Recent news stories demonstrate the plight of the American middle class.
Sensata Technologies is closing a 200-employee automobile-sensor plant, moving production from Illinois to China. It’s in the headlines because Bain Capital owns Sensata, and Mitt Romney is a founder and part-owner of Bain.
The outsourcing of jobs is hardly unique to Bain, though. In December, Emerson Climate Technologies closed its Copeland plant in Hartselle, moving production to Mexico.
Americans are convinced they can out-work Mexicans and Chinese. Maybe so. But China’s average wage is about $2.50 per hour. Mexico’s is about $3.50 per hour. Emerson and Bain apparently concluded the productivity of the American worker is not so great that it offsets the wage differential.
In Alabama, we see signs of the pressure on the middle class in disputes over public employees. Politicians and their constituents complain that public employees are paid too well and receive overly generous benefits. The result has been a reduction in teacher pay and the reduction of many state pension plans. Legislators last week said they may close Alcoholic Beverage Control stores, thus eliminating state employees and their benefits.
Cutting taxpayer-funded wages is easy politically, because Alabamians are frustrated when they see state employees making more than they do. The distressing fact, though, is that public-employee wages are not rising. Rather, private-sector employees are making less.
Tennessee Valley Authority, which recently had to add $1.3 billion received from customers to its pension fund, is under political pressure to adjust pensions or eliminate them. This pressure comes not because TVA’s pensions are up, but because private employers — including solid companies like United Launch Alliance — increasingly are doing away with pensions.
The problem is disturbing, but clear: The downward pressure on wages and benefits is hurting our quality of life, and damaging our expectation that our children will have better prospects.
The solution, if there is one, is complex. It is made more thorny by the fact that it is a problem not affecting the wealthiest Americans, who enjoyed a 277 percent gain in real income over the last three decades while 90 percent of wage earners saw a decline. They have, in other words, benefited from the low wages of their employees.
This tension between owner and employee is nothing new. It is a reason, though, to make sure we elect leaders seeking a strong middle class, not leaders seeking cheap labor.