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Monday, August 11, 2014

A Brief History of Workplace Competition & Stagnant Wages

One of the ideological tenets of modern bastardized capitalism (as opposed to true Adam Smith Capitalism which was intended to benefit the individual And the society he/she lived in) is that of competition..

Competition is wonderful they say..  Brings fresh new blood..

OK, that does appeal to our vampire instincts but hmm..  Besides this notion of new ideas, new energy and new newness, what really does competition bring into the workplace?

Some may argue it pushes people who may have lost motivation or incentive to work harder and be more productive and allows for greater efficiency, etc..
That may be true on an individual level but lets move from micro to macro..  

What is the #1 thing that competition does that few openly admit?

Competition depresses wages i.e. keeps them artificially low.

Before we go into a brief history of competition in the workplace in America to make our point, remember we're talking here about basic concepts of supply and demand.

Ex:  You need to hire someone to lift heavy objects.  Five people apply.. One very brawny guy and four weaklings with toothpick arms..  Who holds the cards in negotiating wage, you or the brawny guy?
Now let's say all five applicants are very strong individuals..  Now you get to play one off another to see who will work the most for less and resume the boss role..

Historically, its very easy to see this pattern.  

First one has to go back to America in the mid-late 1600s.    The first whites to settle and build the New World got all the work..  Then many more ships full of Western Europeans landed and they competed for those jobs..

Now those who hired, had more choice so they could control wages..
And when this wasn't enough, then you had the introduction of the Indentured Servant who worked for his/her boss for seven years for free in exchange for learning specific trade skills..

And when that wasn't enough, black Africans who were sold off by other black Africans to white traders were shipped over and became full time free labor..  

Well 'free' except for feeding and clothing and shelter and medical care..

In spite of Hollywood film representations, slaveholders who spent all that money to purchase their chattel ($80k per slave in today's economy) were not insane psychopaths who beat and tortured them merely to pass the time or sadistically watched them starve and die.   

So 'free' was still not economically Free..
This archaic economic system existed through to Colonial times were eventually the Indentured work was banned though slavery continued.

Now moving ahead to the early 1800's as America expanded west and grew as an industrial nation, more and more people were needed to work the factories in the North.

These were called immigrants.

They were paid next to nothing, lived in dirt and squalor, were more easily replaceable than a AA battery and of course undercut the labor of natural-born Americans who came to resent them deeply.
And the wealthy well-to-do industrialists came to resent and despise slavery more and more because even those they were paying their workers pennies a day, that was still pennies more than how they perceived their southern counterparts working agrarian..

Legally they couldn't simply make people work their factories for zero because slavery was abolished in all Northern states by then..  So what to do??

Simple..  Politically push for the emancipation of the blacks in bondage in the south and when they would ultimately migrate north looking for work, hire them at wages that would undercut the immigrant.

And by the late 1860s this was done...
This was the major cause hatred among Irish and blacks back in that time and why the Irish immigrants started the famous NYC Draft Riots of 1863 depicted in "Gangs of New York"..   They didn't want to fight and liberate blacks knowing full well they'd ultimately take their jobs..

Remember.. this is called 'competition'...

Before we continue, its very important one really understands how competition plays one vs another both individually and collectively as wages are concerned.

Person A is accustomed to getting $10/hr which to him/her isn't much but its something.   Person B comes from a background where $10 is unheard of and simply earning $7/hr is a feat onto itself..
Now both are going to compete for the same job..  Unless 'A' brings something amazing to the table, how can he/she justify $10/hr when this other person is giddy to do the same work at $7?!

And thus Person A has a choice..  Accept the new wage of $7 and adjust his/her life and expenses accordingly, or starve..  Either way what does the business give a shit?  They saved $3/hr no matter who takes the job..

That's competition.

So by the 1880s, you have poor native born whites and blacks and immigrants working side by side from coast to coast at labor rates which allowed gradual savings and ultimately to break the chain, as it were..
Then what happened?

Yep.. The second major immigration boom which lasted till around 1914 when WWI began..

The first boom involved mostly western Europeans.. Irish, English, Scots and German and that took place around the 1820s to the onset of the Civil War.

This second boom involved Southern and Eastern Europeans-- Russians, Poles, Jews and other Slavs as well as Greeks, Italians, etc..
The at the time dormant Ku Klux Klan was resuscitated in the 1890s in Illinois as a result of this influx of so-called religious and ethnic undesirables (The original Klan pretty much died out by the late 1860s)

These workers brought new competition to unskilled work which allowed for depressed wages.

An interesting thing happened afterward..

Many of these immigrants, especially Jews rather than spending their money on themselves on frivolity, saved and saved so they could send their children to college..

So now you had for the first time 1st generation natural-born Americans, the children of immigrants competing for and taking white-collar and education specified jobs..  

And from this, you saw by the early 20th century, great xenophobia and anti-Semitism among the academic and economic well-to-do as well as what was typical from the common yolk as they started to feel directly threatened socially and economically.

So now we fast forward to Great Depression where wages were continually cut due to the 25% unemployment allowing for massive competition for few jobs and then World War II where women really for the first time entered the work force in droves to replace the men off fighting and dying..  

And by the end of WWII, the women who did such a good job keeping the homefront running, were not so eager-beaver to go back to being homemakers... 

So now in the 1940's/50's you have the first sincere gender competition in the work place.  

Add to the racial, ethnic and religious competition and you can see the more people who are given opportunities for a better life and to make it on their own, the greater the selection to choose from by bosses and thus a 'take it or leave it' attitude among wages..

And of course women historically are paid less then men so that was/is great for companies' bottom dollar and profit-hoarding

And then in modern times, the now antiquated notion of 'Affirmative Action' where jobs are specifically set aside and given to blacks because..  well, just because..'
And the heavy influx of immigrants, legal and non pouring into the nation as well as the modern horror phenomenon of 'outsourcing', both steadily suffocating natural wage growth that would normally keep up with inflation...

Competition.. Competition.. Competition..

And its killing the nation from within.

There's simply no time to absorb the numbers.. So many people domestically and globally to do the work, and ultimately everyone gets replaced by machines and technology..
To survive and thrive in this ever-changing 21st Century world, its not about getting a college degree..  hundreds upon hundreds of millions of people possess them globally from Univ of Indiana to University of Calcutta, India..

Its about obtaining a skill or trade that is not localized (meaning you can do it anywhere in the world) and not easily outsourced..

If you own a home in Florida and your roof is destroyed due to a hurricane, you're not contacting a roofing company in Georgia or Ohio and you're certainly not contacting China or Brazil for assistance..

You're seeking someone local to do the job.
Same with a broken air conditioner or heating system needing repair, or needing new tires and brake pads on your car or having a big tree removed after it crashes on your front yard...

The people who do these jobs have specialized skills, have local importance and charge a proverbial arm and a leg..

And compared to doctors, lawyers, teachers, engineers, MBA grads and people with computer experience, do not have nearly the competition.

And so they shall always survive... And thrive.