Features of Low-Wage South Move to 'New North'

By ROGER BYBEE

The low wages and corporate domination pervasive in the US South, despite all the hollow talk of a “New South,” have been crucial in creating a “New North” where workers’ expectations and wages are sliding downward, and where public policy is increasingly geared toward appeasing corporate demands.

Northern corporations have relocated huge numbers of jobs first to the US South and then increasingly to even-lower wage, repressive nations like China and Mexico. One painful result is that the US South—and the Global South as well—haves exerted an enormous downward drag on US workers’ standard of living.

But at the same time, the US South has played a crucial role in first igniting and then continually fueling the interstate competition for jobs waged through granting enormous subsidies and tax breaks to corporations in the hope of attracting or at least retaining footloose corporations. The South established a model of near-total obeisance to corporate demands for subsidies drawn from the public treasuries in deeply-impoverished states, and in shaping other public policies that starve funding for public education, healthcare, public recreational space, and other vital social needs.

Policy-makers in Northern states, increasingly desperate for jobs as millions were shifted to the South and later offshore, have felt that they have no alternative but to match the subsides offered by other states, regardless of how these “incentives” have failed to work while they drained public treasuries across the nation. Despite repeated failures by corporations to live up to job-creation and living-wage promises that were supposedly conditions of the corporate “incentives,” the states feel ever more pressure to grant more financial concessions to major corporations.

As of 2012, the New York Times estimated that corporate subsidies cost the states about $80 billion. But that number climbed to $110 billion by 2014, says tax expert and author David Cay Johnston, driven by firms like highly-profitable Boeing wrenching $13.2 billion from the states.

The competition pitting states against each other was initiated in the South by economic and political elites who sought to economically diversify a region heavily dependent on cotton farming and other agriculture along with textile jobs that had fled New England in the 1920s. The South of 90 years ago was marked by deplorable system of public education that failed to stem widespread illiteracy, pervasive public health problems usually confined to the Third World, and shoddy roads and public infrastructure.

But the “incentive” programs for corporations originating in the South directed public revenues not to the region’s urgent social needs, but to seek to draw more Northern jobs with corporate subsidies. Starting in the early 1930s, Mississippi’s “Balance Agriculture with Industry” program of large subsidies aimed at luring Northern firms to the South with the combination of dirt-cheap wages and huge incentives.

Wages were held down by fierce waves of violent repression against those who dared to strike, followed up by the enactment of “right-to-work” laws in several Southern states in the 1930s. “Right-to-work” laws, which eventually swept across the entire old South, as these laws brought together the interests of white supremacists seeking to avoid the interracial cooperation crucial to unions and corporate managers seeking to avoid unionization together.

The South became a haven for “runaway shops” as US corporations sought to avoid unionization, relatively high wages, and sacrificing a measure of control over workplace conditions. The South added hugely to its manufacturing based, especially from the late 1960s into the 1980s. But then US firms began to leap-frog the US South and head for the Global South, where they could find far lower wages and even tighter control over labor, as in Mexico and China. The wholesale shift of many industries overseas now means that 50% of the production of major US-based firms is conducted outside America, according to economist Jeff Faux in his book The Servant Economy.

Significantly, US firms have essentially transplanted the Southern model to their global operations, as historian Mary Frederickson details in her book Looking South. The crucial elements: tight control over labor including strictures against unionization, low wages, and demanding large subsidies from the native governments.

Meanwhile, much of the South remains mired in insecurity and misery, as Paul Theroux depicts in his account of extensive travels through the region in his new book The Deep South. These conditions remain despite an influx of foreign plants, especially in the auto, aerospace, and auto-parts industries (see chart on auto industry subsidies below). With weak unions and the widespread use of temporary workers in these plants, Southern workers possess little leverage to lift their earnings and live more dignified and secure lives.

Shackled by “right-to-work” laws which make sustaining unions nearly impossible, just 2.2 % of workers in South Carolina are union members, 3.7% in Mississippi, and as the very lowest of the 50 states, 1.9% in North Carolina. The weakness of labor in the South has effectively removed the leverage which unions once held when they represented 35% of the American workforce in the mid-1950. At present, unions contain just 6.6% of the private-sector workforce nationally.

One outcome has been the narrowing of the once-huge differential between good-paying jobs in the North—at an earlier point driven up by the strength of unions—and the still-miserable wages prevailing in the South. As Harold Meyerson points out in The American Prospect, “In tandem with Southern manufacturers and with the spread of Southern economic norms, it has brought Northern wages closer to Southern levels. In 2008, the wage gap between states of the industrial Midwest and those of the South—for all workers, not just those in manufacturing—was nearly $7, according to Moody’s Analytics. By the end of 2011, it had fallen to $3.34.”

The South is viewed by many corporations as an alternative to China with much greater productivity, no trans-ocean shipping costs of finished and diminished political resentment against autos and other big-ticket items made outside the US, along with the huge subsidies. As a union representative on the Airbus board explained the key advantage to Meyerson, “When we go abroad, we have the high-value work, the research and development, done in Germany. We [workers in German factories] supply the high-value parts. The workers who assemble the parts in the Airbus factory in Tianjin, China, produce 3 to 5 percent of the total value. But given the 6-to-1 productivity advantage that the United States has over China, it’s cheaper to do the final assembly in the US.”

The arrangement works superbly for the “transplant” corporations who combine First World productivity at wages only about 31% higher than those found in China. But the South continues to founder in human suffering, as Theroux recounts as he surveys one de-industrialized Southern town after another amidst a few oases of new plants: “Big companies have always sought cheaper labor, moving from North to South in the United States, looking for the hungriest, the most desperate, the least organized, the most exploitable. It has been an American story.”

The super-exploitation of the South, then, is nothing new, going back to the days of slavery. What is new is the power of America’s corporate elite—in tandem with foreign corporate managers—to impose the Southern model on all of the US and thereby create a dismal “New North.”

Roger Bybee is a Milwaukee-based writer and University of Illinois visiting professor in Labor Education. He edited The Racine Labor weekly for 14 years. Email winterbybee@gmail.com.

From The Progressive Populist, November 1, 2015

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