Monday, March 29, 2010

Leveling the playing field

In the great debates about international trade, the voices of ordinary people get drowned out by politicians, executives and economists. I wrote The China Price to put a face on Chinese workers for people in the West. Starting today, I hope to add to that discussion the voices of other workers.

Matt is about my age and works at a unionized Ford transmission plant in the Detroit area. A Michigan native and the son of a General Motors employee, he has always worked at car component factories. Matt and his wife, an employee of the same Ford factory, earn about US$30 an hour, 45 hours a week. They are about to have their first child.

I wanted to speak to Matt, who asked that I not use his real name, to see what it was like to work at an American factory and what people in America’s industrial heartland thought about China. It wasn’t easy to find him. I emailed friends and contacts in the US and Asia, and found only two people who knew anyone who worked in a factory. As a friend who lives in Washington, DC wrote: “Man, you really made me realize how far removed I am from mainstream USA in DC. We don't make ANYTHING here (besides bad policy), do we?”

Matt’s factory proves that contrary to what a lot of executives out here in China say privately, unionized American manufacturing can still be extremely competitive. The question is for how long.

Matt first applied to work at Ford in 1993. “I’ve been waiting since I graduated from high school to get in,” he says. Ford jobs were scarce, and even the application forms were prized. Matt’s uncle, who worked at the plant where he works today, brought him the application form. Then as now, the unionized plant only hired when enough older workers retire to justify new additions. Today, there are people on the floor next to Matt who have been working there for more than five decades. Many were hired in the late 1970s. There is another, smaller cohort that joined in 1995. The plant hasn’t hired a single new employee since 2000.

Being a union member guarantees Matt benefits and job security – almost antiquated privileges in today’s economy. Manufacturing has lost more jobs than any other non-agricultural sector in the US except construction since December 2007, according to the Bureau of Labor Statistics.

Production at Matt’s factory is expanding, not shrinking. The main reason is trade. About 60 percent of the transmissions Matt and his colleagues make are exported, mostly to BRIC countries – Brazil, Russia and China. It’s still cheaper to make them in Michigan and ship them overseas than to make the transmissions abroad.

China is Michigan’s third largest export market, after Canada and Mexico. Some 43 percent of the state’s exports are transportation equipment (cars and trucks). About 28 percent of Michigan manufacturing workers depend on exports for their jobs, according to the US Department of Commerce.

As grateful Matt is for his job security, he admits that “some of the stuff [about the union] is not the greatest.” Employees who regularly miss work get the same paycheck as Matt, who is rarely absent. “There’s no bonus for working harder than another person,” he says. “Everybody’s equal, whether or not they’re equally efficient.”

There’s little incentive to go the extra mile to get the job done better or faster. “In a place like this, nobody’s going to give you a kudos, nobody’s going to give you a promotion. Everybody is on a level playing field.”

Although China’s one national union is the world’s largest, at the coastal consumer goods factories I visit in China, factory workers are paid by the piece and almost never unionized. If they’re lucky, they work 11 or 12 hour days, six days a week (a 72 hour work week). They don’t even necessarily want job security. When orders slow, many resign to take time off and find another job elsewhere. Average wages in China were 81 US cents an hour in 2006, 3 percent of the average US hourly wage of $30.

Auto workers in China may be better paid and thus less flighty than those in electronics and apparel factories, but maybe not. An economist friend tells me that even the International Monetary Fund struggles to hold on to its Chinese economists because so many leave for better pay at foreign investment banks. To me, this seems not cultural but rational: there are inevitably more job openings in the world’s fastest-growing economy. In an economy that is growing 8.7 percent a year, people are naturally less interested in job security than the freedom to switch jobs and earn more elsewhere.

But in my conversations with Matt as well as Chinese and Japanese workers over the last few months, I have been surprised by the contrast between the desire for stasis in the US and Japan (the desire to hold on to what we used to have) and the hunger for movement in China. Chinese people’s appetite for mobility – whether it be leaving your children and moving across the country for a job on the coasts, or forgoing the relative security of a factory or white collar job to start your own business, or switching jobs once a year – is part of what makes China such an attractive place to manufacture consumer goods.

I wonder whether those same qualities make China any more attractive as a place to manufacture transmissions. I also wonder whether you could make the case that trade is not a zero sum game, that the more transmissions Chinese people need, the more Matt will make, regardless of whether Ford starts producing the same transmission in China.

Turns out, what Matt and his neighbors talk about over lunch and across their lawns in Michigan isn’t China – it’s Japan.

“Japan doesn’t allow many American cars to be sold in their country,” he said. “If a country’s not going to accept our imports, we should cut down on the stuff they’re allowed to import to us.”