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Guest Column

January 11, 2014

How to bridge a widening wealth gap

If the government’s figures are correct, the gap between the haves and the have-nots is growing. Two questions logically follow: should that be a surprise; and what are we going to do about it?

A decade or so back our politicians made a conscious decision to change the US economy from a manufacturing-based economy to a service-based economy. It was popular to send our manufacturing jobs offshore and to pass NAFTA (North American Free Trade Act) which allowed countries with lower manufacturing costs (especially labor costs) to flood the US with cheap goods. It seemed like a good idea at the time to transfer all those “nasty” environmental and health issues (externalities) somehow tied to manufacturing, either by perception or reality, to some other country and then buy their goods for less than our own manufacturers could sell them.

Unfortunately, our middle class jobs went with that manufacturing. For decades our middle-class existed and prospered due to the manufacturing giants that provided good paying jobs and benefits. It is difficult, if not impossible, for the service industry to compete with that record. In other words, McDonalds isn’t able to provide a comparable level of compensation and benefits and still compete. There is an effort underway to unionize that workforce and thus enable those workers to better advocate for increased pay and benefits. However, if they get them, the cost of a big-Mac will increase.

Looking back, it’s easy to see that a similar thing happened to our manufacturers. Early on the unions provided a much-needed force to improve workers’ well-being. Over time, however, they may have gone too far and contributed to the inability of those manufacturers to compete on a global basis. It wasn’t just the US economy that was going through change – we were beginning to face the complexities and challenges of competing in a global economy.

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