The Fall of General Motors and the Three Paths to the Middle Class

by: Drum Major Institute

Wed Jun 03, 2009 at 13:26


Originally posted by Amy Traub at DMIBlog.

"For decades, unionized manufacturing jobs have been considered the surest path to middle-class prosperity and realizing the vaunted dream for blue-collar workers," writes Nick Carey in an eloquent analysis for Reuters. Yet today General Motors is in bankruptcy and the United Auto Workers has made a series of painful cutbacks from wages for future workers to retiree benefits to waiving the right to strike. That's before we even get to the job cuts.

As Robert Reich points out  in the Financial Times, "middle-class jobs that do not need a college degree are disappearing." In the 1950s, high-wage GM was the nation's largest employer and it supported car dealerships and parts suppliers many of which also provided a middle-class standard of living. Today, the biggest employer is low-wage, meager benefit Wal-Mart, squeezing its supply chain to provide similarly inadequate jobs. As GM and other islands of blue-collar prosperity succumb to the economic tide, we are left with a model that does not support a mass middle class.  

Yet it is unacceptable to give up on the idea of job stability, health coverage, retirement security and wages that can support a family for the majority of Americans. So, after the dramatic retrenchment of the American auto industry, how do millions of Americans get to the middle class? And what policies can we pursue to help them get there?  
Drum Major Institute :: The Fall of General Motors and the Three Paths to the Middle Class
It's hard to see any single sector of the economy offering a way forward in the long term. Green jobs are great, but they alone won't be enough to sustain a mass middle class. Jobs for college-educated workers are already amongst the highest quality positions out there.  But no matter how accessible we make higher education, there is no future scenario in which every job in America requires a college degree. No matter what, we are left with those burger-flipping, shelf-stocking, grass-cutting, retail-counter positions in the service industry. Except that those jobs don't have to be the low-wage, low benefits positions that make up today's Wal-Mart economy. Just as it was unions that made the original GM jobs into what is today the last faltering bastion of the middle class, unionization could also make the service industry into another viable path to a middle-class standard of living.

In fact, both unionization and education are critical components of all three paths to the middle class. A revitalized manufacturing sector, exemplified by the enthusiasm for green jobs,  will require skills training and union-level wages to produce genuinely middle-class employment. College education must be made more affordable and accessible to all Americans, yet the opportunity to organize and bargain collectively is also needed to ensure that professional employees don't see their own working conditions degrade. Finally, the service sector jobs that so urgently need a union boost to wages  and benefits  would also benefit from education and training that can provide genuine career ladders.  

GM may be a shadow of it's former self for a long time to come, but if we can accomplish the overhaul of labor law and make the substantial public investment in education we need, the nation's middle class doesn't have to fail along with it.  

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The Fall of General Motors and the Three Paths to the Middle Class | 30 comments
So where is Obama about the EFCA? (4.00 / 2)
Without card-check, what are the chances that unions can avoid shrinking further, much less expand?

How many readers of OpenLeft are willing to refuse delivery by non-union no-benefits outfits like DHL?

Can you say...

"No, I won't sign for that package."

How many readers are willing to boycott Wal-Mart?

How many readers won't ever buy another shirt without a union label in it? (or another pound of coffee without a Fair Trade label?)

first of all (0.00 / 0)
DHL is represented by the Teamsters.  you probably meant FedEx.  

Second, along with with obtaining good paying secure jobs, the unions need to start thinking of how to work with companies to keep them operating financially and competitively.  For too long and for too many contract negotiations, the UAW had unmatched leverage in their negotiations which gave great returns to the employees but would eventually be a determining factor in the situation we find ourselves today.  

The need for a more strategical unionization process in here now.  We can't continue to play old school unionization and believe this will get us what UAW got during their negotiations.  There is always going to be union and non-union businesses and the importance of remaining competetive will be the key to long term success for union members.

[ Parent ]
DHL is still busting unions. (4.00 / 4)
There's not much left of DHL's domestic operations for the Teamsters to represent any more, and there was never a company-wide contract that covered all hourly employees, as far as I know. One year the Teamsters had 7,000 members at DHL, the next year it was 12,000, out of 20,000, and the next year DHL's domestic operations went down the toilet.

Now DHL is relocating what's left of their operations to red states with all possible dodges to reduce union membership.

RR's claim that UAW contracts were "a determining factor in the situation we find ourselves today" is a neo-con talking-point without much basis in reality.

Toyota and Honda carved a slice out of the US car-market in the Seventies with superior engineering and fuel-efficiency, at prices comparable to Ford or Chevy.

