Thursday, June 23, 2016

Obama, Florida, Hanauer

In an extended interview with Bloomberg editors about America's economic future and role in the global economy, Obama hewed to a simple principle: embrace global trade, but adjust current rules to increase labor's bargaining power while investing in education and skill development. He struck a couple of  notes that recalled things I've read that have resonated with me, about why, where and how wages have to rise. 

First, with respect to manufacturing vs. service jobs:
I think that as we move toward an economy where, because of automation, you need fewer and fewer people to make more and more stuff, more and more of us are going to have to move into the service sector. The service sector historically has been a low-wage sector. And in order for us to make sure that we don’t see this growing divide between haves and have-nots, with a middle class that’s shrinking, we’re going to have to make sure the service sector pays better.
Yes, the U.S. can create some good new advanced manufacturing jobs, in ways that James Fallows has illustrated in his travels around the country for the American Futures project, but the share of those jobs in U.S. employment won't match the totals of yesteryear.  The notion that service jobs are not inherently inferior to manufacturing jobs is one that Richard Florida has been advancing for some time, e.g., in this 2010 essay:

Yet the blue-collar jobs we pine for were not always good jobs: we made them good jobs. When my father came back from the second world war, his poorly paid factory job had been transformed. He was able to buy a house, put his two sons through college and participate fully in the American dream. Some of this was due to the power of unions. Most of it was because of the enormous improvements in productivity wrought by improved technologies and management techniques.

The same thing can and must happen in the service sector. It is starting already. Companies such as Wegmans, Whole Foods, the Container Store, Best Buy and Zapposalready account for a fifth of the top 100 best places to work in America. A typical hourly worker at the Container Store earns about $30,000 a year, not nearly as much as a GM factory worker but about 50 per cent more than the average for hourly-wage retail workers. Retail outlet Trader Joe’s mandates that full-time workers earn at least their community’s median household income, while its “store captains” can make six-figure salaries. These companies recognise that better conditions lead to better customer experiences – and an improved bottom line.
That closing claim that paying good wages is a matter of enlightened self interest is of course a basic tenet of our eroding social contract -- one that needs to be reinforced, and enforced. That also is Obama's argument:
You know, if I am a CEO in a boardroom right now, I should be thinking about, how do I make sure my workers are making a decent wage? And if I’m a shareholder, that is something I should be paying attention to, too, because if you’re not, that’s when you start getting the kinds of political pushback that you’re seeing here in the United States. That’s how you start getting a Brexit campaign. Over time, you’ll strangle this goose that’s been laying you all these golden eggs. Share the eggs. 
Of course there's often a disconnect between the immediate effects of one's own action -- more or less profit -- and its relatively tiny impact on the national and global economy. Still, the larger economy can come back to bite us all, and in fairly short order.  That's the mantra of populist billionaire Nick Hanauer, who warned his fellow .01%ers back in 2014:
If we don’t do something to fix the glaring inequities in this economy, the pitchforks are going to come for us. No society can sustain this kind of rising inequality. In fact, there is no example in human history where wealth accumulated like this and the pitchforks didn’t eventually come out. You show me a highly unequal society, and I will show you a police state. Or an uprising. There are no counterexamples. None. It’s not if, it’s when.
Obama was a bit less apocalyptic, but the upshot was similar:
My argument has been that the reason people are resistant to [the free-trade] argument is because global elites have been inattentive to the issues of wages, incomes, and opportunity for ordinary people. If you’re selling globalization and saying it’s great, even though each year, not just in the United States but across the advanced economy, you’re seeing more and more of a winner-take-all economy, where not just the top 1 percent, but the top 0.01 percent, are getting a larger and larger share, then, yes, it’s going to be pretty hard to make the argument that “Don’t worry, this is great for you.”

And this is another area where sometimes I find myself arguing with my friends in the business community. The issue is not resentment or class warfare or that somehow we want to level everybody down rather than lift everybody up. The issue is that, if in fact automation and globalization do have a tendency to create vast wealth and opportunity for a very small, highly skilled set of people and have a tendency to create a larger and larger group of folks who feel redundant in the economy, and if you don’t pay attention to that, then people will rightly resist. They will understandably say, “I am not getting a good deal here.”  
As with most extended Obama interviews, it's hard not to come away impressed by the president's deep intelligence, grasp of facts, awareness of nuance, willingness to take the long view, and overarching pragmatism. Yes, we're going to miss him.

1 comment:

  1. Hanauer is a fine man and I appreciate his writing overall.
    But he is wrong to say that inequality will cause riots in America.
    If Warren Buffett gets an extra billion and hedge fund managers get higher incomes one year, that makes us more unequal. Does that send anyone into the streets?

    America did have bloody riots in the 1960's -- I saw a few of them. They occurred because of the draft, the Vietnam war, and police brutality toward mainly blacks. No one computed income inequality at the time.

    Actually there are some political pitchforks out right now, and most of them are on the side of Donald Trump. Not exactly a protest over inquality, unless you posit that the white racists who support Trump want more inequality.