Mexican state of Baja Calif. to test government wage support

While far from an ideal solution, Mexico’s federal government is planning to experiment in the state of Baja California with an unprecedented program to subsidize the difference between private wages and livable incomes for some farm workers.

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If signed on June 4, this plan negotiated by the state and federal government — in an effort to prevent current labor disputes, strikes, and blockades from boiling over into wider disorder or violence — would be in lieu of setting a much higher minimum wage and attempting to compel the private industry to pay that full amount (probably to keep the companies from just moving the jobs to another state with a lower prevailing wage).

The downside of the plan (I’m guessing) is that it’s likely some companies will try to lower their wages (illegally or otherwise) to pay even less at prevailing effective wage levels, but the government says it will negotiate with the industry to come to some sort of solution so that the existence of subsidies isn’t abused. (They’ll also raise the minimum wage somewhat — just not all the way to the 200 pesos/day target. The remaining difference will then be subsidized.)

Another criticism will likely be that this is essentially a taxpayer-funded gift to the large Mexican agribusiness corporations whose representatives and allies dominate the state’s government. But more on that later.

In general, of course, this new plan is fairly strange to our eyes, because the government here (also) typically doesn’t have a direct role in subsidizing general wages, since paying workers is a role we assign entirely to the actual employers, and the government just sets the legal floor. In theory. As The Atlantic points out, that’s not actually really accurate in practice in the United States; we just obscure it better than doing direct wage subsidies:

Having the government step in to fill the gap between reality’s wages and livable wages might seem foreign to Americans, but the U.S. government in a sense already does this—just less directly. A recent study from UC Berkeley’s Labor Center found that nearly three-quarters of people participating in government programs such as Medicaid and food stamps are in families headed by workers. The authors, calling this a “hidden [cost] of low-wage work in America,” estimated that through these programs, taxpayers provide these families with about $150 billion in public support. Additionally, programs such as the Earned Income Tax Credit essentially subsidize the wages of workers whose income is below a certain level.

Shouldn’t companies be making up this difference instead of taxpayers? That’s how some state legislatures feel. Starting next year, California will publicly name any company that has more than 100 employees on Medicaid. And in Connecticut, state legislators are considering a bill that would require large employers to pay a penalty for each worker on their rolls earning less than $15 an hour.

 
And of course those various hidden costs to the government don’t even get into the actual blatant government subsidies in the U.S. for various agricultural production like dairy and corn to maintain certain production and price levels. Or the various massive tax incentives doled out to attract companies to specific states or communities (ideally only if they create a specific number of jobs, which is then essentially a wage support program in disguise).

But the Mexico experiment gets to the bigger questions: Whose job is it to ensure a livable wage in a globalized economy? And how is that goal best achieved, regardless of “moral” responsibility?

We may not instinctively like the idea of the government writing a check to make up the difference when private industry tries to tighten the screws on its workers in a loose labor market that favors employers, but what we like and how to realistically get the necessary goal accomplished may be two increasingly different answers in the 21st century.
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March 18, 2015 – Arsenal For Democracy 120

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Topic: How the Shareholder Revolution is hurting America’s businesses and workers. People: Bill, Nate. Produced: March 16th, 2015.

Discussion Points:

– What happens to companies that borrow money to make shareholder payouts?
– Why aren’t American companies investing in the future as much as they used to?
– Why should American companies tie wages to increases in profits and productivity instead of focusing on dividends and stock buybacks?

Note for listeners: We’re testing a half-hour version of the show over the next few weeks. Let us know whether you prefer this format or the longer format.

Episode 120 (27 min):
AFD 120

Related Links:

AFD: Corporate borrowing diverted to shareholders, not investment
The Roosevelt Institute: Blog post on “Disgorge the Cash: The Disconnect Between Corporate Borrowing and Investment”
The Globalist: U.S. Stock Ownership: Who Owns? Who Benefits?
The Globalist: Can the United States Close the International Wage Gap?
The Globalist: Want to Fix Income Inequality? Relink Wages to Productivity

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iTunes Store Link: “Arsenal for Democracy by Bill Humphrey”

And don’t forget to check out The Digitized Ramblings of an 8-Bit Animal, the video blog of our announcer, Justin.