Union wages were a miniscule factor in the demise of the Big Three compared to the abysmal stupid of top management.


[ Parent ]
Typo (4.00 / 3)
It should be...

"...compared to the abysmal stupidity of top management."

And it's probably worth repeating, since neo-cons are pushing the meme of "unions killed GM."

Union wages were a miniscule factor in the demise of the Big Three auto-makers, compared to the abysmal stupidity of top management.


[ Parent ]
Big Three have had lousy management (but well-paid) (0.00 / 0)
Agree. The Big Three spent much of the last 40 years fighting with their workers and suppliers, trying to squeeze every nickel out of them, which led to supply problems, morale problems with their workers (including strikes), and cars that rattled and fell apart. Meanwhile, Toyota was working with its workers and suppliers to figure out how to build good cares cheaply. Ironically, the Toyota Production System was inspired by Dr. Edwards Deming whose ideas were widely embraced in Japan, but not in the US.
[ Parent ]
As a former (0.00 / 0)
DHL employee for six years, let me correct your facts.  When DHL purchased Airborne Express in 2003, it assumed all of Airborne's Teamster contracts as well as its employees and routes.  Since 2003, the teamsters gained several additional contracts with DHL including a National Master Agreement on both the Express and Freight division.  

DHL Express domestic operations went down the toilet because they were not able to overcome huge losses in the domestic arena (600 million in 2003, 600 million in 2004, 500 million in 2005, 600 million in 2006, and so on).  They finally figured out they could not gain much market share from FedEX and UPS.  DHL is not relocating to red states.  They are getting out of the domestic express business altogheter.  

The only part of DHL in the U.S. will be the freight division which is doing quite well (number 1 in the world) in freight.  about half of the freight division is made up of teamsters with long standing contracts including a National Master Freight Agreement Which covers about half of the hourly employees represented.

[ Parent ]
Did you read my link? (0.00 / 0)
Wednesday, May 15, 2009...

First, is DHL's move from Wilmington to the northern Kentucky airport a "relocation" of its Wilmington operations, and will the work to be performed in Kentucky substantially be the same as the work currently done by employees in the company's international operations at Wilmington?

Second, does DHL currently employ "a representative complement" of employees in the proposed union group?

And third, what changes in the description of the proposed union group would be required to reflect any new employee classifications due to DHL's move to Kentucky?

Attorneys for DHL speak of an NLRB tenet that, according to the attorneys, tries "to balance two competing interests: ensuring maximum employee participation in the selection of a bargaining representative, and permitting employees who wish to be represented as immediate (a) representation as possible."

Attorneys for the American Postal Workers Union noted the application for an election was filed on Oct. 11, 2006. In the nearly two and a half years since, "the company has used unlawful conduct and legal delays to frustrate their (employees') attempts at getting a free and fair election," the attorneys wrote.

So when the neo-con troll RR claims that DHL isn't still trying to screw the unions while it relocates from Wilmington to Kentucky...

I don't believe him.

[ Parent ]
Troll Troll Troll (0.00 / 0)
thats your only response when someone has a diifferent opinion.  If we don't think like you, then we are all wrong.  

What you are reading is not entirely correct.  DHL already has a Kentucky operation.  It is their HUB station for distribution across the U.S.  And yes, they are shutting down the Delaware operation and sending everything they have left to the Central Hub in Kentucky.  This is a prelude to eventually shutting everything down as they get out of the express business all together. The Kentucky Hub has been open and operating since 2004.  

In case you missed it, DHL is going out of business and winding down its operations.  Thousands of jobs are being lost both union and non-union.  This is no different than Chrysler, GM, Caterpillar, Roadway, etc etc...I can go on and on.  This union only mentality has been the downfall of the unions for the last 20 years and hence they are down to 7% membership in the private sectors.  My point to my original post was that if they unions don't begin to change their strtegies, that 7% will only continue to shrink.

[ Parent ]
on more thing...FYI (0.00 / 0)
in ref to your statement:  

"How many readers of OpenLeft are willing to refuse delivery by non-union no-benefits outfits like DHL? "

DHL has both a full retirement pension plan and a 401K with match along with paid holidays and sick days. They also have 2 premium (non-HMO) medical plan with Cigna and BCBC.    

[ Parent ]
Good essay. (4.00 / 1)
This is the key question in rebuilding the economy.  Obama spoke of a new foundation.  That's what we need.
Wal-Mart (4.00 / 7)
I haven't gone to Wal-Mart in over a decade because of their despicable labor practices.  Go to Costco. Prices are similar and the workers get paid double the Wal-Mart level (and gove superior service).
oops (4.00 / 1)
Give superior service
[ Parent ]
Where do we start to make a life worth living? (4.00 / 1)
You said this,

"...As GM and other islands of blue-collar prosperity succumb to the economic tide, we are left with a model that does not support a mass middle class.  

