A Domestic Payoff From the Global Shift? Believe It

Does the advancing global economy mean a payoff or a layoff for U.S. workers?

That blunt question is a good one to ask this Fourth of July weekend because in the bitter strike at General Motors, the United Auto Workers union has accused the company of shipping jobs to Mexico and other low-wage countries.

And U.S. opinion lately seems to have shifted against world commerce. Trade bills die or are withheld in Congress. Examples of U.S. companies gaining new markets--from the opening of Chrysler’s truck plant in Brazil (see accompanying story) to the Shanghai Motors-GM joint venture in China that President Clinton didn’t visit last week--seem only to arouse politicians and commentators to wilder claims that global commerce erodes American living standards.

But the facts say otherwise. The U.S. economy, even though slowing at the moment, continues to add jobs--205,000 more last month. Unemployment, 4.5% in June, is near a 28-year low. And even manufacturing jobs in the U.S. automobile industry, at 987,000 currently, have grown by more than 100,000 over the last 10 years as U.S. production by foreign auto companies added to expanded output by U.S. companies. The global economy can be a two-way street.

Times change, jobs change. The leading U.S. industries today are the related fields of computer electronics, telecommunications and software, now employing 4.5 million. It is in those industries that new service jobs have grown up, such as computer programmer, network manager and so forth. Often derided as low-wage, such service jobs in fact pay more than $50,000 a year on average.

That’s not to say there aren’t problems to be dealt with, low-wage societies prominent among them.

But looking at today’s changed economy as it is, rather than harking back to half-remembered earlier eras, is the way to deal with them.

You realize how much the economy has changed when you learn that the company employing more people than any other is now Manpower Inc., the Milwaukee-based temporary-help firm with 850,000 U.S. employees, ranging from stenographers to scientists, and 850,000 more outside the U.S.

You realize how significantly the economy has changed when you learn that in 1970, when the global economy was first making an impact on American consciousness, only 40% of U.S. women were in the work force. Now that figure is 57%.

The facts about the GM strike are very different from the rhetoric. The strike at the Flint, Mich., stamping plant, which turns out fenders, door panels and other car body parts, is not about Mexico but about honest work and good management, neither of which have been prominent at GM in recent decades.

The production workers at Flint have been operating the stamping presses at half or less of capacity for years, yet collecting pay for full operation. Why? Because GM managements in previous labor negotiations had ceded to the United Auto Workers local union the right to work at that pace as a way of buying labor peace.

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But now GM management says it is forced to change the rules. Why? Because the company is in trouble. “GM uses almost twice the number of people to do a job that Ford and Chrysler do,” says James Harbour of Harbour Associates, a Troy, Mich., expert on auto manufacturing.

That’s why at best--even forgetting price discounts to sell their cars--”GM can only earn $850 on a car, compared to $1,330 for Chrysler and $1,520 for Ford,” Harbour says. Toyota and Honda also make more on each car than GM.

The company can’t go on as it has. Whatever compromise ends the Flint strike, GM may have to close some plants and move work not to Mexico but to other U.S. locations where it can produce efficiently.

But GM will still invest $21 billion in U.S. plants over the next five years and more than 200,000 production workers will operate them, because the company has to be successful in the North American market, still the world’s largest.

GM and other U.S. companies also need to be successful in foreign markets. A company relying on one market or region, as some European companies have done, becomes vulnerable to multinational competition.

GM, which is building up in China, Brazil and South Korea, gets no argument from the UAW about producing in foreign countries. Walter Reuther, the UAW’s legendary leader, “said you have to build them where you sell them,” says union spokesman Paul Krell. There was no question in Reuther’s mind that through global operations, U.S. companies earned more and created opportunities for the general welfare of all their workers.

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But Mexico, where GM and other companies make auto parts and some vehicles, is a problem because the Mexican people can’t afford to buy many cars and trucks after years of declining living standards caused by government corruption and mismanagement of the economy.

Therefore, Mexico has become a source of cheap parts exports to the U.S., aggravating tensions between workers and managements and giving fuel to opponents of open trade policies.

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It should be understood that Mexico is not an economically attractive place to produce sophisticated products such as automobiles. It has unreliable electricity, transportation and other infrastructure along with its cheap labor.

The solution to Mexico’s problem is economic development, for which even its low-wage jobs are a start. But changes are needed on both sides of the border. The UAW is already working with the Mexican workers federation to lift wages and standards in Mexico. GM management and its U.S. workers could develop ways to use Mexican production for the total company. But such cooperation will require trust between management and labor--which doesn’t seem to exist currently.

“Global production is beneficial if it is with the cooperation of U.S. workers, but not at their expense,” says Harley Shaiken, a labor economist at UC Berkeley.

The situation of workers and of companies is different in the new industries mainly because U.S. companies lead the world in computers, electronics, software, to some extent in telecommunications, and in the new frontiers of computer networking and Internet commerce. “U.S. industry sets the standards,” says Craig Barrett, president of Intel.

There’s a great benefit to that. The profits of innovation come to U.S. companies. There is money to invest in even newer visions, money to reward employees. Standard-setters attract investors, high stock prices and further rewards of innovation.

U.S. companies’ use of computer networks to link customers and employees has enhanced their global abilities. Internet innovators, such as bookseller Amazon.com, presage whole new industries. Manpower is introducing a global training system on the Internet so its many freelance employees can upgrade their skills. The training will be free, yet it will yield great value to the company by cementing connections to its workers and its customers.

The Internet is the kind of business innovation that has set the U.S. economy apart in this decade. “The U.S. system has engendered more entrepreneurial companies and innovated more efficiently in this decade than at any time in its history. That’s why it has created so many different new jobs,” says Jonathan Aronson, professor of communication at USC and co-author of “Managing the World Economy.”

That’s the reason the world is looking to and investing in the U.S.

We should keep that in mind, especially now, as the U.S. economy appears to be slowing and doubts about the global promise may become louder. Be not deterred: The payoff is huge.

Auto Jobs

In the bitter strikes at General Motors, the United Auto Workers union and some politicians have raised the specter of manufacturing jobs being transferred to Mexico and other low-wage countries. But U.S. government figures show jobs in the auto industry increasing over the last decade, as foreign car makers have opened factories in this country. Union jobs have declined, but not automotive production or employment. U.S. auto industry jobs for June of each year, in thousands:

‘98: 993

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Source: Bureau of Labor Statistics