Globalization, Use of Temps, Destroying Middle-Class Jobs

Roger Bybee Dec 22, 2010

Two related trends—using globalization as a lever to extort multi-tier wage systems and the massive expansion of temporary work—are producing profound structural changes that leave workers increasingly at the mercy of Corporate America.

They are also creating the architecture for a stunningly unequal and socially unstable society. Most recently, the threat of relocating their jobs offshore forced members of UAW Local 833 at the Kohler Corp. in Wisconsin, a union with a long tradition of militancy and resilience, to accept massive concessions.

CEO Herbert Kohler laid out an explicit threat: swallow the concessions or “this location will continue to shrink.” The new five-year contract will create a two-tiered wage structure inserting non-union temporary workers into the workforce. Seeing no alternative, they voted Sunday by a 62% to 38% margin to accept the painful changes.

One worker described the sense of utter powerlessness felt by him and his co-workers: “You vote yes, you have a job,” he said. “You vote no, you don’t have a job. Plain and simple.” In the absence of a national labor campaign with sufficient resources committed at the local level, even tough-minded and sophisticated union locals can only do so much on their own.

Without the national labor movement contesting every threat of plant relocation as an act of greed and disloyalty, workers sense no broader movement against de-industrialization and are unable to see any way out through a protracted battle. (Exceptions to this pattern have been the UE union and the Untied Steelworkers.)


But corporate globalization—and the attendant threat of relocating jobs—has  proved a much more powerful in weapon forcing even well-organized, sophisticated union members into accepting devastating concessions.

The threat to send jobs to Mexico or China tilts the playing field against working people more than either a corrupted political and legal system or armed violence. Kohler’s threat is quite real: it already has 57% of its global worker force outside the United States.

With this powerful threat, Kohler was not only able to impose a five-year pay freeze on current workers making an average of $22.50 an hour, but they established a second tier where workers will  be paid just $14.50 an hour. Workers confined to this tier will include workers called back after 2 1/2 years of layoff, new hires, and the temporary workers who will be brought in during periods of expanded production.

The system will eventually erode the gains built up over eight decades by the UAW’s struggles, unless and until the workers discover some new means of regaining their leverage. “It totally destroys the future,” said Local 833 President Dave Bergene, part of the union bargaining team which refused to recommend acceptance of the contract.

The introduction of temps at Kohler fits in both with trends that have become notable in Wisconsin at unionized plants and with a broader national substitution of temporary workers for full-time workers entitled to health and retirement benefits. The two-tier trend has surfaced full-force in Wisconsin at Mercury Marine (see here, here and here  and gained momentum at Harley-Davidson (here, here, and here). This emerging model became the basis for demands from the Kohler Corp. (here and here and here).


Nationally, U.S. corporations have become increasingly reluctant to hire permanent full-time workers, at least for their U.S. operations as opposed to low-wage subsidiaries in places like Mexico, China, and India. In every decade since 1940, the US has witnessed job growth ranging from 20 to 38%. But since 1999, U.S. job growth has essentially flat-lined: close to 0% growth.

In place of permanent workers in America, U.S. corporations have increasingly substituted temporary or part-time workers. As the NY Times reported,

This year, 26.2 percent of all jobs added by private sector employers were temporary positions. In the comparable period after the recession of the early 1990s, only 10.9 percent of the private sector jobs added were temporary, and after the downturn earlier this decade, just 7.1 percent  were temporary.       

… “It hints at a structural change,” said Allen L. Sinai, chief global economist at the consulting firm Decision Economics. Temp workers “are becoming an ever more important part of what is going on,” he said.       


With natural population growth, we are facing fewer and fewer good jobs to go around. It’s like a game of musical chairs, with more and more of the chairs being shipped off to Mexico, China, and India, and others converted to temporary chairs. David Stockman, the former budget director under Ronald Reagan, estimates that we have already lost 10% of our middle-class jobs in recent years (and 32% of our manufacturing jobs since 2000).

At the same time that employers like Kohler are destroying middle-class jobs and cutting pay, life keeps better and better for Corporate America and its executives. America, the land of the middle class, now literally has a class structure more like a “banana republic,” with 1% taking in almost 25% of all annual income.

As Timothy Noah of Slate noted in a vitally-important series on inequality, the United States may well have a more unequal distribution of wealth than traditional “banana republics” like Nicaragua, Venezuela and Guyana.

As a result of the biggest pay-slashing wave since the Great Depression,  “Paychecks from private business shrank to their smallest share of personal income in U.S. history during the first quarter of this year, a USA Today analysis of government data finds.” That reflects the growing share of the national income pie that goes to the ultra-wealthy in the form of divvidends nad other capital income.

But in contrast, as the New York Times reported recently, Corporate America earned all-time record profits in this year’s third quarter and is on course for a record $1.659 trillion for all of 2010: Wall Street is preparing to shell out a record $144 billion in bonuses.


The recently-consummated deal on taxes between the Obama Administration and the Republicans only figures to deepen the class divide in several ways. Most obvious: while the richest 0.1% would have received a tax cut of $61,000 under President Obama’s original position (not extending the Bush tax cuts for the richest 2%).

But under the deal, the hyper-rich top-tenth of 1% will now get $370,000  , according to the nonpartisan Tax Policy Center. That provides only a slight economic stimulus, because the rich are less likely to spend their tax savings than a moderate-income family. The economic downturn—accompanied by falling wages and unemployment—figures to keep on dragging on for a huge slice of working families.

As Charles Dickens famously observed in The Tale of Two Cities about pre-revolutionary France, “It was the best of times, it was the worst of times.”

This article was originally published on Working in These Times.

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