TOYOTA,  THE ORIGINAL MODEL FOR LEAN MANUFACTURING

IS THIS WHAT WE HAVE TO LOOK FORWARD TO?

From the AFL-CIO Working Families E-Activist Network

"Moving Forward."  That's how Toyota describes itself to its customers.  But on the treatment of its workers, the company is stuck in reverse.

Toyota has received $371 million in state and local tax subsidies since 1986, according to publicly available records.  In return, the company promised to bring quality manufacturing jobs to states like Kentucky.  But Toyota isn't keeping its promise.  At a town hall forum March 31, workers at the plant in Georgetown Kentucky told about co-workers who were injured on the job and then never came back to work.  Employees told about full-time workers being replaced with temporary workers who get paid half of what regular employees earn and cannot afford health insurance. .....

These trends could be just the beginning.  The Detroit Free Press reported Feb. 08 that a "report from Seiichi Sudo, president of Toyota Engineering and Manufacturing in North America, said the company should strive to align hourly wages more closely with prevailing manufacturing pay in the state where each plant is located, 'and not tie ourselves so closely to the U.S. auto industry, or other competitors.' "  In Kentucky in 2005, manufacturing wages were 56% of motor vehicle manufacturing wages.

At the town hall forum a few miles from the Georgetown plant, workers demanded the company respect its employees and the community that made the plant successful.

Tim Unger, an 18-year veteran Toyota worker, said:  Shoulders would wear out, wrists would require surgery and back and hands started to fail.  It seems as if the good people who contributed to the success of Toyota were being used up and disposed of like garbage.

Added Noel Christian Riddell, a 10 year veteran skilled-trades worker:  We executed model-change activities faster than any other manufacturer.  I truly felt my contributions played a role in the company's success.  But something happened.  After only a few years, training ceased.  Suddenly, I had no sick days.  My raises became smaller.  My benefits were cut.   My group's manpower was slashed.  And the number of temporary employees steadily grew.

It's time Toyota gave these workers the justice on the job they deserve.

You can take action to help the Toyota workers by going to the AFL-CIO Working Families E-Activist Network through the AFL-CIO website link.  There you can send a message to Steve St. Angelo, head of Toyota North America, to till him that the workers deserve more respect.

Published: Sunday, January 20, 2008

Overseas Investors Buy U.S. Holdings at a Record Pace

For much of the world, the United States is now on sale at discount prices. With credit tight, unemployment growing and worries mounting about a potential recession, American business and government leaders are courting foreign money to keep the economy growing. Foreign investors are buying aggressively, taking advantage of American duress and a weak dollar to snap up what many see as bargains, while making inroads to the world’s largest market.

Last year, foreign investors poured a record $414 billion into securing stakes in American companies, factories and other properties through private deals and purchases of publicly traded stock, according to Thomson Financial, a research firm. That was up 90 percent from the previous year and more than double the average for the last decade. It amounted to more than one-fourth of all announced deals for the year, Thomson said.

During the first two weeks of this year, foreign businesses agreed to invest another $22.6 billion for stakes in American companies — more than half the value of all announced deals. If a recession now unfolds and the dollar drops further, the pace could accelerate, economists say.

The surge of foreign money has injected fresh tension into a running debate about America’s place in the global economy. It has supplied state governors with a new development strategy — attracting foreign money. And it has reinvigorated sometimes jingoistic worries about foreigners securing control of America’s fortunes, a narrative last heard in the 1980s as Americans bought up Hondas and Rockefeller Center landed in Japanese hands.

With a growing share of investment coming from so-called sovereign wealth funds — vast pools of money controlled by governments from China to the Middle East — lawmakers and regulators are calling for greater scrutiny to ensure that foreign countries do not gain influence over the financial system or military-related technology. On the presidential campaign trail, the Democratic candidates have begun to focus on these foreign funds, calling for international rules that would make them more transparent.

Debate is swirling in Washington about the best way to stimulate a flagging economy. Despite divided opinion about the merits, foreign investment may be preventing deeper troubles by infusing hard-luck companies with cash and keeping some in business.