Linking U.S. wages to productivity (it might take a while)

Former U.S. deputy assistant Treasury Secretary and economist George R. Tyler, writing for The Globalist, argues that it may take a generation to rally the American people to reorganize corporate governance laws toward a profit model that takes worker pay into account like many other advanced economies do (which has created an international wage gap):

However, ensuring that real U.S. wages rise steadily year after year will require more, including legally linking wages and productivity growth. If a company does very well for itself, some percentage of those profits must be translated into higher wages for employees, rather than merely being plowed into stock buybacks, dividends and executive compensation packages.
[…]
Making that case, however, will be a generational challenge for wage advocates, including Democratic lawmakers. Why generational? The Reaganesque division of gains from growth since the 1980s featuring a war on wages has become institutionalized. American history has shown that once a damaging economic arrangement has been established, it is extraordinarily difficult to uproot.

 
I highly recommend everyone read the full article from Tyler (and not just because I worked closely on the edits for it). This is an important topic for the future of the U.S. economy, workers, and wages.

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Volkswagen US still driving toward unionization

volkswagenBack in February, German automaker Volkswagen’s U.S. division attempted to unionize their own workers in Tennessee, the center of union-free US auto manufacturing. That effort was thwarted by illegal interference by anti-union politicians and threats of cancellation of state subsidies and incentives. But it didn’t stop the company’s pro-union management.

As I explained in February, most major German corporations are big fans of cooperating closely with unions (at least far more than their American or British counterparts). This cooperation increases social-corporate harmony and it encourages win-win negotiations instead of everyone trying to bleed everyone else dry. This tradition of having unions and management work together in formalized joint committees, and (in Germany) even usually having the companies partly owned by the workers themselves to give them an official say in management and a stake in the company’s long-term health, has been a key tool for consensus-building and smoothing potential tensions over.

Despite the defeat in February, a collection of over 700 workers in Chattanooga voluntarily formed their own United Auto Workers local later in the year for the purposes of eventually unionizing the company’s labor force, as desired by management. Initially, it seemed like this might be delayed until some time well into 2015 by the setback in February and the local political opposition.

But Volkswagen is so determined to unionize its US employees over the objections of Tennessee Republicans (and to get around so-called “Right to Work” anti-union laws) that they held negotiations with the United Auto Workers in Germany to come to an arrangement to bring a union on board for its workers. Reportedly, they will be partially recognizing unionization of their Tennessee workers some time in the next few days. The UAW says that the interim deal, in place at least until a final vote to unionize (which will still have to come later), does not cover collective bargaining but does allow for a clear process of worker-management meetings, in the aforementioned German postwar tradition.

From the Wall Street Journal summary, the German approach is precisely what the company hoped to implement at minimum:

The new policy could allow the auto maker to accomplish its goal of establishing a German-style “works council” where workers and managers set up the rules and operations for the plant, but might prevent the UAW from gaining full bargaining control at the plant because of the presence of smaller unions.

The company said it is creating three tiers of representation for workers based on the percentage of hourly workers who sign up. The rule is expected to allow a UAW local that claims more than half the plant’s hourly work force has joined it to gain influence at the plant, but it also allows for other unions to set up shop.

Volkswagen said the new policy will govern its interactions with labor organizations who represent a significant percentage of factory employees. Volkswagen will use an external auditor to verify the percentage “to determine what level of engagement has been reached,” it said.
[…]
VW has a works council at most of its plants and would like to have one in the U.S. These worker-management groups set up schedules, benefits, operations and even take part in the business side of the operation. Under U.S. labor law, workers can’t participate in a works council unless they are represented by an independent union, and not a “company union.”

 
The remaining big question is whether the UAW can overcome the opposition of anti-UAW workers and Tennessee officials who are putting together a rival “union” to dilute the future bargaining power of the UAW within the Tennessee operation of Volkswagen.

VW: When management is the vanguard of the proletariat

volkswagenBeen a busy month for me so I haven’t had a chance to give the story due diligence, but if you didn’t hear: the German automaker Volkswagen’s U.S. division attempted to unionize their own workers in Tennessee.

This is unusual for a number of reasons, as I’ll get to in a moment, but it’s particularly significant coming in Tennessee, a state that has become home to a lot of foreign car manufacturers’ American branches and is a so-called “Right to Work” state. “Right to Work” laws are designed discourage unionization by changing how worker votes occur and allowing management to intimidate or pressure workers into voting against forming a union, i.e. giving workers the “right” to work outside of union (because every American must have the right to be their own David against the corporate Goliath in contract negotiations… I guess?).

So anyway, if VW employees unionize, it will automatically put pressure on Tennessee’s other foreign-based carmakers to raise wages somewhat to remain competitive and retain their workers, even if they remain non-unionized (past studies have demonstrated this effect pretty clearly), and it will probably encourage unionization drives elsewhere.
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