Dennis Rider’s career path changed directions recently, as reported by The Grand Rapids Press. After 27 years as a roll forming and laser cutting machine operator, he was let go in 2007. After spending serious time job hunting, Rider decided to retrain as an auto mechanic. He told the newspaper that he likes his job a lot; he was a serious car tinkerer in his youth, after all. He does miss the money, though. Today he makes about half what he made at his former position, factoring in all the night-shift and overtime work he had operating metal fabricating machinery.
You read right: He now makes half of what he used to make, and he put himself through two years of school to get that smaller paycheck. Note that this isn’t your stereotypical, relatively unskilled assembly person. This person was trained in metal fabrication technology.
You could argue that Rider didn’t move to where the metal fabrication jobs were. But you probably can’t argue against the fact that, across the middle class, wages are getting squeezed. Media have covered this issue time and again, but I had yet to read a good explanation for the phenomenon. That is, until I read a book called Supercapitalism, by Robert B. Reich, a one-time labor secretary who’s now a public policy professor at Berkeley. If you’re conservative, you probably won’t agree with Reich’s proposed solutions, which lean to the left of the political spectrum. Politics aside, I think his book, published in 2007 (before the financial crisis), still paints a solid picture of how we got to where we are today.
His main point: We’re all culpable.
Reich said we play a part in society in three ways: as a citizen, an investor, and a consumer. In the past, the citizen was dominant. In recent decades the investor and consumer have stepped to the footlights. Here’s how.
During the postwar era, the country enjoyed prosperity, and large corporations led the way. For many, these corporations provided lifetime employment and a guaranteed pension. They could do this because, among other reasons, many sectors had extremely high barriers to entry. For manufacturing, you needed huge machinery and a huge work force. The main way to drive down price was through mass production and economies of scale.
This environment protected jobs, because it was tough for upstarts to gain a market foothold, so existing players could rest assured they could maintain a certain margin. In this environment, our “citizen” won out over the consumer and investor. The citizen received implicit guarantees of lifetime employment and retirement income. This meant a factory town could remain a factory town. The factory employed most of the town’s homeowners, who paid taxes to support local schools, which educated the town’s next generation of factory workers.
During these years, though, the investor and consumer lost out. The phone system was regulated, so you paid a certain price for mediocre service. Automobiles got bigger but not necessarily better, and they got more expensive. In fact, according to some studies (including one by Elizabeth Warren, a Harvard professor who’s now an Obama administration adviser), nearly everything was, in real-dollar terms, more expensive in the middle 20th century. Electronic products are the most obvious examples, but even cars and groceries were more expensive back then. (Two big things—homes and health care—were much less expensive, Warren said, but that’s another topic altogether.) As far as investors go, the stock market really didn’t see fantastical returns in the middle of the last century. Investors got steady, predictable returns, nothing more and nothing less.
In the ensuing decades, technology advanced faster than anyone predicted. It lowered the barrier to entry for many businesses and enabled the logistical wizardry that made the global supply chain possible. Technology has made it so all the world’s producers work their hardest for the investor and consumer. The cheaper and better they make products, the happier consumers become. The more consumers buy, the better a company does, and investors reap the rewards.
Consumers now go to big box-stores and load their carts with cheap stuff. They have to buy cheap, because their wages are stagnating. The less money companies pay their workers, the better they can please their investors and consumers (who, paradoxically, are often the same people). It’s a vicious circle.
Reich even extends this logic to today’s astronomical pay packages for executives. Before the barriers to entry were torn down, large corporations enjoyed a relatively predictable business climate. Now that climate is anything but predictable, and the people who can lead a company successfully in such turbulent business waters are very valuable. It takes a lot to please the consumer and investor, who today can switch to the competition with the click of a mouse button.
Today, when a company announces layoffs, its stock price usually heads skyward. The citizen in us laments, but the investor in us smiles as our 401(k)s benefit; we have no choice but to invest in those 401(k)s, because defined pension programs are a rarity today. (And even if they weren’t, who would trust a company, in such a ultracompetitive environment, to keep its promise of a guaranteed retirement income?) Meanwhile, the consumer in us keeps buying cheap stuff; we don’t have a choice, because we can’t afford anything else.
Reich is careful not to point his finger at globalization. Globalization couldn’t have happened without technology, he said. Even if China didn’t become a manufacturing power, technology would still have lowered the barrier to entry for various businesses, thereby increasing competition; depressing wages; and making jobs less secure, especially for those who couldn’t adapt to the changing market demands, be it because of lack of training or retraining, an inability to relocate, or anything else.
So there it is. There aren’t easy solutions, and you really can’t point the finger at NAFTA, China, or another political hot button. Technology got us to where are today, and like anything else, it has had both positive and negative effects. We can call our friend or business associate halfway around the planet with little effort or cost. We can eliminate backbreaking labor through automation. We can comparison-shop with a mouse-click and find better deals than ever before. But we, as part of the middle class, also have less money and less job security.
Regardless of what happens, people like Dennis Rider are adapting. Some may find more success at adapting than others. People may succeed on sheer talent or sometimes on just plain luck. Rider spent decades in metal fabrication and ended up working on a passion of his youth: cars. Sure, he’s not making as much as he did, but he’s enjoying his job, putting food on the table, and finding his way.
It’s not a fairy tale ending, but that’s life. And besides, for Rider and the rest of us, the story hasn’t ended yet.