Helping Isn't Easy - Or Free

Last Wednesday’s Chicago Tribune had an article entitled "As wages fall, workers slip from middle class / Amid the demise of manufacturing jobs, the birthright of a nice home, college for the kids is under siege."* The article talked about job losses and wage cuts in the manufacturing sector. The focus was on Delphi plants, plants that General Motors owned before Delphi and its parts business were spun off because GM could not afford them any longer.

While the article did a good job of describing the plight of these workers, it did not explain how and why this occurred. Without doing so, either in that article or another article, the whole story is not being told.

Basically, the reason this occurred is that customers were no longer willing to buy the products these workers made. The prices that had to be charged to pay the wages of these workers were too high. I know that sounds harsh, and I do not mean it to be, but it is true. I suppose it is possible, if management salaries were lower or if the company was willing to take a lower profit, that the prices could have been cut and more could have been sold. But it would not have been enough to make a difference.**

The fact is, unless we were going to not let people buy the products they wanted to buy and, effectively, force them to buy what these workers made, not enough people were going to buy the products these workers made. I suppose we could have raised tariffs or imposed quotas to keep out foreign goods, but that would not have helped where the other products were made in the United States. It was not just cars made in Japan that caused Detroit to lose all those jobs; it was cars made in Ohio and Tennessee and elsewhere in the United States. And it was not because those other cars were cheaper. They were better – or at least that is what the customers thought.

Even if we could pass enough laws and add enough rules to force people to buy the products made by the companies that employed these workers, either the customers would have to pay higher prices or the government would have to pay subsidies (or something else) to cover the wages paid to these workers. The effect of this would be to make customers pay some of their own wages (through increased prices or higher taxes) to support these workers so these workers could continue to get their old wages.

And the odds are that at least some of the people who would have to pay the higher prices or extra taxes to support these workers would be people earning less than what these workers were getting paid. I know it is unfortunate these workers cannot continue to earn what they used to, but is it fair to take money from people who are earning less to support the wages of workers who are earning more?

I understand it is sad for these workers, but that does not answer the question. When we say we want to help people, we also have to decide who is going to pay for the help. Help is not free, and if we are not going to do it personally, we ought to figure out who is going to have to pay for the help before we give it.

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* I am not going to get into the fact that, if "college for the kids is under siege," it is more a result of colleges raising tuitions much faster the rate of inflation (because they can get away with it) than it is because of falling wages.

** In most cases the company could not have taken a lower profit because the company was already losing money.