Yet it is unacceptable to give up on the idea of job stability, health coverage, retirement security and wages that can support a family for the majority of Americans. So, after the dramatic retrenchment of the American auto industry, how do millions of Americans get to the middle class? And what policies can we pursue to help them get there?..."

You recognize that if certain benefits depend on high wage employment, then people flipping burgers and cutting grass will have to get the wages and benefit packages in the future that auto workers have received in the past.

I am not sure that this can be done. Yes, a hamburger stand could be unionized, and its employess given a certain level of health and retrement benefits, but, to do that to the level of auto workers would make those burgers unaffordable.

You might argue that if you paid your burger flippers a family supporting wage then you'd be able to sell those burgers to your employees and everyone would benefit, but not everyone, I think, will be able to get such high wage high benefit burger flipping jobs. Those burgers will become too expensive for people who don't have those wages.

One solution to this problem might be to have have health benefits paid for by the government in a single payer kind of system. Then, even people who have relatively low wage jobs can have first class health access and coverage. Relieve the burden of having to provide health benefits to employees from business.

Another solution would be to fully fund those social services local governments have been lax about providing to children, the disabled, and the elderly so that there is not the fear for what will happen to you if you are not employed in a high wage job. We would not then have to force burger stands out of business trying to maintain a middle class.

Another solution would be to find ways to promote local manufacturing and productive ness. There is a crying need to prepare the country for a time when there is not cheap gas and oil, so we'll need mass transit and local agriculture. Spread out cities will become unsustainable so they will need investment in rebuilding. It's not like there isn't work that could be done.

Again, I don't think service workers can be paid enough to replace manufacturing related family wage jobs.


Plenty to go around (4.00 / 5)
These are the same arguments that were used against the UAW when it was first forming -- that no one could buy a car if they were produced by union workers because they would be too expensive. Instead, union workers worked smart and hard, which increased productivity. Also, since workers could afford to buy cars this provided a big consumer base for the automakers. It worked for everyone.

The only reason we can't provide good housing, healthcare, education, childcare, and other important aspects of a middle class lifestyle for everyone is that these are not priorities. Instead, the focus has been on producing high profits and high income for the rich. Investment bankers contributed almost nothing useful over the past 20 years -- much of what they were doing was building gigantic Ponzi schemes and suckering people into putting their money into these schemes. If all that effort and talent had gone into something useful, such as producing high-quality goods, providing important services, improving energy efficiency, etc., then everyone in this society could have had a much better life. But all that effort and money was wasted.

There is still time to harness the immense skill, experience, and drive of American workers for the benefit of us all. But we can also continue to squander these resources on lots of useless plastic junk made in China and on "lifestyles of the rich and famous".

When sufficiently powerful and operating at their best, unions have been critical in ensuring that the wealth of the nation was distributed to everyone, not squandered and not pocketed by the rich and powerful. Democratic unions will be a key player in doing this in the future.

There are no valid reasons for any job to pay less than a living wage and no valid reasons for our government not to ensure provision of housing, education, healthcare, childcare, and decent retirement to every person. Anything less than this just shows how little we value our neighbors and how little we care about our country. It just shows how classist we are.

[ Parent ]
A revitalized manufacturing sector (4.00 / 5)
if we want more manufacturing jobs in the usa, aren't we going to have to talk about single payer health care reform?

continuing to have health insurance to tied to employment puts american manufacturing at a severe disadvantage.

Middle Class Lifestyle (4.00 / 3)
I'm not sure what that means. The diary seems to define it as the ability to get a living wage job without a college degree. By that definition, I grew up in a middle class family. Thing is, even with my Ph.D. in chemistry and a good job at the local VA Medical Center, I'm not doing much better than my middle class parents.

To the extent that the "middle class" made possible by the manufacturing industries were the driving force behind suburban sprawl and the almost complete dependence of the US on private automobiles for transportation (among many other environmental and cultural issues), are we really sure that returning to that status quo is the best plan?


"It sounds wrong...
     ...but its right."

Mistakes were made (4.00 / 4)
Our society could have addressed poverty in cities and racial turmoil. But instead our society just made it possible for those who were a little richer and whiter to move out to the suburbs and get away from poor people and minorities. And our society could have provided healthcare to everyone and ensured everyone received a living wage. But instead, healthcare was tied to employment (which forced workers to be more loyal) and the emphasis was on ensuring high profits and high wages for executives. These forces were associated with the manufacturing industries as they evolved, but there was nothing inherent in manufacturing that demanded that our society make these choices.

