Sometimes an event comes along that crystallizes people‚Äôs awareness of an issue. It is just the right things at the right time. The layoffs at the Indianapolis Carrier air conditioner factory are an example of this kind of event.
The layoffs have focused many people‚Äôs feelings about our disastrous ‚Äútrade‚ÄĚ agreements that enable, even encourage, companies to move jobs and factories out of the country so that executives and Wall Street can pocket the wage and environmental-cost differential for themselves.
What Happened At Carrier?
In February air-conditioner manufacturer Carrier, a wing of United Technologies, announced that beginning next year it will move its Indianapolis production to Mexico and lay off the company‚Äôs U.S. workers. (It will also gut the factory‚Äôs suppliers and surrounding businesses.) The announcement was caught on video and went viral just as the presidential campaign was focusing on the disastrous effects of our country‚Äôs ‚Äútrade‚ÄĚ policies.
United Technologies reported $7.6 billion in profits for 2015. This was up from $6.2 billion in 2014. The company is spending $12 billion to purchase its own stock, which manipulates an increase in the stock price. That gives an idea of just how much cash the company has at its disposal. They use plenty of it to enrich executives, with their CEO getting almost $10 million in 2014 after getting more than $20 million in 2013.
Meanwhile, Mexico pays wages averaging $2.70 an hour for manufacturing jobs. By moving production there, the company, executives and Wall Street shareholders can pocket the wage differential. Carrier‚Äôs Indianapolis workers, suppliers, businesses, tax base, housing prices and job market? Too bad for them, but that‚Äôs not United Technology‚Äôs problem.
Workers Driven To ‚ÄúOutsiders‚ÄĚ Sanders, Trump
Indiana‚Äôs presidential primary is Tuesday, and the Carrier layoffs have become an issue in the campaign. Zach Carter, reporting at The Huffington Post, in ‚ÄúWatch Corporate America Turn A Roomful Of Workers Into Bernie Sanders And Donald Trump Supporters,‚ÄĚ writes about the effect of that video announcing the layoffs:
‚ÄúThroughout the transition, we must remain committed to manufacturing the same high-quality products,‚ÄĚ an executive can be heard insisting in a video of the announcement.
‚ÄúYeah, fuck you!‚ÄĚ a member of the crowd responds.
‚ÄúPlease quiet down,‚ÄĚ the official says. ‚ÄúThis was an extremely difficult decision.‚ÄĚ
In his report, Carter explains how this fits into the larger national discussion of ‚Äútrade‚ÄĚ and the effect our ‚Äútrade‚ÄĚ policies have had on jobs and incomes, and why this is a boost to Bernie Sanders‚Äô and Donald Trump‚Äôs ‚Äúoutsider‚ÄĚ campaigns:
Both Republicans and Democrats have consistently backed economic policies over the past 35 years that have systematically gutted the American middle class. For decades, Congress has listened to corporate lobbyists who told our representatives that if they could just cut this one tax rate, or just ease this one regulation, there would be a renaissance of prosperity. The renaissance has happened for the rich. Everyone else has been left behind.
The middle and working classes have been hit hard by these economic policies that favor the upper-end ‚Äúdonor class.‚ÄĚ This ‚Äúestablishment‚ÄĚ abandonment of America‚Äôs middle- and working-class voters is a ‚ÄúYUGE‚ÄĚ issue in this year‚Äôs presidential election, driving the insurgent campaigns of Sanders and Trump. In an example of how the Carrier layoffs are driving this, The Indianapolis Star reported on Trump‚Äôs campaign announcement, in April‚Äôs ‚ÄúTrump opens Indiana campaign by blasting Carrier, Republican nominating process‚Äú:
‚ÄúYou‚Äôre looking at a situation where the jobs are being ripped out of our states, out of our country, like candy from a baby,‚ÄĚ he said.
He lambasted massive layoffs at air conditioner manufacturer Carrier‚Äôs plant in Indianapolis. The company and its affiliates announced in February they would eliminate 2,100 Indiana jobs as they move production to Mexico. The layoffs have been a favorite target of Trump, who said Wednesday he would ‚Äútax the hell‚ÄĚ out of the company.
‚ÄúYou‚Äôre going to bring it across the border, and we‚Äôre going to charge you a 35 percent tax,‚ÄĚ he said. ‚ÄúNow within 24 hours they‚Äôre going to call back. ‚ÄėMr. President, we‚Äôve decided to stay. We‚Äôre coming back to Indianapolis.’‚ÄĚ
While the economic picture moves many voters toward both Sanders and Trump, it appears that Sanders is the once getting much of the support of the Carriers workers themselves. Dave Jamieson, also writing at HuffPo, has an article headlined ‚ÄúUnion Representing Laid-Off Carrier Workers Endorses Bernie Sanders‚Äú:
The Carrier workers found themselves in the national spotlight after a video emerged in February that showed a company executive informing them that their jobs were going to Mexico. Since then, the Carrier story has worked its way into the stump speeches of presidential candidates on both the left and the right, as they have pilloried the company for its plans to offshore 2,100 jobs.
