Wednesday, March 15, 2006

A Race To The Bottom

I have been slogging through Thomas Friedman's 'The World Is Flat'. It deals with free trade in an information era. He looks at outsourcing, insourcing and job movements; What led to it, where we are, and where we are going.

A term that has been around for a while gets an occasional mention in his text.

A race to the bottom, referring to the effort to find the lowest cost for all aspects of an operation.

I was talking to a friend, about his sister. She has worked for Delta for about 25 years now, the vast majority of the time as a gate or counter agent. At her wage peak she was paid just under $25.00 an hour. She is a loyal hardworking company woman. She knew how to do a number of jobs, she could fix some of the equipment when it broke, she was one of the best at her job. With benefits and overtime her annual wage came in at close to $70,000.00 for a few years.

The she took a couple of pay cuts, got promoted and a raise, took a couple more pay cuts, lost most benefits, and then Delta entered bankruptcy.

This year, she hope to make $30,000.00.

This occurred in a job that can not yet be moved offshore, in an industry that has to remain in it's market. But she has also been effected by the offshore effect.

The 'market' demands a lower price, and when you can not lower the cost of materials, you have to go after labor cost. The same factors that have resulted in Mexico shipping more cars into the US than the US ships out to the whole world has cut her wages.

Her job has not moved to China, or India, or Mexico, but to attract business Delta has to price it's product as if it had, and has to pay her accordingly. Everyone expects Wal-Mart pricing for all their purchases.

So she has also been caught up in the race to the bottom.


1 comment:

Lynne said...

Wow, that's one of those aspects you just don't think about. It certainly doesn't show up in any "official" stats.
This is why Americans are pessimistic about the economic outlook despite the "proof" the government offers of how things are looking up.