Today’s New York Times carries an article “Falling Fortunes of Wage Earners” noting that “Even though the economy added 2.2 million jobs in 2004 and produced strong growth in corporate profits, wages for the average worker fell for the year, after adjusting for inflation – the first such drop in nearly a decade.” This is a theme in Barbara Ehrenreich’s book Nickel and Dimed, which I recently finished listening to while driving back from Virginia. Ehrenreich did her research in the boom economy of 1998 and 1999 when labor was in short supply yet wages barely rose for the unskilled. Ehrenreich took service jobs in Key West, Portland, Maine, and Minneapolis to see if she could make ends meet after one month.
Ehrenreich notes that the official poverty line was defined in 1964 as a multiple of the cost of food (see http://www.census.gov/hhes/income/defs/poverty.html) and has barely been revised since then. The marketplace, however, has changed. Real estate and rents have become much more expensive and food has stayed relatively cheap. Thus it is easy to envision a family whose income is 3X the cost of eating at McDonald’s but who can’t afford rent. Ehrenreich finds that almost no unskilled worker would be able to afford rent plus a car at the same time. If they can’t team up with a spouse and they need the car to get to work they are forced to live in the car.
Ehrenreich’s conclusion is that this can’t last. The workers will rebel and demand their right to at least an efficiency apartment plus some means of transportation to a job. She predicts a Proletarian Revolution. Six years have elapsed since Nickel and Dimed was written and yet the Walmartians and hotel and restaurant slaves seem as docile as ever.
What did Ehrenreich overlook? Immigration! There are plenty of people from poor countries who think that working 60-70 hours per week for $7.50/hour is acceptable, especially if there are opportunities for their children to do better. As long as the immigrants are streaming into the U.S. it seems unlikely that wages for the unskilled will rise.
One might ask “Why do we have such a welcoming immigration policy?” Countries that value quality of life restrict immigration. To get into New Zealand, for example, you need to demonstrate some combination of youth, education, and wealth. The New Zealanders don’t see a need to clog their neighborhoods with development and their highways with traffic unless the newcomers are bringing something interesting. The U.S., by contrast, is happy to grant visas and green cards to people who don’t speak English and who in some cases are dedicated to the destruction of the U.S. government (the September 11th terrorists, for example, most of whom had official U.S. INS blessing). The U.S. government puts GDP growth as its #1 priority because GDP growth enables the government to collect more in taxes and the extra tax revenue enables the government to expand. If the population growth that is required to generate the GDP growth means that young people have to work two jobs in order to rent an apartment that’s not Uncle Sam’s problem. High housing costs and the lack of guaranteed health care are both desired spurs to keep potential taxpayers getting up and going into work every day.
The best predictions available today show the U.S. population rising from its present 295 million to 500 million within our lifetimes. With wages for low-skill workers set according to wages in India and China the living styles of many unskilled workers in America will have to be more like those in India and China. Ehrenreich’s idea that a worker is entitled to an efficiency apartment does not apply in India or China. I visited Agra, home to the Taj Majal, a few years ago. Statistics showed that 2 million people lived there, subsantially smaller than the population of Boston and its closest suburbs, yet there were essentially no buildings taller than one story. If a family of 8 people ran a little shop by the road they would roll down the shop door at night and sleep there as well. A friend recently returned from living in Shanghai and reported the same system there.
We could argue about the merits of globalization and U.S. immigration policy but these factors are unlikely to change. Better to think about how best to deal with the implications. Low-wage workers in America won’t be able to afford housing constructed with currently prevailing methods. In Third World countries this has traditionally resulted in shantytowns springing up (cf. Mexico City). Perhaps with innovations in prefab housing we could provide shelter in the exurbs at a cost affordable to unskilled workers. If not and if we have to accept the idea that a low-wage worker with a car will never be able to afford an apartment maybe the solution is an inexpensive car that is comfortable for sleeping. If the Chinese can make a cheap car they should be able to make a cheap small RV. If the Chinese can make a sleeping van for $10,000 (new) a low-wage worker could have transportation and minimal shelter at the same time.
Karl Marx thought that the Industrial Revolution would end scarcity, i.e., that everyone in the U.S. would be living in a McMansion and driving an S.U.V. That was one of his main reasons for concluding that Communism would be the natural end-result of economic development. Marx did not count on a world population explosion, however, and the simultaneous stagnation in construction technology resulting in tremendous pressure on housing costs.