The most conspicuous beneficiaries are Wall Street banks like Merrill Lynch, Citigroup and Morgan Stanley, which have sold stakes to government-controlled funds in Asia and the Middle East to compensate for calamitous losses on mortgage markets. Beneath the headlines, a more profound shift is under way: Foreign entities last year captured stakes in American companies in businesses as diverse as real estate, steel-making, energy and baby food.

The influx is the result of a confluence of factors that have made the United States both reliant on the largesse of foreigners and an alluring place for opportunistic investors. With American banks reeling from the housing downturn and loath to lend, businesses are hungry for cash.

The weak dollar has made American companies and properties cheaper in global terms, particularly for European and Canadian buyers. Even as Americans confront the prospect of a recession, economic growth remains strong worldwide, endowing oil producers like Saudi Arabia and Russia and export powers like China and Germany with abundant cash.

As the German company ThyssenKrupp Stainless broke ground in November on what is to be a $3.7 billion stainless steel plant in Calvert, Ala., its executives spoke effusively about the low cost of production in the United States and the chance to reach many millions of customers — particularly because of the North American Free Trade Agreement, which allows goods to flow into Mexico and Canada free of duty.

“The Nafta stainless steel market has great potential, and we’re committed to significantly expanding our business in this growth region,” said the company’s chairman, Jürgen H. Fechter, according to a statement.

Foreign giants like Toyota Motor and Sony have been sinking capital into American plants. Investment in the American subsidiaries of foreign companies grew to $43.3 billion last year from $39.2 billion the previous year, according to the research and consulting firm OCO Monitor.

“This is a vote of confidence in the American economy, the American marketplace and the American worker,” the deputy Treasury secretary, Robert M. Kimmitt, said. “These investments keep Americans employed and keep balance sheets strong.”

Five million Americans now work for foreign companies set up in the United States, Mr. Kimmitt said, and those jobs pay 30 percent more than similar work at domestic companies. Nearly a third of such jobs are in manufacturing, which explains why Rust Belt states have been wooing foreign investment.

“We’ve lost 400,000 manufacturing jobs,” said Michigan’s governor, Jennifer M. Granholm, a Democrat, who has traveled three times to Europe and twice to Japan in pursuit of investment since taking office in 2003. “I’ve got to get jobs for our people.”

Some labor unions see the acceleration of foreign takeovers as the latest indignity wrought by globalization.

“It’s the culmination of a series of fool’s errands,” said Leo W. Gerard, international president of the United Steelworkers. “We’ve hollowed out our industrial base and run up this massive trade deficit, and now the countries that have built the deficits are coming back to buy up our assets. It’s like spitting in your face.”

Other labor groups take a more pragmatic view.

“We need investment and we need to create good jobs,” said Thea Lee, policy director for the A.F.L.-C.I.O. in Washington. “We’re not in the position to be too choosy about where that investment comes from. But it does bring home the consequences of flawed trade policies over many, many years that we’re in this position of being dependent.”

At the center of concern is the growing influence of sovereign wealth funds, which invested $21.5 billion in American companies last year, according to Thomson. Analysts say they could skew markets by investing to improve the fortunes of their national companies or to pursue political goals.

“This is a phenomenon that could be called the growth of state capitalism as opposed to market capitalism,” said Jeffrey E. Garten, a trade expert at the Yale School of Management. “The United States has not ever been on the receiving end of this before.”

Perhaps emblematic of national ambivalence, in an appearance on CNBC last week, the voluble market analyst Jim Cramer spoke in menacing terms about the growing role of state investment funds from the Middle East and China.

“Do we want the communists to own the banks, or the terrorists?” Mr. Cramer asked. “I’ll take any of it, I guess, because we’re so desperate.”

