The Philadelphia Inquirer from Philadelphia, Pennsylvania • Page 20

THE PHILADELPHIA INQUIRER Sunday, September 8, 1996 AMERICA Under the new economic rules, corporations lay off employees in good times, as well as bad. Who Stole the Dream? A20 4 "T1 Lv7' that are being shipped offshore? Well, take the computer industry. The writing and production of software programs and the manufacture of computer hardware have created thousands of new jobs. Twenty-five years ago, there was no Microsoft the software developer whose operating system controls the workings of most personal computers, a company that employs around 16,000 people. But already, the United States is facing challenges in high-tech jobs from developing nations, whose' governments are targeting technology and whose technicians work more cheaply.

To be sure, the demand for computer systems analysts and scientists in the United States has grown steadily, from 359,000 in 1985 to 933,000 in 1995. But in a workforce of 116.6 million people, those jobs represented just eight-tenths of 1 percent of the total. Meanwhile, other computer industry jobs already are in decline. The number of workers in computer production and related jobs has fallen from a high of 298,000 in 1988 to 189,000 in 1995. ib rrm I f-r imnw fit Jobs that might have been James R.

Rude James R. Rude of Chatham, N.J., was a computer programmer for American International Group Inc. until he and his department at the insurance company were replaced by foreign workers. He thinks big business is "taking the greatest market and destroying it." The Disappearing Autoworker Hourly employees of GM, Ford and Chrysler. 667,000 JOBS from A19 immigrants has been the equivalent of adding 13 new cities to the U.S.

map another Philadelphia; Boston; New Orleans; Fort Worth, Texas; Kansas City, Portland, Tucson, Atlanta; Cincinnati; Buffalo, N.Y.; Louisville, Newark, N.J., and Des Moines, Iowa. On top of those 6.8 million immigrants, Congress made it possible for employers to bring in foreign workers, often at salaries below those of American employees. Add 2 million more people to the labor force, competing for a declining number of good jobs. The fall of labor As corporations have gained more power, influence and size, trade unions which once served as a buffer to corporate power have declined, both in members and political influence. Whatever your attitude toward unions, three trends overlap in this century: The rise of labor in the 1930s and '40s coincided with enactment of federal safety-net programs from Social Security to unemployment compensation to the minimum wage.

Its continuing strength in the 1950s and '60s paralleled the growth of a broad-based middle class, which for the first time expanded to include blue-collar workers. Conversely, the decline of labor in the 70s, '80s and '90s union membership fell from 35 percent of the workforce in 1955 to 14 percent in 1995 mirrors the decline of the middle class. So do strike statistics. With corporate mergers and layoffs, unions have had to concentrate on saving jobs, not striking for higher pay. During the 1950s, unions averaged 352 work stoppages a year.

That dropped to 283 in the 1960s, then held steady at 289 in the 1970s. The number plummeted to 83 in the 1980s, and to 38 in the 1990s. The number of workers involved in strikes has fallen from an average of 1.6 million a year in the 1950s to 273,000 in the 1990s. Caught in the tax trap Tax policy over the last three decades has worked steadily against the middle class. Along with the transition to a more regressive- tax system has been another form of wealth-shifting: transfer of much of the corporate tax burden to individuals.

America's largest and most powerful businesses now pay federal income tax at a fraction of the rate they once paid. To understand the magnitude of the tax shift, consider this: If corporations paid federal income tax today at the effective rate paid in the 1950s, the U.S. Treasury would collect an extra S250 billion a year more than wiping out the federal deficit overnight. The top corporate rate in the 1950s was 52 percent. Today it's 36 percent.

Rise of influence-peddlers To sway policymakers and members of Congress to their point of view, U.S.-based multinational corporations and foreign companies hire high-priced Washington lobbyists usually former government officials who have access to the people in power. A revolving door of Washington insiders, who go from government jobs to lobbying work and back again, has given insiders and those who hire them enormous influence over government decision-making. Working Americans have no comparable representation. How effective is the corps of lobbyists who work for foreign interests? In 1970, Japan, Mexico and South Korea fielded 41 registered agents to lobby Washington on their behalf. By 1995, their ranks had swelled to 118 an increase of 151 percent.

