Capital, Free Trade and U.S. Hypocrisy


Image from Kheel Center, Cornell University

Nearly 100 years after the infamous Triangle fire, on December 14, 2010, workers producing apparel for the Gap in the Hameen factory outside the capital of Bangladesh, became trapped by a 9th floor fire (Hammadi & Taylor, 2010).  The fire quickly became a conflagration and raged between the workers and the exit.  The workers fled to the fire exits and found locked doors, because management sought to prevent theft.  Left with no recourse, workers either jumped from the top of the building to the ground below or perished from the smoke or flames (Hammadi & Taylor, 2010).  This modern-day Triangle tragedy killed 29 workers and injured more than 100 (Griggs, 2011).

Image from Reuters/Andrew Biraj

The tragedy in Bangladesh serves to highlight the continued exploitation of labor that occurs in the developing world in order to drive down the costs for U.S. corporations.  The problem of exploitation is a complicated one that includes many factors, including the capitalist motives of growth and profit, relaxed or free trade agreements, the appeal of cheap labor and lack of regulatory standards in the developing world, and the need of developing world countries for capital investment to create economic stimulation.  These factors combine to create a vicious cycle that leads to worker exploitation and needless tragedies like the Hameen factory fire and other equally abhorrent labor practices that often impact woman and children the most.

Structural Problem with Capitalism

Hodsen and Sullivan (2008) describe Marx’s view of the structural problem inherent under capitalism:

“The exploitation and misery of workers results directly from the laws of capitalism in which the market system demands that every capitalist buy labor as cheaply as possible in order to produce and sell goods as cheaply as possible and still turn a profit.  If capitalists do not exploit their employees, they will be undercut by other capitalists who do.”  (pg. 8)

Lower costs allow U.S. corporations to return profit to shareholders, compete more effectively, and fund new initiatives to grow their business; in essence, the capitalist incentive system is designed to maximize growth and profit, in direct conflict with workers’ needs for living wages and safe working environments.

The Appeal of Global Labor Differences

            Labor costs vary widely across the globe based on a variety of factors, including the country economy, inflation rate, worker wages, overtime, benefits, and regulatory standards.  Economies without regulatory standards to protect workers, prevent worker exploitation, or protect the environment can be very attractive to corporations that can pass savings on to shareholders in the form of profits or to fuel new growth initiatives.

Free Trade Agreements

            Free trade agreements eliminate trade barriers like tariffs and quotas that historically prevented companies from moving work to countries with lower cost structures.  Advocates of free trade policies, like the WTO and the World Bank argue that free trade promotes economic growth for open economies and a resulting reduction in poverty and inequality.  In the World Bank report on globalization Collier and Dollar (2002) indicate that:

Globalization generally reduces poverty because more integrated economies tend to grow faster and this growth is usually widely diffused. As low-income countries break into global markets for manufactures and services, poor people can move from the vulnerability of grinding rural poverty to better jobs, often in towns or cities.  (p. 1)

Others argue the free trade creates a race to the bottom where industries are more likely to move across borders to countries that have different cost structures and regulatory standards (Hassoun, 2008).  While free trade agreements have opened markets and promoted trade, “these global institutions, however, have been much more reluctant to implement policies that provide protections for workers or for the environment” (Hodson & Sullivan, 2008, p. 203).  By way of example, the Hameen factory fire is indicative of lax safety standards and either poor or poorly enforced labor policies.

A Vicious Cycle

The availability of lower cost labor pools made assessable by free trade agreements have driven the trend by corporations to move work overseas to countries whose economies are in dire need of capital investments and who consequently have created a business-friendly environment.  The government of these countries, like Bangladesh, El Salvador, or Honduras, keep labor costs low to attract needed capital.  For example, El Salvador, a member nation of the International Labor Organization (ILO), one of 5 nations that participate in the Central American Free Trade Agreement (CAFTA),

Image from laurizza

has particularly egregious violations of international labor standards including discrimination against women, the worst forms of child labor and the “violation of the fundamental rights of freedom of association and collective bargaining” (Monterrosa, 2004, p. 46).  Countries with poor economies, high unemployment and free trade agreements make attractive targets for manufacturing investment, particularly when coupled with a pro-business environment that discourages labor unions and lacks effective enforcement of labor laws; the low labor costs are simply too attractive to pass up.  Large infusions of capital for new manufacturing investments can perpetuate pervasive labor problems like exploitation of women and children, low wages and occupational safety issues.

An Example: From a Sweatshop in El Salvador to CSU

            Two years after CAFTA was signed into law, Hanes Brands, a U.S. based maker of apparel across numerous brands, including the Champion Brand, announced the acquisition of the textile manufacturing operations of Industrias Duraflex, El Salvador, in order to continue to lower global supply chain costs (HanesBrands, 2007).  Hanes Brands, has been implicated in child labor violations in Bangladesh (Kernaghan, 2006), while in the Dominican Republic, Hanes used “a range of illegal means to thwart workers’ efforts to exercise their associational rights” (Worker Rights Consortium, 2007, p. 3).  A May 2009 report from the Washington Office on Latin America (WOLA) found continued institutional weakness and pervasive impunity in the enforcement of labor rights post-CAFTA in countries like El Salvador and cited numerous labor violations by Hanes Brands (2009).  Companies like Hanes Brands are able to operate largely with impunity in free trade zones, ignoring ILO labor standards and local labor laws while being applauded by the investors for their superior business management.  Meanwhile, Colorado State University, is selling CSU-branded Hanes merchandise to students and helping to support El Salvador’s sweatshop economy.

This shirt is made in El Salvador

How are we to begin to solve the labor problems associated with globalization when we reward the worst abusers with profit?