Proponents of investment from overseas note that finance from sovereign wealth funds is a mere trickle of the overall flow from abroad. Indeed, the bulk comes from Europe, Canada and Japan. Just as Americans have scattered investments around the world in pursuit of profit — with holdings of foreign stock and debt exceeding $6 trillion in 2006, according to the Treasury Department — foreigners are looking to the United States, with their capital generating economic activity, proponents say.

If fear of foreign money now inspires Americans to erect new barriers, that would damage the economy, said Todd M. Malan, president of the Organization for International Investment, a Washington lobbying group financed by foreign companies.

“The policy choices on the negative side would have enormous economic implications that would make the current situation look like a bubble bath,” he said.

Tensions spawned by foreign investment hark back to the 1980s, when Japan snapped up prominent American businesses like Columbia Pictures, and some intoned that the American way of life was under assault. The new wave of foreign money is washing in at an even more important time, analysts say.

The United States has lost more than three million manufacturing jobs since 2001, with foreign trade often taking the blame. Foreign-made goods now account for roughly one-third of all wares consumed in the United States, roughly tripling their share over the last quarter-century. The soaring price of oil and a widening trade deficit underscore how the American economy is increasingly vulnerable to decisions made far away.

In 2005, Congressional opposition scuttled a bid by the state-owned Chinese energy company Cnooc to buy the American oil company Unocal. The following year, furor on Capitol Hill prevented DP World, a company based in the United Arab Emirates, from buying several major American ports.

No such outcry has greeted the purchase of stakes in major Wall Street banks by state investment funds in the United Arab Emirates, Kuwait, China, Singapore and South Korea. This is largely because the banks sold passive slices and ceded no formal control, which would have set off a federal review of the national security implications. But the silence also reflects the imperative that these enormous institutions swiftly secure cash.

“It would be good if these companies didn’t need all this capital and better if the capital was available in the United States,” said Senator Charles E. Schumer, Democrat of New York, who was a vocal opponent of the DP World deal. “But given the situation that these institutions find themselves in and the fact that there’s a pretty strong credit squeeze, there’s only two choices: Have foreign companies invest in these firms or have massive layoffs.”

In years past, particularly when Japanese money washed in, many foreign purchases proved not to be so prudent in the end. This time, with the dollar weak and troubled American companies in a poor bargaining position, the prices really do seem cheap, some economists say.

“They’re buying financial assets at well under book value,” said Gary C. Hufbauer, a trade expert at the Peterson Institute for International Economics.

Trade experts assume tensions will rise as developing countries — which tend to have more state companies — continue to expand their share of investment in the United States.

Canada still spends the most money buying stakes in American companies — more than $65 billion in 2007, according to Thomson. But other countries’ purchases are growing rapidly. South Korea’s investments swelled to more than $10.4 billion last year from just $5.4 million in 2000. Russia went to $572 million from $60 million in that span; India to $3.3 billion from $364 million.

But even if political tension increases, so will the flow of foreign money, some analysts say, for the simple reason that businesses need it.

“The forces sucking in this capital are much bigger than the political forces,” said Mr. Garten, the Yale trade expert. “If there is a big controversy, it will be between Washington on the one hand and corporate America on the other. In that contest, the financiers and the businessmen are going to win, as they always do.”

See Snapshots archive.

Snapshot for July 2, 2008.

Official poverty measure undercounts the nation's poor

By Jared Bernstein

In a few weeks, the U.S. Census Bureau will report on the 2007 poverty rate in America. Most likely, poverty as officially measured will have fallen slightly. But whatever the outcome, one thing is for sure: the official measure will represent a significant undercount of the nation's poor. A more accurate measure would reveal that millions more persons face material deprivation.

The chart shows the official measure alongside a more accurate, alternative poverty measure taken from recent research that incorporates the recommendations of the National Academy of Sciences (see note). This alternative measure provides a much more detailed accounting of who is poor.

In both 2000 and 2006, the alternative measure is higher than the official measure. In 2006, 12.3% of the population—36.5 million people—were officially poor. But under the more comprehensive, alternative measure, 17.7% were poor—16 million more poor persons than under the official measure.