During that period, imports from the three countries increased by 2,900 percent from $7 billion to $210 billion. If supporters of the minimum wage had enjoyed the same lobbying success with Congress and the White House, the lowest-paid worker in America today would earn $48 an hour. Technology: Future of work? Not all U.S. job losses, obviously, have been caused by imports, immigration or corporations seeking bigger profits. Technology, too, has eliminated jobs.

Hardly an industry has escaped the revolution in computers. Tasks that once required dozens of workers now are done by one person at a terminal. The process of machines replacing human labor is hardly new. But in the past, when a new technology replaced an older one, often more jobs were created than were eliminated when airplanes replaced passenger trains, for instance. That's not happening today.

1 What is also different: Many of the jobs being eliminated aren't casualties of changing technology or obsolete industries. We still use telephones, hammers, screwdrivers, paper clips, ceiling fans, notepaper, toys and windshield wipers. We still wear shoes, dresses, pants, shirts, sweaters, skirts and coats. We still watch television, listen to radios and play stereos. None of these products has become obsolete, like the buggy whips and steam locomotives of old.

What's obsolete in the new American economy is the people who make them. These and other things we buy increasingly are made outside the United States. But isn't high technology the answer? Haven't entire new industries sprung up to provide jobs, so we no logger need the manufacturing plants and his job suddenly came to an end. To the astonishment of Rude and the 250 others in AIG's computer operations, the company announced it was dismissing them in two months. AIG had hired a subcontractor who would employ programmers from India, then being brought into the United States by the thousands to fill high-tech jobs.

Suddenly, professionals were losing their jobs just like blue-collar workers before them but with a notable difference: The blue-collar jobs disappeared when production work moved offshore. Now, white-collar workers were being replaced by foreign nationals brought here to do the work. It was all part of a U.S. immigration program engineered in 1990 by the Republican Bush administration, a Demo: cratic-controlled Congress and businesses with ties to both parties. The businesses had used the threat of global competition to extract permission from the government to bring in foreign workers for specialty jobs.

Next to losing his $64,000 salary, the worst part for Rude was having to train the people who were taking his job. "We were told two months before our last day that we were leaving as of a certain day because we were going "td be terminated," Rude said. "And for that two months, we had all these people coming over from India and we had to train them. And we were told, 'If you don't train these people, you will be terminated on the spot and you won't get your severance In December 1994, Rude and his fellow programmers were out of a job. As incomes fell, so did their standard of living.

Rude was unemployed nearly two months. When he landed a job, i was at roughly half his AIG salary. He became a recruiter placing programmers with companies. Since start ing the new job, he has increased his income to $37,000 a year or $27,000 Continued on next page Mexico. Indeed, the U.S.

trade deficit with Mexico was greater than with all of Western Europe ($15.2 billion). Exports to Mexico have gone up, from $41.5 billion in 1992 to $46.2 billion in 1995, an increase of 11.3 percent. But, in a story that has been repeated over and over in U.S. trade policy, imports from Mexico rose five times faster going from $40.5 billion in 1992 to $62.4 billion in 1995, an increase of 54 percent. Not everyone in Washington, of course, subscribed to the policies that are costing American jobs.

Many who supported them acted out of good intentions, actions that have had unforeseen consequences. But, collectively, these decisions are causing a relentless erosion of the middle class. The policies were sold to Americans with the promise they would create jobs and provide consumers with the broadest choice at the lowest price. Rep. David Dreier, a California Republican, put it this way during congressional debate on NAFTA in 1993: "Now, what is the goal of implementing a free-trade agreement like this? It is to help the consumer gain the ability to purchase the best-quality product at the lowest possible price." But if price is the primary consideration, American workers lose.

