Monday, September 5, 2011

Labor Day, A Day To Celebrate The Demise Of American Labor

Labor Day, a federal holiday to celebrate American labor since 1894 when it was rushed through Congress in an attempt to head off further conflicts after the killing of numerous striking workers by the US authorities, seems to have lost some of its luster lately.

Currently as many as 16-20% of the US population is either unemployed or underemployed all while many US companies are seeing record profits often on the backs of cheap foreign labor. Since 1973, private sector union membership has declined from 34% down to approximately 8% while at the same time wage inequality in the private sector has increased by more than 40 percent. (no correlation there right?) Hardly numbers to to be celebrated.

While many are looking for work, Apple the US based darling of Wall Street and one of the biggest companies as far as revenue generated gives us a good example of the current labor/business relationship such as it is.

In 2009, the materials to make an iPhone cost Apple $172.46 and the Chinese labor to assemble it added another $6.50. Given those numbers, Apple had a profit margin of around 64% on each and every iPhone sold. Now look at what those numbers might be if Apple decided to manufacture that same iPhone in the US:
For the sake of discussion, they assumed that assembly line wages in the U.S. are ten times higher than in China. Given that Chinese production workers earn roughly $1 an hour, that is not an unreasonable assumption. The higher wages would mean that the total assembly cost per phone would rsie to $65 and the total manufacturing cost would approach $238. If Apple continued to sell the iPhone for $500, the company would still earn a very respectable 50% profit margin.
Yep, Apple would be forced to only make a 50% profit margin on each unit and 1000's of new jobs would be created. Obviously the example above isn't completely accurate as you can't touch an unsubsidized iPhone for anywhere near $500 and it doesn't take into account any benefits that Apple might chose to offer those imaginary workers but you get the picture.

Now despite how it sounds, I am not going to turn this into another "corporations are greedy" meme, well maybe I will a little bit, and I freely admit that Apple is free to run their business as they see fit and to make as much money as possible. Heck if Nike can employ a workforce of children in the 3rd world to make their $200 shoes why can't Apple also take advantage of cheap labor to make their toys? I only point this out to show how the current climate is taking us down the road to a 3rd world wake up call in which we could eventually become the next former superpower. Our education system is already well on its way there, so how long before that $1 an hour assembly job starts looking good here as well?

So on this Labor Day when we find that being employed in the government sector is bad for your employment prospects and private business is not creating jobs despite banking trillions in profits, maybe we should consider changing the name of the Labor Day holiday. How does Boardroom Day sound? We can make it a day when all the CEO's collect their multi-million dollar bonus checks and we can stand in line to collect our latest unemployment checks.

After all if you are unemployed, do you really need another day off?

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