Hot! America, the world’s sweatshop

TheStar.com – business
Published On Thu May 19 2011.   By David Olive, Business Columnist

I saw a headline earlier this week for what I assumed was the umpteenth story about Dominique Strauss-Kahn’s alleged sexual misconduct at a Manhattan hotel last weekend: “The U.S.: Where Europe comes to slum.”

But the topic was far more disturbing than the conduct that earned “DSK” seven criminal counts for physically abusing a 32-year-old chambermaid.

In the Los Angeles Times, Harold Meyerson, a veteran progressive journalist, was trying to surface an under-the-radar trend of profound importance to the welfare of North American workers. Namely, that the U.S. South is becoming the world’s sweatshop of choice.

U.S. and a few Canadian manufacturers have long been relocating in the low-wage U.S. South. They’ve now been joined by European multinationals, most of which also operate in Canada. The Euros leave behind the social-justice practices of their homelands, as keen to squeeze blood from a stone as the most avaricious business operator.

A stunning Human Rights Watch report from last September describes systematic exploitation of U.S. workers by such familiar European names as Ikea, Sodexo, BMW, Siemens, Daimler and Volkswagen.

“Even self-proclaimed ‘progressive’ companies can and do take full advantage of weak U.S. laws,” says Arvind Ganesan, HRW’s human rights program director. “The U.S. needs to close the loopholes in the country’s woefully inadequate laws to protect workers.”

So what exactly are we talking about, in a society where I get dirty looks for confessing that I bought my shirt at Wal-Mart?

Sweden’s Ikea was revealed in April to be operating a manufacturing plant in Danville, Va., that is a toxic brew of charges of racial discrimination, routine worker maltreatment, and brutally successful efforts to bust union-organizing drives.

Sodexo, which operates the cafeteria at this newspaper and my Mom’s nursing home, has threatened and fired workers who tried to unionize, as HRW found from studying official decisions by U.S. labour-law authorities, along with worker interviews and employee court testimony.

At its newish California chain of grocery outlets, U.K. supermarket giant Tesco has muzzled workers trying to discuss organizing a union. The Netherlands-based Gamma Holding has hired permanent replacement workers to put strikers out of a job — in contravention of international labour standards, but not of U.S. law.

And Deutsche Bank turns out to be one of LosAngeles’s biggest slumlords. After foreclosing on some 2,000 L.A. homes, Deutsche Bank continued collecting rent while allowing the premises to rot and become gang-infested to such an extent that dead bodies are not infrequently found there. “Nothing, in other words, that would be allowed to happen . . . in Frankfurt, the neat-as-a-pin German city that is home to Deutsche Bank,” Meyerson writes.

The hypocrisy here stinks to the heavens. In Europe, minimum wages average $19 an hour. Governments mandate five-week paid vacations. Norway just introduced paid paternity leave. And most European multinationals not only are unionized, but union reps fall just short of a majority on many European corporate boards.

Many top European firms have joined “the race to the bottom” in employee costs.

But China is no longer the “off-shoring” jurisdiction of choice. With annual wage gains now averaging 15 per cent to 20 per cent, combined with stagnant wages in North America, China will lose its labour-cost advantage over North America in just four years time, according to a report this month by the Boston Consulting Group.

From Hamburg to Lyon to Stockholm, the question is why aren’t we serving the North American market from lower-cost facilities there? Which means that “guilt-free shopping” will soon mean avoiding “Made in USA” labels on products made by workers denied a decent living wage.

The Euro-exploiters are especially drawn to the U.S. South, which for three decades have lured employers with so-called “right to work” laws. That’s an Orwellian term for government-sanctioned hostility to workers’ rights, including the right to organize.

In small-town Virginia, Ikea gets away with paying workers to make the components of its trademark bookcases just $8 an hour, and granting only 12 paid vacation days.

In North American culture, jobs are dispensable. In Peoria, Ill., Caterpillar laid off 25,000 workers on one day in 2009. Try that in France or Italy and you’re inviting a national general strike.

U.S. officialdom has for years hectored other nations to upgrade their labour-rights standards. But as the HRW report shows, the issue is retrograde U.S. labour standards.

The irony here is that employee denigration does not work. German manufacturing pay averages 50 per cent higher than that of the U.S. Yet Germany enjoys a massive trade surplus. And America suffers a ruinous trade deficit, for all its disdain of European-style full-employment practices.

My local Staples manager complains he can’t keep employees “because we don’t pay much. I can’t blame them for leaving.” High turnover hikes training costs and annoys customers dealing with staff who lack product knowledge.

This a social-justice issue, no mistake. But really it’s the hard-headed business strategy of a Henry Ford, who paid above-average wages to spur consumption.

It’s the reason today that Costco, with its outsized employee benefits, outperforms Wal-Mart. (Costco shares have increased 133 per cent over the past decade, to Wal-Mart’s measly gain of just 6 per cent.)

And it’s among the reasons that Eaton’s is dead. In the midst of the 1985 strike at that Canadian retailer, I asked then-CEO Fredrik Eaton why his family chose to break a nascent union, rather than deal respectfully with employees on the picket lines who had me almost in tears describing their loyalty to the then 116-year-old firm.

“People here have no need of unions,” said the fourth-generation Eaton owner-CEO, who declined to elaborate. Fourteen years later Eaton’s filed for bankruptcy.

I’m not saying maltreated employees were the chief factor in the demise of Eaton’s. But the casual regard for employee relations at Eaton’s was indicative of management’s ineptitude generally.

When you’re next at Ikea, ask the workers serving you — a surly lot, I’ve always found — what the pay is like before imagining that you are engaged in “guilt-free shopping.”

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