Nov. 10, 2009 (Naked Capitalism) -- In America, it isn’t hard to answer the question in the headline “yes.” The oft recited, “Our employees are our greatest asset” is pure Orwellian prattle; most companies treat employees as liabilities, doing everything they can to minimize labor costs, getting rid of workers whenever possible.
And this now extends well up into the management ranks, with most people who are still on the corporate meal ticket assigned responsibilities that would have constituted 1.5 to two jobs a decade ago.
And before readers argue that this is a necessary response to globalization, the evidence does not support that view. If companies were simply responding to tougher competition (in this case, lower cost suppliers from overseas), you’d expect to pressure on wages AND profits. Instead, we’ve seen wage stagnation (save at the very top) with (pre bust) record profits.
If you look at past post-war expansion periods, the vast majority of GDP growth went to labor, in the form of increased hiring and higher wages. The post war average (pre the last upturn) was close to 60%; the low was 55%. The jobless recovery lived up to its billing, with under 30% of GDP gains going to workers. By contrast, the portion of GDP growth that went to profits was an all-time record.
Similarly, as any properly-trained MBA will tell you, companies can compete on other axes besides cost: convenience, product features, speed of delivery, other types of service. And US businesses have a huge advantage: physical proximity to the biggest consumer market. Offshoring and outsourcing create considerable rigidity and risk (more coordination required, which increases the odds of snafus) Some evidence supports the idea that outsourcing is a fad that US companies embraced whether or not it fully made sense. Most companies find outsourcing to be overrated as a cost saver. A former senior executive at Ethan Allen told me there was not reason for the US to cede anywhere close to as much furniture manufacturing as it did, particularly given the cost of shipping (often two ways, since much of the raw materials come from North America). But in Ethan Allen’s case, Wall Street wanted to hear they were manufacturing overseas, and they complied.
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