The American way of life

RATIONAL EXPECTATIONS

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"Oh yes, there are cheaper caskets", a typical conversation you had with the undertaker would broadly run, "this one costs just $1,000, and it is two feet smaller than the $10,000 one, but we could break your father's legs, and tuck them under him ... yes, we could give you this if you don't mind your father feeling a bit squashed."

Needless to say, you took the $ 10,000 casket! Mitford, in fact, updated her bestseller before she died in 1996, and that too was a runaway success "" Mitford was so dismayed by the huge costs of funerals, especially for working class families, her husband and she even set up a non-profit undertaking service.

But what's even worse than the American way of death, it would appear from a series of serious research-books that have recently been reviewed in the The New York Review of Books (NYRB), is the American Way of Life.

Contrary to what most of us in the third world feel, life isn't quite milk and honey for the average Joe. Not only is the average American worker under threat, the family is also under serious pressure "" and I'm not talking of the divorce rate which, at 49 per cent of marriages is pretty high, or the drug addiction.

Some aspects of this, of course, are evident from the serious backlash that's currently taking place against outsourcing. But, while several analysts here, like those at Nasscom, argue that the backlash is more political in nature, the NYRB, and the reviews, suggest the problem could be deeper rooted.

The book Downsizing in America by William Baumol, Alan Blinder and Edward Wolff, for instance, analyses job creation and destruction in the US over the years, and concludes that the number of new jobs that have been created have always exceeded the number of jobs lost by a huge margin.

Between 1980 and 2002, for instance, while population grew by 23.9 per cent, the number of employed Americans rose by 37.4 per cent. The authors argue that downsizing, in fact, is more or less restricted to the manufacturing sector (due to automation and US firms becoming uncompetitive), while other sectors have in fact been upsizing.

Andrew Hacker, NYRB's reviewer, smartly goes a step ahead, and examines the kinds of jobs being lost and compares them with the kind of jobs being created. He takes some top companies, like General Motors and Xerox for instance, and looks at their payrolls between 1981 and 2000 "" while GM more than halved its workforce from 746,000 to 350,000, Xerox cut its staff from 120,500 to 79,000.

At the same time, however, Wal-Mart increased its payroll from 27,000 to 1.3 million, and McDonald's added 296,000 workers. In other words, the number of jobs may have gone up, but the average pay's gone down "" a typical new job at Wal-Mart, Hacker says, pays around a third what industrial jobs pay.

This, in fact, is brought out starkly in the next book Hacker reviews, Low-Wage America by Eileen Applebaum, Annette Bernhardt and Richard Murnane "" the book concentrates on what it says is a growing number of "Americans who do not even earn enough to support themselves and their families". Hacker adds the problem is relatively new.

In 2001, for instance, less than a sixth of Americans earned $ 65,000 a year, roughly the sum required to support a family with children in middle class America.

As a result, most families are forced to have more than one wage earner (half have two, and 14 per cent have three or more earning members) in order to support themselves "" Hacker doesn't seem to think so, but surely this is positive in the sense it encourages families to stay together!

Interestingly, Hacker points out that the median pay cheque for wives was under $ 18,000 in 2001, which places them in the really low wage category "" less than half the wives have full-time jobs. In the typical two-job family, the wife's income would be a third of the joint family income.

Surjit Bhalla's been working on women (!) in India, and his yet-to-be-finalised research (co-authored with his wife Ravinder) shows that Indian women earn almost the same amounts that men do. In Bhalla's typical in-your-face style, the book's called Getting Even.

The dramatic increase in the number of teenagers working "" between 1980 and 2002, teenage employment grew 63.2 per cent as compared to 37.4 per cent for all groups "" is also another reason for wages remaining low, as teenagers are happy to work for amounts just enough to pay for their cars and some functional independence from their parents.

In areas like hotels, the presence of Hispanics and Asians has helped lower wages. With much of the high-paying industrial jobs disappearing a long time ago thanks to competition from imports from countries like China, it's hardly surprising then that Americans would resent even the moderately-paying ones now being offshored to countries like India.

But, it is equally true that if the jobs aren't outsourced, the companies will become uncompetitive and will have to shut down, leading to even more unemployment. This is America's inflection point. It needs to retool itself completely, to educate workers enough to move up the value chain.

Failing which, salaries will continue to move south, both literally and figuratively, and to use Mitford's analogy, even the American Way of Death could move beyond the reach of the ordinary worker!

suniljain@business-standard.com