Numbers sometimes paint a more vivid picture than words. For instance, these numbers:
Largest private sector employer in 1950: General Motors
Largest private sector employer in 2012: Walmart
Average worker wage by largest private sector employer in 1950: $50 per hour
Average worker wage by largest private sector employer in 2012: $8.81 per hour
Percentage of the labor force that belonged to a union in 1950: 34
Percentage of the labor force that belonged to a union in 2012: 7
Those figures come from former Labor Secretary Robert Reich, and the $50 per hour includes benefits and is adjusted for 2012 dollars. Reich adds that one-third of Walmart workers are allowed only 28 hours per week, so they are not eligible for benefits. They are also barred from unionizing.
Which brings us to Twinkies.
When the company told its employees recently that they would have to surrender their benefits or the company would liquidate, management tried to blame the situation on the union. But there have been six management teams over only eight years, a dizzying revolving door in the executive suite, with one Bain Capital-esque restructurer after another asking for more concessions from workers while sending the resulting profits to investors. As union president Frank Hurt told it:
When a highly-respected financial consultant, hired by Hostess, determined earlier this year that the company’s business plan to exit bankruptcy was guaranteed to fail because it left the company with unsustainable debt levels, our members knew that the massive wage and benefit concessions the company was demanding would go straight to Wall Street investors and not back into the company.
Our members were aware that while the company was descending into bankruptcy and demanding deep concessions, the top ten executives of the company were rewarding themselves with lavish compensation increases, with the then CEO receiving a 300 percent increase.
The situation at Hostess is the new norm, a crystal clear demonstration of how wealth gets concentrated at the top in America and why the middle class is shrinking.
The same thing is happening at Walmart.
Walmart earned $16 billion last year (it just reported a 9 percent increase in earnings in the third quarter of 2012, to $3.6 billion), the lion’s share of which went instead to Walmart’s shareholders — including the family of its founder, Sam Walton, who earned on their Walmart stock more than the combined earnings of the bottom 40 percent of American workers.
But the 1% busting unions and raiding corporate piggy banks are only part of the problem with our economy. There’s an even bigger one, and it’s probably in your pocket.
Mobile device technology, according to Michael Saylor in his new book, The Mobile Wave, is disruptive, not evolutionary. As more objects are transformed into software, manufacturing will be devastated.
Saylor gives example after example of things that are no longer things. Cameras, keys, books, newspapers, magazines, music, games, travel agencies, news and journalism, even credit and payment industries are being replaced by software.
No wonder this has been a jobless recovery. Unless you’re a software engineer (and as Saylor says, typically that’s a 20-something software engineer with nothing to lose), you’re probably in trouble.
…software based products and services will be inherently cheaper to create. Factories will not be needed, distribution networks will be less necessary, and brick-and-mortar stores will disappear. Vast amounts of capital will be driven out of the production equation.
We’ve had a taste of this upheaval in the music industry. In the physical-product world, if you decided to buy a specific song, you drove to a record store, pored through the racks, and paid $16 for a CD that was physically packaged with a back-load of songs you probably didn’t actually want…
Then MP3 and the iPod came along and turned music into software…it became possible to distribute music electronically (via iTunes), sell music by the song (for $.99), and market music directly by the artist, without the involvement of any middlemen.
This, Saylor says, frees up money you used to spend the old way ($16 for a CD with one song you liked) for you to spend now another. What he doesn’t say is that you might not have the $16 to begin with if you no longer have a job.
Mobile technology is a stunning gift to economies in places like India and Africa, which can leapfrog older captial-intenstive infrastructure and join the newer mobile-enabled world. In some areas, mobile devices will be the first true infrastructure that residents have ever seen, and their economies are accelerating because of it.
Saylor forsees a day when a doctor in Bangalore will examine us via mobile device, checking our temperature, heart rate, blood pressure, and administering an EKG if needed through sensors connected to our phones or at medical kiosks…for $10.
I haven’t finished the book yet so I can’t tell you how this story ends but I have a feeling that it will get worse before it gets better in countries like ours that slogged through the Industrial Revolution and have to start all over. The ones who get to skip that step are at a clear advantage.
There are a million good reasons not to shop at Walmart today or any other, but Walmart is only part of a complicated problem with no obvious solutions.