low-wage workers in the area. They have dispersed to Houston, Atlanta and a thousand other places, never to return, and leaving few people to work as busboys, dishwashers, housekeepers and all the other support positions critical to the Crescent City tourist industry.

Another "dot" worth connecting was last week's proposal by Congressional Republicans to raise the work requirements for welfare recipients under the Clinton welfare-to-work program, to 40 hours per week from the existing 30. While aiming for the quite legitimate and admirable goal of full-time employment, the inevitable result of such a mandate will be to push many people into longer hours at very low wages.

Finally, the news came last week that General Motors will lay off 30,000 employees and close several major facilities across the country. Those jobs, like the millions of manufacturing jobs that have disappeared over the past two decades, once formed the foundation of the American middle class.

Now, as we have witnessed in community after community, many of these formerly well-paid General Motors employees will end up working at Wal-Mart (literally or figuratively) for half of what they once earned.

As liberal columnist Paul Krugman wrote in The New York Times last week, this is just another example of the decline in the stability of American industries. For example, he pointed out, employment in the U.S. steel industry declined by 60 percent from 1968 to 2000.

But more significant is that last week's termination announcement by GM is only the most recent, dramatic indication that the nation's economy is increasingly evolving into one with no working middle class.

It has always been one of America's dirty secrets that many of our human support systems — Medicaid, welfare, unemployment — were effectively taxpayer subsidies to businesses, because they helped provide a reservoir of low-cost, part-time, unskilled labor to fill essentially dead-end jobs. Now we must come to grips with the possibility that the U.S. economy will be increasingly dependent on this category of worker. That will mean an expanding, rather than contracting, welfare system, and a permanent lower economic class.

As Krugman wrote, "We like to think of ourselves as rugged individualists, not like those coddled Europeans with their oversized welfare states. But ... if you add (to what we conventionally consider welfare spending) corporate spending on health care and pensions — spending that is both regulated by the government and subsidized by tax breaks — we actually have a welfare state that's about as large relative to our economy as those of other advanced countries.

"America's semi-privatized welfare state worked in the first place only because we had a stable corporate order. And that stability — along with any semblance of economic security for many workers — is now gone."

There are even more dots to connect in this very ugly picture, which should alarm both conservatives and liberals. One thing is for sure: So long as corporate America keeps raking in huge profits, it has little incentive to provide a response.

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