The High Cost Of Cheap Labor
Feb. 5, 2007, was the coldest day of the winter in my hometown of Chicago. Temperatures dropped to minus 10. Pity the beleaguered travelers who had to pass through O’Hare Airport on that day - especially if they were booked on a United Airlines flight.
That’s because two-thirds of the independent contract workers hired to fuel United’s planes decided to take the polar day off. You can imagine what that did to flight schedules. Severe weather always disrupts flight operations at O’Hare, and when it’s that cold, absenteeism is bound to rise. Yet no other airline suffered it to the extreme as United.
The reason most likely lay in the fact that United’s contracted fuelers get paid all of $8.50 an hour, according to an article in the Chicago Tribune. For that kind of money, who can blame two out of three of them for calling in sick when it’s 10 below and the wind spews needles crossing an open tarmac.
Go ahead and fire me, they were thinking. They could make just as much working in a warm fast food joint with free lunch thrown in. Higher-paid fuelers with other airlines showed up for work at a much higher rate than United’s ultra-cheap contracted labor did on that frigid day. United’s own higher-paid employees also showed up for work pretty much as usual.
The Tribune further reported that United used to pay unionized employees $10 an hour more to fuel planes. They were among thousands of workers jettisoned during the company’s bankruptcy when United turned to outsourcing and other forms of penny-pinching to survive.
A company in such dire straits as United had little choice but to make painful cuts. Understood. At the same time, the experience of Feb. 5 illustrates that cost-cutting does not come without cost. After behaving irrationally in so many other ways, that vexing human element tends to respond in a rational manner to economic incentives.
The Greasy Ladder: Almost everywhere we look in today’s economy we see labor costs getting squeezed. It’s become a craze for manufacturers to outsource to China, whose factory workers are lucky to get paid in a day what most of America earns in an hour. And Indian accents seem to be all you hear when calling customer service and technical support phone lines.
We see it in our industry, where in some sectors of the country residential construction “plumbers” make less than $10 an hour. This despite a severe shortage of skilled labor. Labor has become so devalued that hardly anyone attempts to raise plumber pay scales to the point where it might pay off in increased supply.
This mad rush toward ever-cheaper labor serves to drive down the cost of goods and services so that more and more people can enjoy the finer things in life. This is how to view it from an academic perspective, and I respect that point of view. When most of us buy things, we ask how much they cost, not how much the people who made them or perform the services get paid.
On the other hand, when cheap labor gets pursued with such single-minded purpose, it’s easy to overlook the hidden costs associated with it. How much did it cost United Airlines last Feb. 5 not only in customer goodwill, but tangible financial losses from all those airplanes unable to fly?
How many lousy plumbing installations are America’s new homeowners putting up with these days, and how much are they paying to get them in good working order? How often do they have to replace shoddy Chinese-made merchandise they buy at Wal-Mart?
What bothers me most goes beyond economics. An obsession with cheap labor carries with it social costs that threaten to undermine one of the bedrock principles of this vaunted land of opportunity.
Millions of our ancestors came here as desperate immigrants from various parts of the world. Most of them lacked skills, education and connections, but through hard work they advanced up the economic ladder and were able to provide a better life for their kids. The rungs on that economic ladder have become greased. The higher one climbs, the more likely it becomes to slip off and get replaced by someone starting at the bottom.
As a result, the gap continues to widen between the haves and have-nots in our society. The good life is receding out of reach for people willing to work hard but without the right skills, education and connections to land top-paying jobs.
Is this really the kind of society America wants to be?