Heavier Around the Middle?

Back on June 22, 2011, Forbes explained a bit why our American middle class was contracting: “‘The idea that one can have a single-earner family, get a good job, keep it for life and have a comfortable living is all but gone,’ says Kevin Hallock, professor of labor economics and director of the Institute for Compensation Studies at Cornell University. ‘Long-term job stability is declining, and there aren’t good unionized jobs like there once were.’

“The recession may have just complicated and compounded what was already occurring. Generally, jobs are disappearing where there’s been a technological advance—‘where a human was doing something, now a technology is doing it’–or a change in the way that organizations function, says Hallock. And not only are old-fashioned assembly line jobs on the decline, several white-collar office positions are also in jeopardy.

‘There has been some long-term decline in middle-income jobs,’ says Harry Holzer, Georgetown University economist and co-author of Where Are All The Good Jobs Going. ‘Specifically, it’s good-paying production and clerical jobs that are disappearing.’” To compound these changes, where manufacturing is returning to the United States, it is increasingly reliant on robotics and automation instead of human labor. Thus, the money that was once allocated to union workers “making stuff” is now being transferred to the owners of the automated equipment.

We are also making increasing revenues from financial services based upon market fluctuations versus long-term corporate growth. These factors have moved more income into those at the top of the food chain and contracted opportunities in the middle and at the bottom. Our tax code, which favors capital gains over earned income, has also shifted wealth upwards, resulting in a “banana republic-like” 1% of our country owning 42% of its wealth, a feature that both the World Bank and the IMF tell us is not conducive to long-term general economic growth.

In our chauvinistic perception of Latin America, we tend to look at those economies as the original “banana republics.” Despite vibrant middle classes that are growing in most of those nations below our border, we just refuse to think of them that way. Mexico, perhaps, suffers the most from this gringo view, but they seem to be doing something we are completely failing to accomplish: growing their middle class.

“Education. More sophisticated work. Higher pay. This is the development formula Mexico has been seeking for decades. But after the free-market wave of the 1990s failed to produce much more than low-skilled factory work, Mexico is finally attracting the higher-end industries that experts say could lead to lasting prosperity. Here, in a mostly poor state long known as one of the country’s main sources of illegal immigrants to the United States, a new Mexico has begun to emerge.

“Dozens of foreign companies are investing, filling in new industrial parks along the highways. Middle-class housing is popping up in former watermelon fields, and new universities are waving in classes of students eager to study engineering, aeronautics and biotechnology, signaling a growing confidence in Mexico’s economic future and what many see as the imported meritocracy of international business. In a country where connections and corruption are still common tools of enrichment, many people here are beginning to believe they can get ahead through study and hard work…

“This is a Mexico far different from the popular American conception: it is neither the grinding, low-skilled assembly work at maquiladoras, the multinational factories near the border, nor the ugliness of drug cartels. But the question many experts and officials are asking is whether Mexico as a whole can keep up with the rising demand for educated labor — and overcome concerns about crime and corruption — to propel its 112 million people into the club of developed nations.

“‘We are at something of a turning point,’ said Eric Verhoogen, a professor of economics and international affairs at Columbia University. ‘The maquila strategy has been revealed not to have been successful, so people are looking around for something new.’… The automotive industry has been Mexico’s brightest spot so far. In many ways, central Mexico has already surpassed Detroit. There are now more auto-industry jobs in Mexico than in the entire American Midwest. At least 100,000 jobs have been added in Mexico since 2010, according to a recent Brookings Institution report, and General Motors, Ford, Chrysler, Honda, Mazda, Nissan, Audi and Volkswagen have all announced expansion plans, with nearly $10 billion to be invested over the next several years, mainly in a 400-mile corridor from Puebla to Aguascalientes.” New York Times, November 18^th. Like the picture of central Mexico City above? See any bananas? Exactly.

I’m Peter Dekom wondering if someday there might be gringos – “drybacks” – sneaking south of the border for jobs.