November 27, 2005
Detroit’s Woes Don’t Spell End of ‘Dream’
By
Thomas Bray
The Delphi
bankruptcy and GM’s announcement last week of more plant
closings have sparked a new wave of concern about the middle class
and the supposedly vanishing American dream. “Shifting Down:
A Middle Class Made by Detroit Is Now Threatened by Its Slump,”
fretted even The Wall Street Journal recently.
Certainly
the downsizing of the Detroit-based auto industry is a threat
to its workers, most of whom would consider themselves middle
class – something that requires an income of about $45,000
a year. Delphi is proposing a base wage of $12.50 an hour, or
about $26,000 a year, with a comparable downsizing of benefits
as well as major work rule changes. GM says it plans to close
nine plants outright.
But the death
of manufacturing in the United States is vastly overstated. While
manufacturing jobs have indeed contracted 20 percent or so just
since 1996, and by 50 percent since 1970, manufacturing output
itself has remained fairly steady when adjusted for prices, according
to the Economist magazine. Something similar characterized
the transition from an agricultural to an industrial economy in
the early 20th century.
And what
Delphi is proposing to do is not reduce its workers to Third World
levels but to the levels of most other American manufacturing
workers. While Delphi’s total labor cost, including retiree
pensions and health care, currently is a staggering $76 an hour,
according to Steve Miller, chairman and chief executive, such
competitors as Lear, Johnson Controls and Denso pay wages and
benefits closer to $21-25 an hour.
Miller acidly
notes he has visited some of those other suppliers, “and
there is no rioting in the streets there.”
Miller most
recently presided over the emergence from bankruptcy of Bethlehem
Steel, another icon of American industrial supremacy. He finds
its story instructive. Bethlehem trimmed its workforce to 8,200
from 11,500, ended company-paid health care for retirees and handed
off pension costs to the Pension Benefit Guaranty Corp. (which
reduced pension payments by a third).
But as the
New York Times recounted several weeks ago, Bethlehem,
now owned by the Dutch giant Mittal, “has consolidated into
a larger company with a leaner work force and more pricing power.”
The result has been a return to profitability and good, if not
spectacular, wages. “I’m doing better at this mill
than I’ve ever done,” the Times quoted an
employee at the huge Sparrows Point plant in Maryland.
The loss
of industrial jobs has been just as rapid in other advanced countries.
In America, however, it has been accompanied by an increase in
other, even higher-paying jobs. That’s why the middle class,
far from disappearing into the ranks of the poor, has by and large
been disappearing into the ranks of the affluent.
The share
of households earning more than $75,000 (in inflation-adjusted
dollars) has expanded sharply since 1980, while the share of households
earning $25,000 or less has declined, according to a Census Bureau
report last year.
Bill Ford
Jr., whose company faces problems very similar to those of GM,
was in Washington last week making the case for a new round of
subsidies for his beleaguered industry, including support to “help
American manufacturers convert existing – but outmoded plants
– into high-tech facilities.”
That might
be something that politicians in a lot of states with “existing
but outmoded” plants might support. But overall support
may be tepid, at best, from an American middle class that is by
and large making the transition to a globalized marketplace on
its own. Reform from within is still the best hope for a Detroit
looking to rejoin the American dream.
Thomas
Bray is a Detroit News columnist.
