Jeff Rains, a retired steelworker at the sprawling mill here, made the discovery. Out walking a month ago, he waited impatiently at a rail crossing while a freight train slowly passed, its flatbed cars stacked with steel pipes, each wide enough for a child to crawl through. Then he noticed �Made in India� stenciled on the pipes.Here's the deal. Like it or not, and union workers clearly don't, this is a global economy.
The United Steelworkers union has been trying ever since to galvanize the Granite City story into national outrage over steel imports, raising suggestions of protectionism in the process. The union and its workers want steel pipe for future projects to be made in the United States, creating domestic jobs.
The imported pipe has inflamed that sentiment. The union filed an antidumping lawsuit in Washington last Wednesday against tubular and pipe steel imported from China. A day earlier, Local 1899 staged a rally here, drawing more than 500 people to the same field where the lengths of �Indian pipe,� as the people here call them, have been stacked.
�The steel pipe behind us is a symbol of what has gone wrong in this country,� one of the speakers declared, arguing in effect that a lax Congress and greedy businesspeople, as in Wall Street, had brought three months of layoff, so far, to more than 10 percent of Granite City�s work force. The crowd cheered, and some chanted back, �No more greed.�
Companies cannot afford to pay high prices steel or they will not have any profits to share. Union wages and benefits are simply higher than the market can bear and there is no good solution other than what unions do not want to hear.
The choice is not between high priced US steel and imported steel, the choice is between building anything at all and not building it.
Moreover it is highly doubtful imported steel costs any jobs. For every steelworker job lost, there are doc unloading jobs gained, trucking jobs gained, and more restaurants that benefit from increased trucking and shipping along the way.
Of course there is a balance of trade issue that needs to be addressed but that is separate and distinct from a jobs related issue.
Not a Steel Issue
This is not just a steel issue. I am talking about flat panel TVs, steel, copper pipe, appliances, cars, electronics, underwear and damn near anything one can make. The days are gone where someone can be paid $40 an hour, $30 and hour, or even $20 an hour with enormous pension benefits at retirement.
Nothing, and I repeat nothing is going to change this situation. One can protest, bitch and moan, or send me nasty emails (as many do every time I write such a post), but the fact remains, union expectations for wages and benefits are simply too high.
I can hear the screams already. "We need living wages". My answer remains what it always has been. I grew up in Danville, Illinois. There were 6 of us (4 kids) in what was probably a 600 square foot home. We had one bathroom for all of us. There were no flat panel TVs, or SUVs in my childhood. We only went on two vacations, one to the Osarks the other to the Smoky Mountains. But we were happy and growing up I thought we were relatively well-to-do middle class.
The key is we were happy and there were meals on the table every day. Now it seems the lack of a $35000 SUV every few years is out an out deprivation.
Wages Not Even The Issue
The issue is not even wages. The issue is how far those wages go in conjunction with unrealistic expectations about standards of living.
Policy decisions by the Fed, by the Treasury, by Congress, and even by unions are to blame. Unions have priced themselves out of the global economy. But the real problem is the massive amount of wasteful spending in Congress and the loose policies at the Fed that have created this crisis.
At every crisis, the Fed stepped on the gas inflating the economy. Unions benefited as wages rose along with the price of everything. However, eventually there comes a time when no one is willing to pay those wages. That has obviously happened. Yet because of the Fed's expansionary policy, prices of houses and goods and services continued to rise, outstripping wages.
The only people who really benefited from the Fed's expansionary policies were the bank executives, the fat cats on Wall Street, and government bodies who taxed rising property values and took a chunk out of everything people made via sales taxes, income taxes, and property taxes.
The entire mess has now crashed with consumers deep in debt on their houses, SUVs, and credit cards. And union expectations are left out of whack with what those jobs are worth.
No Sugar Coating
No one wants to hear this but here it is without sugar coating: A long painful recovery process is in order. It may take a decade to play out. Lower home prices, lower prices on goods and services, and lower wages and benefits will all be a part of the recovery process.
In aggregate, the current generation now in high school is likely going to be the first generation in America's history with a lower standard of living than their parents for quite some time to come.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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