We can certainly do better than this in the future if we try.  And we can also have lots of manufacturing here. We will always need transportation as well as lots of consumer goods, but we don't have to have 8-lane freeways, 4-car garages, and tons of plastic junk from China in order to get it. There are many ecological and more humane choices our society could pursue.

[ Parent ]
This, I can agree with (4.00 / 2)
But such is not how the "rebirth" of the American manufacturing base is generally presented.  Most seem to look back with such longing on those "good old days" in '50s and '60s. It was that same "middle class" that chose to buy huge gas-guzzling trucks and SUVs and drain wetlands and pave prairies so that they could buy their latest "toys" from a strip mall based big-box retailer.

We have to re-think our entire lifestyle if we are going to survive (I mean as a species, not a nation) and that must include a hard analysis of the pros and cons of our middle class suburban lifestyle.


"It sounds wrong...
     ...but its right."

[ Parent ]
The suv didn't become popular (4.00 / 2)
till the 90s.  I don't think a more class equal society creates environmental problems.
[ Parent ]
Middle Class standard of living (4.00 / 5)
I linked to this definition of the middle class once in the post, but should probably have included more links:

The middle class is more than an income bracket. Over the past fifty years, a middle-class standard of living in the United States has come to mean having a secure job, a safe and stable home, access to health care, retirement security, time off for vacation, illness and the birth or adoption of a child, opportunities to save for the future and the ability to provide a good education, including a college education, for one's children. When these middle-class fundamentals are within the reach of most Americans, the nation is stronger economically, culturally and democratically.

Most Americans identify themselves as middle class. Yet DMI is concerned not only with those who currently enjoy a middle-class standard of living, but also with expanding the middle class by increasing the ability and opportunities of poor people to enter the middle class. The middle class is strengthened when more poor people are able to work their way into its ranks. In a nation that is increasingly polarized between the very wealthy and everyone else, DMI sees the poor and middle class as sharing many of the same interests. Simply put: what strengthens and expands the middle class is good for America.

www.dmiblog.com  

[ Parent ]
Thank you (4.00 / 1)
This definition includes many folks that have education well beyond high school. That's a good thing because it obviates the more class-based social divisions like those based on identifying the supposed color of a worker's collar.  

"It sounds wrong...
     ...but its right."
[ Parent ]
The survival of the middle class will require more. (4.00 / 1)
The survival depends on significant structural changes to our economy including one the relies less on consumer spending.  We were never prepared to make the transition to manufacturing based economy to a service based economy and globalization.  Now we are left with the consequences.

Unionization will help but so well a single payer health care system and a egalitarian (public) education system from head start to second year of college.

RebelCapitalist - Financial Information for the Rest of Us.

Another potential solution (4.00 / 4)
Expanding entrepreneurship. Make it easier for the burger-flipper to start a restaurant, the grass-cutter to start a landscaping business, and the retail-worker to open a neighborhood store. But right now our economic system thwarts entrepreneurship in at least three ways:
1. Tying health care to employment. A terrible idea that makes people stay in jobs they don't like. We need government provided health care so people can move about more independently in the economy.
2. Tax benefits for large corporations while self-employed individuals pay through the nose. Large corporations use tax benefits and other advantages to make everyone compete on large economies of scale. The bigger you are the higher your percentage of taxes should be because the more you "tax" the nation's infrastructure. For every Wal Mart that has to raise prices to "pass along" the cost of higher taxes, there will be hundreds of small businesses that will be able to charge less for their goods and services.
3. Access to financial leverage. The whole banking and financial system is engineered so that large corporations can strengthen their financial clout by selling public shares on Wall Street while entrepreneurs have to resort to high-interest bank loans with awful terms. Fees and restrictions related to the Wall Street-based financial and banking system have to be altered so they end up subsidizing small-scale entrepreneurship.  
Excellent post (4.00 / 1)
And since entrepreneurship is an area where the US is strong, this would be building upon a known strength, reinforcing success.

I'm not sure that the ideal of a "stable, safe" job is truly possible anymore.  Saw a statistic in The Economist yesterday that, even in normal, "good" times, 15% of jobs in the USA are eliminated every year.  To be replaced by other, different jobs.  A lot of small businesses start up every year, and a lot go under.  

The Economist saw this a good part of our dynamic economy.  YMMV.  :-)  But significantly decreasing this number will require major economic changes.  IMO, a better progressive approach than fighting a worthy but losing cause to simply preserve good middle class jobs would be to accept this "dynamic" turnover, but lessen the hit by providing health care, reeducation, and incentives for entrepreneurship and new technology like green tech.

