Be Relevant

Relearning everything we've forgotten.

Monday, February 21, 2011

Is Wisconsin a glimpse of America's future?

Is Wisconsin a glimpse of America's future?  However you wish to fall on the sides of the happenings in Wisconsin the fact remains.  The Governor is trying to get rid of public employee's rights to collective bargaining.  This, in essence, is the strength of a union and without it, the union is essentially a paper tiger.

Why would getting rid of unions in the public realms make sense?  We have to look at the private sector for that answer.  In the late 70's unions were reaching the zenith of their power.  This coincidentally is also the last time that wages kept up proportionately to economic growth.  During the fabled prosperity of the Reagan years, business deregulation, union busting, and outsourcing led to the significant downfall of union power in the private sector.  The reason for doing this was to keep labor low.

In business, simply put,  you have inputs and outputs. By keeping your inputs lower than your outputs you can earn a profit.  Operating costs, labor, raw materials, and transportation of goods to a market are essentially the main inputs (operating costs tend to include energy, licensing, leases, inspection fees, etc. - "the costs of doing business").  The product is the output.  In the global economy it has become very easy for a business to move their operations overseas where they enjoy low labor costs, low costs of natural resources, and low operating costs through government incentives.  Cheap transportation via cheap fossil fuels allow this separation between inputs and outputs.  Because the product must be shipped to another location where the affluence of that population creates a market for the product.

But doesn't suppressing wages while still increasing production create a catch 22 for businesses?  Yes it does.  This is why in the 90's we saw the take off of credit companies.  Here in the United States, wages haven't significantly increased to keep up with the economic production.  Yet to keep a nation of consumers consuming to continue the sacred GDP increase annually, businesses had to allow consumers to borrow on credit.  Essentially borrowing against future wages.   Wages which are all ready so low that  a person, paying the minimum monthly payment, will be paying for the rest of their lives.  Which is actually a great idea.  Why spend the effort to get you to go shopping to earn money when a guaranteed monthly cash flow can be had?

The global economy isn't as big as it's made out to be and its getting smaller every day.  It is no secret that oil will run out one day.  Well, its no secret except to us consumers.  Governments and businesses know this.  Once cheap fossil fuel is no longer cheap then outsourcing no longer becomes as profitable.  If the costs of transporting my product increase then I have to (a) increase the cost of my product, (b) drive down the costs of my inputs, (c) stop transporting my product so far, or (d) all of the above.  As transportation costs sky rocket we will see the end of outsourcing for manufacturing.  We'll also see a rise in product costs and probably the increase in credit companies in 3rd World Nations.  

So this means more jobs here at home.  Good.  Well not if they come about as is (potentially) happening in Wisconsin.  Which makes this idea so diabolical.  Instead of reducing the labor cost outright they reduced the operating costs through tax incentives and other various political outlays to the businesses.  This reduction in taxes has to be made up somewhere.  That somewhere is in the paychecks of public employees and in the cutting of services for the citizens of the state.  Over time, when production far outpaces wages, this will have the net effect of reducing labor costs as well.  Eventually, the public pensions and health care benefits will be no better then the private sectors and then businesses will have their pick of employees.  So getting rid of unions in the public sector will allow businesses to lower their operating costs through tax incentives and other political policy and then the tab is picked up by the public employees.  This way lawmakers don't have to increase the taxes on the entire populace incurring the people's wrath come election time.  Well for now that is.

There is a way out of this.  Yet it requires each and everyone one of us to be vigilant.  We have reached a state of "Unconscious Competence" when it comes to living.  Living for us is so easy that it's like driving to work and wondering how you got there.  Unconscious Competence is good for things like CPR, the Heimlich maneuver, and instances in crisis which require you to act and not think.  We need to take a step back in our competence.  We need to be "Conscious Competent" because we need to think about how we are living our lives.  We need to think about the world we are leaving to our kids.  What kind of life are we living that requires no thought on our own?

So is Wisconsin a glimpse of America's future?  I hope not.

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