Thus, if foreign workers earning 50 cents an hour can produce a shirt that sells for much less than those made by Americans earning $4.25 an hour, under such a policy, the United States would import the cheaper shirts and U.S. workers would forfeit their jobs. Left unsaid is this: A society built on the economic principle that the lowest price is all that matters will be quite different from one built oh the principle that everyone who wants to work should receive a living wage. The first the bottom-line society will be filled with retail clerks, warehouse helpers and janitors earning little more than minimum wage. The other society will have skilled tradesmen, craftsmen and professionals earning a middle-class wage.

Consumers may not realize that's the true cost of the cheaper imported shirt in lost jobs and a declining American standard of living. 398,000 All these and other changes are adding up to a great power shift away from employees and communities, and toward corporations and shareholders. It used to be, under the old implied social contract, that when times were good, workers prospered along with company executives and stockholders. Under the new economic rules, corporations lay off employees in good times, as well as bad; close plants at will; subcontract work out to shops where salaries and benefits are less; export jobs to low-wage countries; bring in foreign workers, who will work long hours for lower pay; and influence government policy along lines that serve their interests exclusively. It is not just employees who have been hurt by these corporate and government shifts; small companies and industes also have borne the brunt.

Take a look at one segment of one small industry flower growers. In 1971, there were 1,525 commercial growers of standard carnations in 36 states. They dominated the U.S. market. As cheaper imports flooded the country, the number of domestic growers dwindled to 95 in 1995 a falloff of 93 percent.

The growers appealed to the government to limit imports, but were turned down. Today, foreign growers control the American market, accounting for 88 percent of all such flowers sold. The result: loss of thousands of American jobs. Or consider the disappearing autoworker. Over the last two decades, 40 percent of the hourly production and skilled workers at the Big Three auto plants have vanished.

From 1978 to 1995, the GM, Ford and Chrysler workforces shrank from 667,000 to 398,000 hourly employees. Not to worry. As Washington and Wall Street are quick to point out, new jobs were created throughout the country to replace the old. Why, employment by Wal-Mart alone has increased by 2,890 percent in less than two decades. In 1978, Wal-Mart had 21,000 employees.

Last April, the company announced from its Bentonville, headquarters: "Wal-Mart's U.S. employment has climbed to 628,000 roughly the population of North Dakota or one of every 200 civilian jobs." In short, Wal-Mart has roared ahead of GM, Ford and Chrysler as a major American employer. There are, to be sure, several significant differences. First, 30 percent of Wal-Mart's workers are part-time; the Big Three autoworkers are full-time. As for pay, a GM assembler earns $18.81 an hour in wages; a tool and die maker, $21.99.

Most Wal-Mart employees earn a dollar or two above the minimum wage, $4.25 an hour. Then there's the matter of benefits. The autoworkers have a guaranteed annual pension. The Wal-Mart employees do not. The autoworkers receive fully paid health care.

Wal-Mart part-timers receive no company-paid benefits and full-time workers must pay for part of their health insurance. Beyond the jobs eliminated, there are the jobs that should have been created but weren't. It used to be that a new invention created jobs for American workers for decades to come. More than a century ago, in 1882, Western Electric Co. became the sole manufacturer and supplier of telephones for the American Bell Telephone later In 1905, Western Electric moved its main manufacturing facility from Chicago to Hawthorne, 111., on the city's outskirts.

Over the next seven decades, the Hawthorne works which included more than 100 buildings turned out telephones and telephone equipment. It provided jobs for as many as 43,000 workers at a time, since all phones used in the country were made in the United States. Then came cellular phones. Within a few years of their introduction in the mid-1980s, most cellular phones were made in other countries, including those that carried the and Bell labels. The drain of ing jobs overseas had its impact at Hawthorne, and, in 1986, it closed.

A chief reason for cellular phones going offshore: U.S. government policies that lowered tariffs on imported products. That encouraged companies to-manufacture in lower-wage countries and ship the phones back here. In 1990, sales of cellular telephones in the United States reached 1.9 million units. Imports totaled 1.3 million units or 68 percent of those sold.