The trend in both measures is also revealing. Despite the fact that this was a productivity-rich recovery, the growth of income inequality over these years meant that income gains from the economy's expansion failed to reach the lowest income families, and poverty rose under both measures. This lack of progress against the scourge of poverty amidst plenty stands as a stark reminder of the costs of inequality.

Note: The source for the alternative measure is Creating a Consistent Poverty Measure over Time Using NAS Methods, 1996-2005 by Thesia Garner and Kathleen Short (2008), The alternative measure for 2006 was kindly provided by the authors. Their alternative measure incorporates the recommendations of the National Academy of Sciences (NAS) from their extensive study of updating the official measure of poverty in America. The new measure counts many more income sources, including tax credits and the market value of food stamps. It also updates the poverty thresholds—the income levels used to determine poverty status—using up-to-date information on consumer spending, including housing and out-of-pocket medical costs. The official poverty measure can be found here.

Check out the archive for past Economic Snapshots.

THE RECESSION IS HERE!

UNEMPLOYMENT CLIMBS

Manufacturing, Construction Jobs Take Biggest Hit

By Sue Kirchoff

Gannett News Service

Yesterday

The Labor Department is reporting that the unemployment rate jumped to 5 percent in December from 4.7 percent in November. The jobs gain of 18,000 last month was the smallest in four years.

Most of the jobs lost were centered in construction and manufacturing. While the construction losses were expected given the sharp housing downturn, some economists were especially concerned that manufacturing was doing so poorly.

Factories shed 31,000 manufacturing jobs in December, and a total of 212,000 in 2007. The job losses come despite a continuing surge in U.S. exports, buoyed by the falling value of the dollar, which makes U.S. goods cheaper overseas.

“There needs to be a look at both what we can do domestically in terms of taxes and help with the costs of health care and energy,” says Scott Paul of the Alliance for American Manufacturing, a coalition of the United Steelworkers and major steelmakers.

“We also have to look at this from a competition perspective, and our manufacturers are just getting hammered,” Paul says.

The worsening jobs picture has the White House accelerating talk about a possible economic stimulus package and puts increased pressure on the Federal Reserve to further cut interest rates to boost consumer and business activity.

Though some economists doubt whether new tax cuts or spending could be enacted quickly enough to do much good, Democrats in Congress also stepped up calls for robust action as the economy veered closer to a recession.

The “R” Word

The weak jobs picture comes as the economy grapples with a depression in the housing sector, high prices for oil, food and other commodities and a continuing credit crunch that has hampered business.

Bush recently met with Treasury Secretary Henry Paulson and other economic advisers to discuss business conditions, though the White House has made no firm announcements about a stimulus plan.

Speaking to reporters after the meeting, Bush said his priority is to ensure that Congress extends his 2001 tax cuts, many of which will soon expire - and are unpopular with Democrats who control Congress.

Democrats, meanwhile, are searching for solutions that could win quick approval in a closely divided Congress.

Though some economists doubt whether new tax cuts or spending could be enacted quickly enough to do much good, Democrats in Congress also stepped up calls for robust action as the economy veered closer to a recession.

“Today’s job numbers should be a wake-up call that a public policy response is needed to help the economy recover more quickly and to help average Americans deal with any downturn,” said House Financial Services Chairman Barney Frank, D-Mass.

Trade Policies

The job losses are likely to underscore populist economic sentiment both in Congress and on the presidential campaign trail. Democratic presidential candidates, former Arkansas governor Mike Huckabee, a Republican, and Sen. Barack Obama, D-Ill., have expressed doubts about U.S. trade policies.

Obama says he would like to rework the North American Free Trade Agreement and eliminate tax breaks for companies that move jobs overseas. The Economist magazine recently quoted Huckabee saying, “I don’t want to see our food come from China, our oil come from Saudi Arabia and our manufacturing come from Europe and Asia.”

