27 October 2003

Grocery Business Transformation

Just some thoughts on the grocery worker strike in California that has been averted in Arizona...

Krogers, Safeway, and Albertsons (and whatever their "equivalents" are called in other locales) are to K-Mart as some of their newer competitors (including Wal-Mart superstores) are to Wal-Mart and newer upstarts (Kohls). What I'm trying to say is that I don't think labor costs are a factor for their market usurpation, just that new and different grocery models are supplanting their market power. And I believe such a strike in Arizona would be ineffective. I was thinking about this thread and the economist training in my head started churning...

Back in my parents day, grocery shopping was an affair that entailed a circuitous journey. Bread was bought at a bakery, meat at the butcher shop, produce at a produce store and/or farmer stand, and the grocer supplied canned goods and daily perishables (milk and bread). Then the supermarket chains consolidated, grew larger and offered prices that put the small time grocer out of business. And while some people still frequent farmers markets and bakeries, most began to fill the bulk of their grocery list at the Safeways and Krogers. Also, in many states, it wasn't until the early 80s where grocery stores were open late and open all days of the week (in many states, grocery stores were closed on Sundays).

Now, a different transformation is taking place and the Safeway and Kroger type stores are getting squeezed from both ends. First, from the Wal-Mart superstore bit that they publicly acknowledge. But they're getting squeezed from another end too, and I think they may not have a handle on this threat as just like K-Mart, their financial prospects are headed south.
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Magnequench Outsources US Missle Technology to China

To a charge of treason by US workers...
The neodymium-iron-boron magnets made by Magnequench are a crucial component in the guidance system of cruise missiles and the Joint Direct Attack Munition or JDAM bomb, which is made by Boeing and had a starring role in the spring bombing of Baghdad. Indeed, Magnequench enjoys a near monopoly on this market niche, supplying 85 percent of the rare-earth magnets that are used in the servo motors of these guided missiles and bombs.

But the Pentagon may soon be sending its orders for these parts to China, instead of Indiana. On September 15, Magnequench shuttered its last plant in Indiana, fired its 450 workers and began shipping its machine tools to a new plant in China. "We're handing over to the Chinese both our defense technology and our jobs in the midst of a deep recession," says Rep. Peter Visclosky, a Democrat from northern Indiana.

It gets stranger. Magnequench is not only moving its defense plants to China, it's actually owned by Chinese companies with close ties to the Chinese government.

22 October 2003

Federal Income Taxes, as a Share of GDP, Drop to Lowest Level Since 1942

Corporate income taxes are at their lowest level since 1937 and individual income taxes fall to their lowest level since 1966.

16 October 2003

The compact that created a large middle class is breaking

Arizona Republic business columnist Jon Talton chimes in on the grocery worker strike in California. Technically, it's more of a lockout, than a strike, considering that of the 70,000 workers affected, only 21,000 are on strike. The other 49,000 have been locked out by management.

The UFCW (United Food and Commercial Workers) claim that grocer profits are up 91% since 1998, yet the firms wish to cut in half health benefits for workers. Industry spokesmen cite increased competition from nonunion rivals such as Wal-Mart is forcing their hand.

Talton is on target in his pronouncement that we indeed have voted for this arrangement, by choosing to spend money at Wal-Mart instead of supporting local merchants.

Wal-Mart did not rise on hard work and small-town values. It rose because the government allowed it to gain an anti-competitive grip on the supply chain that would scandalize even John D. Rockefeller. It charges extremely low prices because of a workforce and sweatshop suppliers that do not have the pay and benefits that once were considered basic American values. Now it has imitators throughout the economy, its methods considered the vogue way to run a business.

Some day we may look back and say, "We never voted for this!" But we did, every time we shopped. Every time we neglected to see that a purchase was part of our connection to others. Every time we failed to patronize a local merchant, or a company that treats its workers well. Every time we crossed a picket line because, after all, if those fat union goons were replaced they got what they deserved.

And then it happened to our neighbors. And then it happened to us. And I guess we got what we deserved.

The question I wish to pose is why should it be this way? Is it collective selfishness that for saving a few dollars we're willing to sanction a return to sweatshop conditions? Or is it just brazen obliviousness? I haven't listened to much talk radio recently but I bet that caller sentiment is squarely against the workers (especially on all those right wing host shows).

12 October 2003

State Agency Charged with Job Creation Outsources Work to India

Another story in a similar vein to the previous one on Andy Grove's remarks regarding outsourcing is this one in Indiana that truly boggles the mind.
Jeff Drozda, a Republican from the Indiana district of Westfield, says he was "outraged" when he found out that a state agency charged with job creation in Indiana had outsourced work to Tata Consultancy Services of India. Drozda says Tata, which was hired by the state's Department of Workforce Development, has a long track record of replacing American high-tech workers with lower-paid L-1 visa immigrants.

And here is another article from the same publication that echoes the future security risks in abandoning our technical workers in America for cheaper, lower cost labor in foreign locales:

Ten years from now we will not have the skills in this country to support our own infrastructure.

Intel Founder Says Government Intervention is Necessary To Stem Tech Job Siphon to Asia

Intel chairman Andrew Grove acknowledges that the offshore job migration that Intel itself has embraced threatens economic recovery and growth in the United States.
Grove acknowledged under questioning that the tech industry itself is responsible for numerous jobs leaving the United States, as firms take advantage of considerably cheaper labor costs in India and elsewhere.

Grove said he is torn between his responsibility to shareholders to cut costs and improve profits, and to U.S. workers who helped build the nation's technology industry but who are now being replaced by cheaper labor. Grove did not offer a solution, saying only that the government needs to help decide the proper balance between the two. Otherwise, he said, companies will revert to their obligation to increasing shareholder value.

Interesting that Grove is basically saying that without a public policy plan on this critical matter, the U.S. will continue to hemorrage information technology jobs and the resultant displacement is a serious threat in many ways...

5 October 2003

Bush administration have no plans to impede companies from moving IT jobs to India

Instead, their answer is a vapid, ineffectual platitude about "growth and innovation".

Once upon a time in American history, there existed another president who idly sat by while the economic health of the nation deteriorated and its workers beset with the plague of unemployment and accompaning economic hardship. And George W. Bush is on pace to be the first president to end a term and oversee a net loss of jobs since that aforementioned other president. That president's name became synonymous with the words dirty and dilapidated.

But back to the Information Technology brain drain. It's an assault on our nation's knowledge workers and a crippling blow to aspiring computer scientists. The number of students studying technical disciplines will continue to plummet, as falling wages and diminished career prospects transform a once lucrative career field into the occupational equivalent of flipping hamburgers. And consider the wholesale relocation of engineering, programming and systems support to offshore locales in the third world. Our position as world leader in technology is eroding as we sacrifice our privacy and security to countries that do not champion freedom and justice. The national stockpile of bright minds is being sacrificed for next quarter's stock price.
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