Workers at the plant are represented by the United Steelworkers Local 1999, based in Indianapolis. ‚Ä¶
Hugunin said the union decided to back Sanders because of his consistency in opposing trade deals such as the North American Free Trade Agreement, which removed trade barriers between the U.S. and Mexico.
With the Indiana primary on Tuesday, Sanders has been showing up and talking about the Carrier layoffs. Last week WFYI Indianapolis reported:
As many as a thousand union members and supporters of Democratic presidential candidate Bernie Sanders rallied outside the Indiana Statehouse Friday in support of laid-off Carrier factory workers.
Sanders‚Äô last-minute appearance at the protest came days before Tuesday‚Äôs primary election, where the Carrier story has taken center stage.
The diverse crowd on the statehouse lawn wielded signs reading ‚ÄúKeep it made in America‚ÄĚ and ‚ÄúSave our jobs, stop corporate greed,‚ÄĚ and chanted union slogans like ‚Äústand up, fight back.‚ÄĚ
Many of them were there just for Sanders, who gave an energetic speech calling Carrier‚Äôs plans to close its Indianapolis factory and move 1,400 jobs to Mexico ‚Äúunbelievable.‚ÄĚ
We will see after the polls close Tuesday know how this affects the Indiana primary.
Racing To The Bottom
Moving jobs to Mexico and other low-wage countries impoverishes American workers and devastates entire regions of the country, while enriching executives and Wall Street shareholders. Our country used to ‚Äúprotect‚ÄĚ our democracy with its good wages and environmental protections by assessing a tariff on goods coming from countries that exploit workers and the environment. This prevented the cost savings gained from this kind of exploitation from undermining American workers and their quality of life.
Since ‚Äúfree trade‚ÄĚ ideology took hold in the 1970s, undoing these protections and allowing companies to move production out of the country, our country has had a trade deficit every single year, and American workers have not seen a wage increase. Wall Street‚Äôs share of the economy (and political power) has soared while manufacturing‚Äôs (and workers‚Äô) share has declined. Inequality has accelerated.
This kind of ‚Äútrade‚ÄĚ trade-off is often justified as good for the workers in the low-wage countries. However, Reuters provides an example of how this just is not the case:
But the same low wages that help make manufacturers competitive are a long-term drag on the economy.[ ‚Ä¶] Low wages are a huge incentive for both Mexican and foreign firms. One in seven Mexican workers earn the average minimum wage of 65.58 pesos ($5.10) a day or less, national statistics office INEGI says. The average hourly wage in Mexico ‚Äď home to Carlos Slim, one of the world‚Äôs richest men ‚Äď is 31.3 pesos ($2.43).
Manufacturing workers fare better with wages averaging about $2.70 an hour but they make up only 16 percent of the labor force and their pay is way below the $19.50 per hour in the United States, figures from INEGI and the U.S. Bureau of Labor Statistics show.[ ‚Ä¶] Mexico City‚Äôs center-left mayor Miguel Angel Mancera has called for a national debate on how to improve wages. ‚ÄúCould it be that the Mexican economy doesn‚Äôt grow because the level of income for workers is so low?‚ÄĚ he said.
Summary: ‚ÄúCould it be that the Mexican economy doesn‚Äôt grow because the level of income for workers is so low?‚ÄĚ Workers there are paid so little that they not only can‚Äôt afford to buy things made in the U.S., they can‚Äôt even get by in Mexico, and this is dragging down Mexico‚Äôs economy along with ours.
Workers here are left fighting each other for the remaining low-wage jobs. Entire regions of our country are left devastated ‚Äď Flint and Detroit, Mich., and the rest of the Rust Belt. ‚ÄúFree trade‚ÄĚ has delivered nothing but misery and destruction to so many ‚Ä¶ but made a very few people enormously wealthy. The public is sick and tired of the ‚Äúestablishment‚ÄĚ that brought this on us.
This is the simple fact that our political class (who are mostly rich) fails to grapple with. I think they see the world as a combination of the way their peers see it (and they‚Äôre mostly rich!), some 30 year old vision of Middle Class America, and The Poors. They don‚Äôt get that middle class America are increasingly becoming like the poors. Maybe a bit more money, maybe a bit better lifestyle, but living paycheck to paycheck with student debt and one financial (medical, etc..) event away from nothing.
‚Ä¶ I‚Äôm sure we can throw a few more credits into the tax code and that will solve everything.
Maybe he‚Äôs right. Maybe a few more tax credits for the already-wealthy will fix everything. Maybe another ‚Äútrade‚ÄĚ deal encouraging even more factories to move somewhere else will fix everything. After all, prices will be even lower as more things are made and done by exploited workers in places that don‚Äôt protect the environment. What could go wrong?
This blog originally appeared at ourfuture.org on May 3, 2016. Reprinted with permission.
Dave Johnson¬†has more than 20 years of technology industry experience. His earlier career included technical positions, including video game design at Atari and Imagic. He was a pioneer in design and development of productivity and educational applications of personal computers. More recently he helped co-found a company developing desktop systems to validate carbon trading in the US.