RETIREMENT

ENSURING RETIREMENT SECURITY

Copyright 2006 AFL-CIO

Retirement security is fast becoming a goal beyond the reach of most Americans.  Our private pension system is fraying. Companies increasingly view bankruptcy as a business strategy to eliminate pensions.  (Funny how they crack down on personal bankruptcy requirements yet business is permitted to continue to use bankruptcy to neglect its obligations)  The bankruptcy code provides little protection for workers' retirement security.  With the law's emphasis on facilitating reorganization at almost any cost, companies in elite industries are shedding their pension obligations with hardly a look back and workers who lose pensions are unable to persue a claim for those benefits in court.

A succession of healthy companies with marquee names and well funded plans are also turning their backs on their pension promises by freezing their plans or closing them to new hires.  Many other companies are soon to follow.

Although workers' ability to achieve retirement security has long been premised on a system of mutual responsibility: government-provided Social Security; employer-provided pensions; personal savings: only Social Security now guarantees a universal benefit.  Only 1/10 (11%) of private-sector employers now sponsor a defined benefit pension plan, down almost 1/2 from 25 years ago.  For non-union workers, the situation is even more dire: only 15% of non-union workers have defined benefit pension plans, compared to 72% of union workers.  And even this limited coverage is on the decline.

Across the country, the retirement security of public employees is also under attack through efforts to replace defined benefit pension plans with riskier defined contribution plans. (Think 401(k))

These trends portend poorly, not only for the economic health of the retirees, but also for the nation overall.  Most of our 76 million baby boomers will face retirement with fewer assets than previous generations, if they are able to retire at all, as many will be forced to remain in the workforce to stave off poverty.  These seniors, who will comprise an increasing share of the population, will be without the purchasing power that is needed for a healthy economy.

The facts about how much workers are saving for retirement are sobering and offer no hope that 401(k)s or other defined contribution plans will make up for the loss of traditional pensions without major changes, both in the design of the plans and the level of contributions.  The average employer contribution to a defined benefit plan secures an individual worker a lifetime pension benefit worth $400,000.  By contrast, half of all American families have no retirement savings whatsoever.  Among families close to retirement (those headed by someone aged 55-64): nearly 2 in 5 have no retirement savings in a 401(k), IRA or other defined contribution account.  Among those near-retirement families lucky enough to have some retirement savings, half have less than $85,000-enough for a monthly retirement income at age 65 of only several hundred dollars.

Moreover, individual saving plans, like 401(k) plans and IRAs, as they exist today, can not offer all the benefits of real pensions.  Well-designed defined benefit pension plans provide benefits for all covered workers, provide lifetime retirement income, deliver valuable survivor and disability protections and may offer important early retirement benefits and post retirement benefit increases. By contrast, individual savings plans require workers to bear all the risk, are often insufficiently diversified, suffer from poor returns and typically carry very heavy fees and expenses.

The AFL-CIO calls on Congress and the President to enact legislation guided by the following principles:

Principles to Guide the Delivery of Retirement Income

• Retirement security should be based on mutual responsibility, with financing and risk allocated equitably among government, employers and workers;
• Every full-career worker should have the opportunity to retire at 65 with at least 70% of their pre-retirement income;
• Retirement benefits should be portable;
• Defined contribution plans should be structured to serve the interest of workers, not those of their employers or wall street;
• Retirement plan participants should be represented in the governance or their plans

NO TIME OFF

As summer approaches, many Americans are thinking about vacation plans. But unfortunately, nearly one in four Americans receive no paid vacation or holiday time. Even worse, nearly "half of all full-time private sector workers in the U.S. get no paid sick days," with low-income workers, parents, and people with chronic illnesses hit the hardest. Businesses also suffer in productivity and other workers face health risks when sick employees are forced to go to work. The American public overwhelmingly agrees that all workers deserve days off from work; 95 percent of workers believe it is "unacceptable" for employers to deny sick days. Sen. Ted Kennedy (D-MA) and Rep. Rosa DeLauro (D-CT) have introduced the Healthy Families Act (HFA), which would guarantee that workers receive at least seven paid sick days each year. Tell Congress to support this legislation here.