[ Parent ]
Regulated Trade is the key issue of our time... (4.00 / 2)
...because if Trade is not highly regulated, it will be used as a powerful tool by multi-national corporations to undercut and undermine any gains made here in this country, every single time.  The proof already lies within the devastated towns and cities across this nation.

If wages are higher in this country, there will always be some other country that can provide wages at a much lower level to multi-national corporations. If worker benefits are higher in this country, there will always be some other country where workers will not have those benefits making it cheaper for the multi-national corporations.  If pollution regulations are more stringent in this country, there will always be some other country that will guarantee a multi-national corporation of no pollution regulations.  I can go on and on.

Unregulated Pro-corporate Trade (falsely presented as "Free Trade") will destroy:
- Good Wages
- Good Benefits
- Meaningful Unionization
- Pollution Regulations
- Our overall standard of living and way of life.
- American Power.
- And the list could virtually go on infinitum.

As I mentioned earlier the key issue of our time is Trade.  And as long as that issue is covered up by our politicians of both parties, the further we all have to fall.

Regards,

True, but extremely difficult (4.00 / 1)
The solution has to be an international one which addresses the needs of labor, by which I mean the vast majority of people around the world whether what they do for a living falls into the category of what we used to call industrial labor or not. Subsistence farmers forced off their lands by foreign-financed latifundia would qualify, as would shepherds butchered by warlords so that oil companies can drill on their pasturelands.

This means solving political and cultural problems as well as purely economic ones. We talk endlessly about wage and price differentials, differing tax structures and environmental protection laws, and the existence of bribable oligarchies, but we rarely speak about how to get the UAW to make common cause with assembly-line workers in China, or what would persuade an Iowa farmer to form an alliance with a Mexican farmer impoverished by the flooding of world markets with cheap, GM maize produced in El Norte.

As I've said before, we need a Fifth International. If someone can figure out how to manage that for real, you'll find me at the corner bus stop, bags packed and ready.

[ Parent ]
A large middle class is a historical anomaly... (4.00 / 3)
...that was largely brought into being by the unionization of a significant portion of the population, who were employed in domestic industries that were protected by US tariffs and the natural historical barriers to global transportation.

The US tariffs were removed only recently in historical terms, the historical barriers of transporation have been largely overcome, and subsequently those domestic industries that were once protected through tariffs and natural barriers have been decimated along with the unions that improved not only their members standard of living but the whole societies standard of living.  The unions in effect brought a middle class lifestyle to most of the population.

With the tarriffs removed, fast efficient global transporation a reality, and a new pro-multinational corporation trade policy in place (so-called "Free Trade") it was now possible for corporations to undercut unions and avoid any domestic regulations.

Our domestic industries now have largely been removed to foreign shores, resulting in our unions and the multitude of benefits that they brought us to be largely snuffed out or made meaningless.  And you now see an ever-shrinking middle-class returning to its historical small size.

Regards,

Redistribution of wealth (4.00 / 2)
Some jobs require more training than others. Some jobs therefore attract more pay than others. And humanity looks at things relatively, not absolutely.

There will always be inequality, but we need to keep that within reasonable levels. Nobody should be so poor that they can't eat properly, can't get healthcare, don't have hopes of retirement without poverty and can't spend time with their children or help them to better themselves.

And there's only one way to accomplish the core conditions necessary for that. You need to squeeze the reach. You need to start reducing income inequality, so that there are many producers of wealth and it isn't one master of the universe and 300 Walmart greeters.

Forgotten Countries - a foreign policy-focused blog

You underestimate the impact of robots (4.00 / 2)
No matter what, we are left with those burger-flipping, shelf-stocking, grass-cutting, retail-counter positions in the service industry.

We won't have those jobs.

robots (0.00 / 0)
  Your comment reminded me of an old gripe of mine. Why should the advances made by technology benifit the rich so much more than the producers in general? Labor saveing devices and methods always end up lowering lifestyles of workers, and enriching employeers. A carpenter with an air nailer will put up more roofing plywood than three without nailers, but gets no (or minimal) extra pay for the added production. We need a system where all share more equally in advances in productivity. I am unsure how to do this, perhaps a tax on labor saveing devices that would be used to reduce taxes on low and middle taxpayers? Or maby just a return to the higher tax rates for the top brackets that worked so well in the years prior to the supply side scam?

Government by organized money is no better than government by organized mob..... FDR
[ Parent ]
The Fall of General Motors and the Three Paths to the Middle Class | 30 comments
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