There is hope. There is hope for all of us poor, struggling souls who have weathered the “Great Recession,” who have resisted wallowing in our misery, who have bemoaned “what once was” in America. The sun is rising on American industry!
Remember the 1970s? Rust forming on shuttered steel mills; chain link fences surrounding massive, padlocked auto-assembly plants with workers picketing outside? The old days are long gone. Bulldozers leveled more than a few of those steel mills; weeds overtook the Ford assembly plant in Mahwah, New Jersey. Those dislocated, displaced souls learned that the U.S. was transitioning from a manufacturing-based economy to one focused on services. To participate in the American dream, one had best get service-focused.
At the time, few understood what this all meant. Who could have guessed that for every four manufacturing jobs lost, little more than one service job would be created? Who could have imagined that much of the promise of the Great Service Economy wouldn’t be so great at all? That is, unless your life desire was to work in a call center for 12 hours placating angry customers or selling long-distance telephone services. Few anticipated the structural damage to the psyche of the American middle class when 40 million people were drawn into poverty. After all, it is hard to envision that number of people drawing food stamps. It is hard to envision that number of people, if they’re working, flipping burgers for minimum wage. A few of those people used to work in Mahwah. But those folks have it toughest of all — since not too many prospective employers will hire someone older than a 1962 Ford Falcon.
Recently, I traveled to the shipping port in Long Beach, California, which provided a truly awesome illustration of what’s been happening to America’s middle class: the unending array of empty steel shipping containers sitting on the docks. The scene wasn’t new to me; I’d seen similar signs of middle-class decay in Port Elizabeth, New Jersey. There are similar ports along the Gulf Coast, too. Long Beach is the largest incoming port from Asia. The sheer quantity of empty cargo containers was there because they sit, useless. Because we have little or nothing to export.
But while now may not be the time to be a nattering nabob of negativity (thank you, Spiro Agnew), oh, the times, they are a-changin’ (thank you Bob Dylan). Yes, Chinese labor costs may be rising, but lesser-cost Indian or Bangladeshi labor is still there to be exploited, and we know that someone, somewhere in the world, is always going to be willing to work under oppressive and often dangerous conditions to keep their family from starving. But at the same time, a more complex algorithm may be detected. We see anecdotal evidence of it: In our June 2013 post on the role of robots in the economy, we cited a small Brooklyn plumbing manufacturer using 3-D printing techniques to sell custom fixtures to Asian customers. A recent New York Times article, “A Wave of Sewing Jobs as Orders Pile Up at U.S. Factories,” brought a key point to center stage.
Hold that thought for a moment, and let me talk about a college education. Don’t worry, we’ll get back to the point.
For years we have instilled in our children the virtues of a college degree. You learn how to become a critical thinker; you learn to drink ridiculous amounts of beer through a funnel; you even learn to spell Ahmadinejad. In the end you graduate and either go to work for a hedge fund or Burger King.
If you go to Dartmouth to get that juicy hedge fund job, it will cost you or your parents approximately $247,748, not including the beer or the funnel. If you borrowed that sum at a 5% rate of interest, and if you paid $1,000 a month on it for the rest of your life, you will still owe $247,748 on the day you die. Or, if you were less self-centered, you might wish to pay back the entire loan. In that case, you’ll need to set aside 360 equal monthly payments of $1,688 to get debt free.
This is just a couple grand a month, right? No big deal if you’re pulling in 30K a month until your mid 50s. If you don’t, forget about putting aside for retirement. Just keep working your ass off and leave an extra $1,688 for the undertaker.
The reality for most college grads these days, however, is much different. Even if you’re more of the average student type and go to a nice school in the Midwest, not only will the math work out differently ($91,600 for an in-state four-year degree in Illinois, for example), but so will your income. In our last post, we noted that the average American family earned $52,000 in 2012. In 2012, the unemployment rate for college graduates was a sizable percentage of the workforce. So if you’re lucky enough to be average, you’ll still need to set aside 18% of your monthly income, or about $758, to be debt free by the time you’re a grandfather.
The key point is the story of Dunwoody.
As reported by Stephanie Clifford in The New York Times, the Minneapolis-based Airtex Design Group wanted to shift an increasing amount of its production from China to the U.S. because customers were asking for more American-made goods. Their issue was finding cut-and-sew workers, with 77% of our labor force lost since 1990. So Artex formed a coalition of manufacturers along with Dunwoody College of Technology in Minneapolis to train a group of 20-somethings over a six-month period. The cost? A mere $3,695 per person. And the tuition was paid for by local charities.
The result? Airtex pays its workers about $13 an hour plus benefits. That’s a hell of an improvement over $8 per hour flipping burgers at Burger King. Overall wages in this sector increased 13.2%, adjusted for inflation, between 2007 and 2012. That’s a hell of an improvement compared to the average American household, where wages remain largely stagnant.
Talk about a win-win situation! Look at what Airtex was facing: wages for its Chinese workers more than quadrupled in recent years, to just under $12 per hour. That was another reason they brought jobs back to the U.S., too.
And let’s say those local charities hadn’t paid that tuition. In other words, let’s do the math: tuition of $3,695 spread out over 30 years at 5% interest equals a little less than $200 per month. Based on a pay scale of $13 per hour, that is less than 10% of monthly income. Bravo Dunwoody College of Technology!
The Airtex-Dunwoody coalition is a model for the rest of our economy. It’s the kind of idea that the Obama administration totally overlooked in its first term. Interestingly, none of this relied on a government program or federal job training. It resulted from groups of like-minded people working together for the common good. Just imagine if they needed government approval or an Act of Congress to go forward.
There isn’t much good to be said about the Republicans after the government shutdown. There are many people who can’t say anything good about Republican approaches to government, period. But in fairness, the Airtex-Dunwoody coalition is the product of a laissez-faire approach to government; it’s something the GOP might have come up with when it really was the Grand Old Party. We can only imagine what might happen if other communities, in other parts of the country, put their creative juices toward solving our economic problems. Maybe we would shut down the government more often.