Blowing Holes in the Low-Road Approach

The Remapping Debate website yesterday exposed the real motives behind a consulting company’s August report that suggested manufacturing companies are finding advantages to investing in the U.S.

The AFL-CIO says the expose "lifts the veil on how the anti-regulatory, anti-labor line finds its way into media coverage of business."

Here's a snippet from the Remapping Debate's takedown:

In August, when Boston Consulting Group, one of the world’s leading business consulting firms, released a relatively optimistic report on the future of manufacturing in America, that good news received extensive coverage, including a front-page article in the Financial Times. Implicit in almost all of the coverage was the premise that the report represented a thorough, objective, and neutral assessment of the relevant facts.

Almost all the coverage—but not Labor Notes.

Jane Slaughter tore through the consulting company’s façade in her frontpage piece in the August issue, “Next Low-wage Haven? USA.”

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Jokes about the U.S. becoming “Europe’s Mexico” are commonplace, but now high-priced consultants are pushing the notion in all seriousness.

They’re predicting that within five years certain Southern U.S. states will be among the cheapest manufacturing locations in the developed world—and competitive with China.

For years advisers like the Boston Consulting Group got paid big bucks to tell their clients to produce in China. Now, they say, rising wages there, fueled by worker unrest, and low wages in Mississippi, Alabama, and South Carolina mean that soon it won’t be worth the hassle of locating overseas.

BCG bluntly praises Mississippi’s “flexible unions/workers, minimal wage growth, and high worker productivity,” estimating that in four years, workers in China’s fast-growing Yangtze River Delta will cost only 31 percent less than Mississippi workers.

Slaughter pointed out some reasons why costs of U.S. manufacturing are sinking, including two-tier union contracts, stagnant wages, and vast unemployment among skilled workers. Her groundbreaking reporting showed how recovering manufacturing through low-road policies may not be something to cheer.

If companies choose to build in the lowest-cost states—as Japanese automakers have done for nearly 30 years—“it quickly becomes a state vs. state competition, a race to the bottom. If South Carolina can offer lower wages, so can Mexico.”

Mischa Gaus was the editor of Labor Notes from 2008 to 2012.mischagaus@gmail.com