A must listen-to podcast from steel country

October 20th, 2017 at 9:35 am

I’ve previously endorsed the New York Times podcast “The Daily,” to which I’m happily addicted. I found Wednesday’s episode particularly well done and important. It tells the story of Shannon Mulcahy, a steel worker from an Indiana plant (Rexnord) that recently moved much of its production to Mexico. If you’ve followed the issue of manufacturing job losses, which has of course been going on for decades, nothing in the podcast or article will surprise you. But, along with putting a human face in the story, it underscores many key points in the political economy. (Plus, you can listen to it while you’re exercising!)

First, many economists label anyone who isn’t college educated as “unskilled.” Decades ago, when I was a baby number cruncher, economist Larry Mishel taught me not to do this. I challenge anyone with half-a-brain to continue to do so after listening to Mulcahy’s story.

Second, anyone who’s running for national office needs to listen to this and figure out what you’re going to say to people like Mulcahy, which is anything but easy. Listen to her talk about Obama, for whom she voted and who she still considers a good president. But she voted for Trump, because he, more than other candidates, communicated an understanding of her plight. You can call her naïve for thinking he’d actually help (she’s since seen the light), but that’s not at all how she comes off to me.

Third, the reporter, Farah Stockman, makes a mistake that I’d like to correct. It doesn’t take anything away from her excellent reporting, but it warrants a correction. In a discussion about why white working-class people were more pessimistic than blacks, she suggested it might be because economic trends have been more punishing for the white than the black working class. Not so, at least if we compare real hourly wages of white and black men with at most high-school degrees. For whites since 1973, their real wage is down 8 percent; for blacks, it is down 10 percent. And, as you see, black male wages are always below those of whites, even within the same education categories.

Source: Economic Policy Institute

Fourth, in one of the most interesting parts of the podcast, the Mexican workers come to the US plant to be trained by the US workers they’d be replacing. Note how the executives did not tell the Mexican workers that they’d be replacing their trainers. I saw this as a way to preclude any potential solidarity between working class persons on both sides of the border.

Finally, it is not hard to see why people like Mulcahy and her fellow displaced workers are ill-disposed to globalization, and how out-of-touch the full-out cheerleaders for “free trade” must sound to them. Most recently in the NAFTA debate, I was struck by the extent to which purveyors of the status quo seem to have convinced themselves that nothing has changed and that they should be able to continue to essentially ignore the plights of those in the podcast.

Consider also at the current tax debate, with its emphasis on tax cuts for the wealthy, for corporations, for the richest 0.2 percent of estates, and most notably in this context, for multinationals (like the one is the story) whose foreign earnings will be untaxed by the US if this plan comes to fruition, incentivizing more offshoring.

People like Mulcahy must believe nobody in power has her back. The sad part is they they’re right. This may sound harsh, but I mean it: If you’re running for office and you have no help to offer her beyond “get educated” or “here’s the next trade agreement,” go away and don’t come back until you’ve figured out how to help. Not how to falsely promise help, ala Trump, but to actually help.

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10 comments in reply to "A must listen-to podcast from steel country"

  1. Dude says:

    There you go, Jared has it right. There’s nothing naive about knowing that NAFTA is more likely to be destroyed under Trump than under anyone else.

    Regarding the racial issue and jobs, the offshoring of jobs has effected everyone including Mexican immigrants. It just to happens that minorities have strong reasons other than the job situation to vote Democrat. If we get to the point where politicians of a certain party are listening to number crunchers and determining that everyone without a college education is racist, then that party is over.

    The above facts have been used in cold blood to create coalitions in both parties against labor. I don’t see anyone in the mainstream of either party that understands this and is determined to fix it. We don’t care if you win if you are not going to advocate for the right policies.

    NAFTA must end.

    • Brett Showalter says:

      lol, NAFTA ends, so does the United States. There will be run on debt big time. Offshoring and NAFTA have little to do with each other. Offshoring to Mexico was big in the 70’s and 80’s, less than you think since. NAFTA was started by the Reagan administration in 1985 so this exactly would not happen with Mexico and Canada pulling capital into Europe, especially with the cold war essentially over. Next consumption will be forced to reduce as Americans figure out they have no spending power with the currency drastically reduced. This will not happen because Vlad does not want it to happen. He has things he needs Trump to do. He needs the Trump boom to reach its natural conclusion by the early 00’s. That means keeping Trump alive. No more NAFTA=no more Trump.

      Sorry, but Steel plants come and go. There was one that opened in northeast ohio in 2016. Why not talk about that Jared? You sound like you are confused in this article. She voted for Trump? Who gives shit. My cousin voted for Clinton and she voted for Mitt in 2012.