By 1994, virtually all cellular phones sold here were made abroad. The manufacturing jobs that once provided a middle-class lifestyle for Americans now went to foreign' workers. Between 1990 and 1994, imports of cellular phones from South Korea rose 446 percent, from 247,038 to 1,349,691. Imports from Mexico spiraled 1,836 percent, from 27,259 to 527,708. And from China, they shot up a whopping 11,428 percent, from 6,245 to 719,905.

All that job loss is from a single industry. When viewed across all manufacturing, the loss of jobs that should have been but aren't is staggering. If the percentage of the workforce employed in manufacturing was the same as in 1956, there would be an extra 20 million high-paying jobs for people who make things with their hands. It was not supposed to turn out this way. Global trade was supposed to benefit American workers by stimulating exports and creating jobs.

But let's look at the scorecard on recent trade with just one country Mexico. When NAFTA the North American Free Trade Agreement was proposed in 1990, supporters insisted it would lead to vast U.S. sales in Mexico. Said George Bush in 1991: "I don't have to tell anyone about Mexico's market potential: 85 million consumers who want to buy our goods. Nor do I have to tell you that as Mexico grows and prospers, it will need even more of the goods we're best at producing: computers, manufacturing equipment, high-tech and high-value products." Said Frank D.

Kittredge, president of the National Foreign Trade Council, in 1993: "The last point I think we cannot miss is the competitive advantage in the Mexican market that NAFTA gives to United States manufacturers. Talking about tilting the playing field, it really tilts the playing field in favor of U.S. manufacturers." Said the New York Times, in a 1993 editorial: "NAFTA would lower Mexican tariffs by a lot and U.S. tariffs, because they are already low, only a little. That means the price of U.S.

goods in Mexico will fall enough to make U.S. exports more affordable to Mexicans. NAFTA will raise U.S. exports." Proponents pointed to a U.S. trade surplus of $4.9 billion with Mexico in 1992 as evidence of the benefits of expanded trade with Mexico.

"Already, we sell far more to Mexico than they do to us," The Philadelphia Inquirer editorialized on Sept. 15, 1993. President Clinton urged congressional approval in a Sept. 14, 1993, speech: "I believe that NAFTA will create a million jobs in the first five years NAFTA will generate these jobs by fostering an export boom to Mexico. In 1987, Mexico exported $5.7 billion more of products to the United States than they purchased from us.

That trade deficit has been turned into a trade surplus for the United States. It has created hundreds of thousands of jobs." Well, how goes the export boom with Mexico? The widely touted trade surplus with Mexico evaporated after NAFTA was approved in 1994. By the end of 1995, the IJnited States recorded a $16.2 billion merchandise trade deficit with 1978 1995 NAFTA Shifts Trade Balance With Mexico The U.S. went from surpluses to a huge deficit in just two years. The Rise of Wal-Mart U.S.

employment. 628,000 A new kind of job sharing The U.S. has a $1 billion trade surplus. Roughly the population of North Dakota The U.S. has a $688 million surplus.

The North American Free Trade Agreement, eliminating trade barriers between the U.S., Canada and Mexico, takes effect. Jim Rude learned about the bottom-line society the hard way. Married and the father of two children, Rude is a computer programmer. After 18 years at Blue Cross of New Jersey, he went to work in 1989 at American International Group Inc. (AIG), one of the world's largest and most influential insurance companies.

Rude, working out of AIG's Livingston, N.J., offices, was one of several, hundred programmers. The data-processing division, with worldwide operations, was a booming enterprise for programmers, a case in which global business generated jobs for Americans. The pay and benefits were good, and Rude, at the encouragement of his superiors, started working toward a master's degree in computer science under a program in which the company would pay part of his tuition. "Everybody says you need more education and I decided to make the effort and go for an advanced degree," he said. By the fall of 1994, Rude was only a few credits away from earning his degree when his continuing education .995 21,000 The U.S.

has a i $16.2 billion trade deficit. SOURCE. U.S. Claimant of Commeite 1978 1996.