DAMAGING PUBLIC HEALTH: For many Americans, getting sick may mean getting fired. "At least 145 countries have paid sick days," notes Public Welfare Foundation president Debra Leff. "The United States is the only industrialized country lacking such a policy." The situation is the worst for the nation's lowest wage earners, 80 percent of whom receive no sick days. Food service workers, who are in constant contact with the public, are also among the least likely to receive paid sick days. New York Times columnist Bob Herbert wrote recently, "Eighty-six percent get no sick days at all. They show up in the restaurants coughing and sneezing and feverish, and they start preparing and serving meals. You won't see many of them wearing masks." Similarly, 55 percent of retail workers and 29 percent of health care and social assistance workers receive no paid sick days. Additionally, workers "who do not have paid sick days for doctors' visits do not have the opportunity to get important preventive care, such as flu shots and vaccinations." A study by the Institute for Women's Policy Research finds that 40 percent of workers "report having contracted the flu from a colleague." "The lack of paid sick days isn't just a family issue -- it's also a public health issue," Kennedy said. "When sick people go to work or sick children go to school, they infect their coworkers or fellow students and the public as well."

NEGLECTING CHILDREN'S HEALTH: Children also suffer when employers do not provide paid sick leave. Just one in three workers receive paid sick days to care for a child, meaning parents are forced to choose between losing a day's pay or sending a sick child to school. Just as viruses rapidly spread in workplaces, the same happens in schools. Even though child-care centers require sick children to remain home, "when parents cannot get off work to stay home with them, many sick children do end up in care." An even bigger threat to children's health occurs when parents are unable to take time off to ensure that their children receive needed preventive care, such as immunizations and well-child visits. Failure to ensure that all children receive timely preventive care has long-term implications for not only their health, but our national health care spending.

DECREASING BUSINESS PRODUCTIVITY: Most people don't want to interact with a co-worker who is sick. In a recent survey, 59 percent of businesses said that they have a problem with presenteeism -- workers showing up to work when they are sick -- compared to 39 percent two years ago. A study by Cornell University "found that presenteeism despite medical problems costs $180 billion annually in lost productivity, and may be more costly than absenteeism due to illness." Yet despite these facts, many businesses still do not recognize that employees need paid sick days. Herbert recently contacted Cracker Barrel Old Country Store about its lack of paid sick leave. The company simply responded, "If employees need to miss a shift due to illness, there are generally many opportunities to make up that lost shift later in the week, or the next week." Ness notes that this type of policy can lead to "economic disaster" for many workers.

ALL WORK, NO PLAY: "The United States is the only advanced economy in the world that does not guarantee its workers paid vacation," according to a new study by the Center for Economic and Policy Research. Approximately 28 million Americans receive no paid vacation or holiday leave. Lower-wage workers "are less likely to have any paid vacation (69 percent) than higher-wage workers are (88 percent). The same is true for part-timers, who are far less likely to have paid vacations (36 percent) than are full-timers (90 percent)." Even the national average -- nine paid days of vacation and six paid days of holiday -- is "less than the minimum legal standard" set in almost all the world's rich economies.

THE REMEDY: Kennedy and DeLauro's HFA mandating that employers with 15 or more employees provide at least seven paid sick days would benefit 66 million Americans: "46 million would gain access to paid sick days; 19 million would gain paid sick days for leave for doctors' visits and family care; and 1 million Americans would gain additional paid sick days." "Paid sick leave is a basic right of people in the workplace and the price paid for denying employees paid sick leave is felt by all of us," said DeLauro. Currently, California is the only state mandating comprehensive paid family leave. The law "provides most Californians with six weeks of partial pay when they take leave from work" to care for a family member. Rutgers University's Eileen Appelbaum and the UCLA's Ruth Milkman note that while the Family Medical Leave Act guarantees "12 weeks of unpaid family leave to eligible employees at large companies, many working families cannot afford to take the time off work without pay," making clear why the HFA is necessary.