      • Smith says:

        Yes, people, especially economists, should recognize moving factories south didn’t start with NAFTA, but all the more reason to see NAFTA as purposefully designed to facilitate more of the same.
        NAFTA could be ended tomorrow with zero effect on the economy. No one is forcing anyone to raise barriers to trade because the formal agreement ends. It’s a bit of a prisoners dilemma as to whether the U.S. or Mexico would change their policy or not adjust current trade law further to accommodate existing trade.
        (your comment may be deleted due to expletive so you might check back a little later to see if a redacted version is in order, surprised to see it get past censors in the first place)

  2. Smith says:

    Great, I linked to that article on October 14 in comments on this blog, read it online a day before it was published. Readers might want to know it was a front page story in the Sunday edition of the New York Times, with a big picture above the fold.
    In agreement with posting above, I too, believe it’s stupid to label non college educated as not pocessing high skills. Hence for the most part I try to use terms like “higher income” or “higher credentialed” when referring to the college educated. One can see that throughout the history of my comments. Personal experience in jobs that don’t require college degrees also informs this assessment, including physical labor.
    It seems it needs to be mentioned that Hillary Clinton message was exactly the “get educated” and “here’s the next trade agreement” that the post above warns against. This is not some great insight, just common sense. One should not need the New York Times to podcast or put this front and center to understand what’s been going on in America the past 30 or more years. Relocating factories predates NAFTA, though NAFTA accelerated and augmented the process.
    Two things that this blog is still missing is a) my theory of an overskilled over credentialed workforce having a different structure than previous labor segment surplus distribution (see below from Oct 10), and b) it’s also noteworthy that those with “some college” also saw their wages drop, while most college educated experienced stagnant wages. Meaning it would be a great error to think the poor performance of the economy is only or mostly affecting less educated.

    “First, because it is my most original contribution to the debate, consider the effect of an overskilled workforce. In the past, the same level of unemployment might have still left a shortage of higher income, or higher skilled, or higher credentialed (more education) workers. The effect would be to tend to pull up wages due to competition (although I’d still contend wages are not primarily determined by supply and demand). The effect of an overskilled workforce is the exact opposite. The high income worker surplus pushes down their wages, and as they displace lower income workers in occupations for which they are overqualified, they push down those wages, plus the lower high incomes exerts a downward pressure due to the whole wage scale no longer as high. The exception is the top 10 percent and especially the top 1 percent, because they control their own salaries, they are management.”

  3. Kevin Rica says:

    Most “trade” deals weren’t really trade deals. They were deals to protect American investors.

    The Chinese made an art form. We’ll give you good investment opportunities. In return, we get your jobs.

    These deals were negotiated by Harvard-educated Democrats.

  4. William Miller says:

    Trump is fighting offshoring with a weak argument against NAFTA that has no legal justification. However, there is a correct legal argument that recognizes the failed paradigm of economic theory for globalization based on comparative advantage and inadequately regulated free trade that doesn’t penalize offshoring. The economic theory ignores the theft of intangible capital (IC) by a company that does offshoring where the IC is a product of public investments in national defense, federal R&D, domestic security, healthcare, education and infrastructure. The theft occurs when business operations at a company with jobs and factories are first established in America with IC created as a result of public investments and then moved offshore with transferred IC based on proven capabilities consisting of knowledge, tools, technology and processes.
    Democrats and Republicans have encouraged offshoring with free trade agreements that ignore the theft of public IC. Theft of IC in offshoring creates a negative externality in economics that is similar to pollution of public resources penalized in environmental regulation. Trade imbalances don’t measure the flows of IC. Measuring and regulating the flows of IC created with public investments is a prerequisite for properly governing offshoring in globalization and recovering the loss of jobs in manufacturing industries and such as steel and specifically at companies such as Rexnord.
    Private IC is protected with patents and copyrights but public IC is not.
    The new international activity in Integrated Reporting is changing financial reporting in business to measure both tangible capital and IC. Regulations on offshoring should require repayment of the apportioned public investments that produced the IC used for manufacturing operations at a company with a tax of at least 20% on the value of traded goods sent back to America from offshored factories.

  5. William Miller says:

    Offshoring is alive and well and exists for office not just factories for manufacturing.
    NYT article September 28, 2017 –
    “IBM Now Has More Employees in India Than in the U.S.”
    The economics of intangible capital in foreign trade are not adequately measured or regulated.

  6. William Miller says:

    Book 2008 Reference – Services Offshoring and its Impact on the Labor Market: Theoretical Insights, Empirical Evidence, and Economic Policy Recommendations for Germany
    WPO 2007 Reference by Alan Blinder – Free Trade is Great but Offshoring Rattles Me
    Blinder estimates that 30 to 40 million white collar service jobs are offshorable.
    But Blinder doesn’t see that offshoring is theft of public investments in intangible capital.
    Paper by the US International Trade Commission offers no policy to limit offshoring because the theft of public investments in intangible capital is not recognized. The paper shows a strong bias to justify offshoring and seems to be searching for arguments that the impact on domestic employment has been positive.

  7. Tom says:

    Trump won because he recognized the plight of these people and tried to connect with them. Clinton appears to have ignored them. Are Trump’s policies going to bring their jobs back? Of course not, and I suspect most Trump supporters realize that. But they were presented with a choice between someone who spoke to them and someone who ignored them. If Democrats want to get these voters back, they’ll have to come up with something other than handouts to win them over.

  8. Ben says:

    @ Tom:

    As long as people believe what they are told, they will continue to vote for hucksters.

    Being able to “speak to the people” with misleading data and outright falseheads is more the fault of an uneducated electorate than the lack of a democratic message. It doesn’t help that “truth” is less tangible today than it was years ago, but to be quite honest, people have always voted from their gut.

    The saddest part is that the “poor unwashed masses” would have done better under a democratic president, but they only believe the snake oil salesman. Reckoning time is coming, hopefully they won’t be fooled twice, though based on our history I’d say that history will repeat long after we are dead and buried.