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Globalization

Salaries in the U.S. and Canada Threatened by Globalization

Saturday, August 02, 2008 by: Barbara L. Minton
Tags: globalization, health news, Natural News

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(NewsTarget) That giant sucking sound so colorfully described by Ross Perot is heard again this season as companies large and small relocate, close their operations or negotiate for lower wages. While the usual suspect, Mexico, continues to drain employment from workers in the U.S. and Canada, competition to attract relocating plants has intensified in other developing countries as China leads the way in the downward wage spiral.

Among the season's list of casualties are 750 jobs at the Dayton La-Z-Boy cutting and sewing facility which is being moved to Mexico, and another 400 from the closure of La-Z-Boy's Tremonton, Utah plant. Meanwhile, 350 workers will watch the bulk of their jobs at the Whirlpool plant in Cleveland also be siphoned off to Mexico.

The President of La-Z-Boy openly cites the reason for the relocation at La-Z-Boy as the lower cost structure inherent in a Mexican-based operation. Following the closure of its Utah facility, La-Z-Boy's upholstery division will have 5.5 million square feet of upholstery manufacturing space still in North America including 4.8 million left in the U.S. and 700,000 established in Mexico. Once this phase of the La-Z-Boy relocation of manufacturing operations is completed, the company expects to realize in excess of $25 million in annual cost savings by 2011.

Then there is the situation at the CanGro canning plant in St. David, Canada, the last canning plant east of the Rockies. The closing of the plant with its loss of 120 jobs has repercussions for the future of farmland in the Niagara Peninsula. Peach and pear farmers will now have no place left to process their fruit, so 1,200 acres of peaches and 800 acres of pears are going to waste. At a time when food shortages and hunger threaten people, farmers around St. David are tearing out their fruit trees.

Local politicians have been petitioning the government, trying to get investment in the plant. They question why the government did not work with two interested buyers to save the plant. They were told that the government was not in the business of canning. Yet government subsidies to businesses are common practice in the area.

A local reporter noted that while the Minister of Economic Trade and Development was in China cutting a ribbon, pink slips were being handed out at CanGro because the government had walked out on negotiations and allowed the plant to be closed. This is the third food manufacturer in the Niagara area to shut down recently. Cadbury Schweppes and a cherry processor were also shuttered. The result is that 4,000 acres of fruit land and grape growing have no where to go for processing.

Onlookers feel the loss, seeing locally grown food as what they are told will sustain them and keep them independent and healthy, as individuals, communities and as a country. They feel that for all the political rhetoric about "sustainability", the real agenda appears to be an undermining of their ability to raise their own food and grow or mine their own resources. Food from China is what they envision will be in their futures.

It's easy to see the appeal of having your work done in Mexico and China. Manufacturing wages in Mexico are as low as $1.50 an hour with the average wage at $2.30 compared to the average manufacturing wage in the U.S. of $14.70. And Mexican workers do not receive the benefits awarded to their northern counterparts. Although the promise of NAFTA was that the wages of Mexicans would rise to meet those of the U.S. and Canadian workers, the reality is that wages in the U.S., Canada and Mexico are being pushed down. Mexican wages are remaining low, being in part depressed by the low wages in China where manufacturers can go if they don't like the wages in Mexico.

Mexican auto unions are now instituting a two-tier hiring scheme and salary cuts that bring their already low wages down to near Chinese levels. Recent wage concessions were critical to persuading Ford Motor Co. to direct many of the 4,500 new jobs to a Ford plan on the outskirts of Mexico City. Union leaders agreed to cut wages for new hires to about $2.25 per hour, half the current level of $4.50 per hour, stressing the need to keep the market competitive.

Manufacturers also see ease in growing the local supply networks in Mexico and China. Mexico's free trade deals help slash the cost of importing materials and exporting finished products.

The United Auto Workers union had hoped to preserve American jobs by offering a two-tier wage system in the U.S. last fall, cutting starting wages for new workers by about half to $14.20 an hour, but it didn't work because jobs are continuing to flow to Mexico where starting wages at some plants also have two tiers with the lower tier starting at $1.50 per hour.

General Motors has also said that it will stop using high-wage workers in the U.S. The message it's sending is lower your wage demands if you want to have a job at all.

The lower costs in Mexico are helping to win a contract from Volkswagen to build a new model that the automaker had been considering building in the U.S. Mexico's large and energetic work force favors auto plants despite the low wages because they are seen as offering relatively stable employment not often found in the working world of Mexico.

The Mexican labor union leader is recently quoted as saying that despite the negotiations for lower wage contracts, for every 2,000 workers needed, 10,000 are going to show up.

Sources:

Staff writer, chattanoogan.com, La-Z-Boy, Whirlpool Moving Hundreds of Jobs to Mexico April 4, 2008.

Christina Blizzard, intelligencer.ca, McGuinty Under Fire for Closure of Last Canning Plant May 3, 2008.

Mark Stevenson, AP, Mexican Autoworker's Wages Driven Further South, June 8, 2008.

About the author

Barbara is a school psychologist, a published author in the area of personal finance, a breast cancer survivor using "alternative" treatments, a born existentialist, and a student of nature and all things natural.
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