Fair Trade versus Free Trade

Free trade agreements have done much to advance the cause of trade and little to advance the cause of workers rights.  A move towards fair trade, with a linkage between international trade and basic labor standards, would do much to level the competitive labor field while improving justice (Barry & Reddy, 2005).  Linkage may also have the effect of improving wages and decreasing poverty (Barry & Reddy, 2005).  Upcoming trade agreements with Columbia and Peru are including more provisions for improved labor standards, although still may fall short in funding for enforcement projects (Washington Office on Latin America, 2009).

Improve Educated Consumer Choice

Information on ethical choices for purchased goods should be readily available to U.S. consumers whose current purchasing decisions reward corporations that exploit workers.  While there is information available for those who choose to do the research, it appears to be fragmented and lacks an appropriate framework to make it easy for a consumer to make an ethical decision.  Perhaps, were products labeled as “ethically manufactured” in the same way organic food is labeled “organic”, consumers could make an informed decision.  That knowledge would certainly have prevented my purchase of the CSU-Global apparel.

Conclusion

            The U.S. government, corporations, and consumers are equally culpable in the continued exploitation of workers and specifically the most vulnerable workers, women and children.  There are many factors contributing to the ongoing exploitation of women and children in the developing world.  Major factors include capitalist motives of growth and profit, free trade agreements that do not include provisions to enforce basic labor standards, the appeal of cheap labor and lack of regulatory standards in the developing world, and the need of developing world countries for capital investment to create economic stimulation.  These factors help create a vicious cycle where U.S companies infuse large amounts of capital into developing economies to take advantage of the opportunity of free trade and cheap labor; while the governments of developing countries allow an environment hostile to labor to perpetuate continued exploitation to attract capital investment.  It is the height of hypocrisy that the U.S. government, corporations, and workers, that insist on basic labor standards inside the U.S., have systematically help deny workers in the developing world the same basic rights.

References

Barry, C., & Reddy, S. G. (2005). Just Linkage: International Trade and Labor Standards (pp. 122). New York: Columbia University.

Collier, P., Dollar, D., & World Bank. (2002). Globalization, growth, and poverty : building an inclusive world economy. Washington, DC New York, N.Y.: World Bank; Oxford University Press.

Griggs, A. (2011, March 24). Triangle’s Fire Still Burns. Labor Notes. Retrieved May 29, 2011, from labornotes.org/2011/03/triangle’s-fire-still-burns

Hammadi, S., & Taylor, M. (2010, December 14).  Workers jump to their deaths as fire engulfs factory making clothes for Gap | World news | guardian.co.uk .  Latest news, comment and reviews from the Guardian | guardian.co.uk . Retrieved May 29, 2011, from http://www.guardian.co.uk/world/2010/dec/14/bangladesh-clothes-factory-workers-jump-to-death

HanesBrands. (2007, September 6). Hanesbrands Inc : Hanesbrands Inc. Acquires Textile Plant in El Salvador Capping Successful First Year as an Independent Company. Stock Market Quotes and Financial News | 4-Traders. Retrieved May 30, 2011, from http://www.4-traders.com/HANESBRANDS-INC-31267/news/HANESBRANDS-INC-Hanesbrands-Inc-Acquires-Textile-Plant-in-El-Salvador-Capping-Successful-First-Year–411680/

Hassoun, N. (2008). Free trade, poverty and the environment. Public Affairs Quarterly, 22(4), 353 – 380.

Hodson, R., & Sullivan, T. A. (2008). The social organization of work (4th ed.). Belmont, CA: Wadsworth.

Kernaghan, C. (2006, October 24). Child Labor Is Back: Children Again Sewing Clothing for Wal-Mart, Hanes and Other U.S. Companies. Common Dreams. Retrieved May 29, 2011, from http://www.commondreams.org/news2006/1024-01.htm

Mcclear, S. (2005, March 1). ZCommunications | Race to Bottom for Garment Workers by Sheila Mcclear | ZMagazine Article. Z Communications. Retrieved May 29, 2011, from http://www.zcommunications.org/race-to-bottom-for-garment-workers-by-sheila-mcclear

Monterrosa, A. l. E. n. C. (2004). LEGAL, POLITICAL AND PRACTICAL OBSTACLES TO THE ENFORCEMENT OF LABOR LAWS IN EL SALVADOR Fundamental Labor Rights in Central America, Latin America and the Caribbean (pp. 51). Washington DC: International Labor Rights Fund.

Washington Office on Latin America. (2009). DR-CAFTA and Worker’s Rights: Moving from Paper to Practice (pp. 28). Washington DC: WOLA.

Worker Rights Consortium. (2007). WRC ASSESSMENT re TOS DOMINICANA (DOMINICAN REPUBLIC)

FINDINGS AND RECOMMENDATIONS. Washington DC: Workers Rights Consortium.

 


Out of a Job: Offshore Labor, Outsourcing or Something Else Entirely?


Image from: vlima.com

As the United States economy rebounds from the effects of the latest recession, many in the media are calling the recovery another jobless recovery, citing the growth of the gross domestic product coupled with a high unemployment rate.  Both the media and politicians frequently suggest that the trend to outsource manufacturing and move service jobs offshore is the culprit for our economic woes.  As a result, legislators are attempting to stem the tide of offshore labor and outsourcing through protectionist policies that mandate the use of American goods and services, tax corporations that use offshore resources or other draconian measures (Sealover, 2011).  Both the media and politicians are spending their time and energy on the wrong problem.  According to some estimates, offshored jobs will only make up 2% of the jobs lost by 15 million Americans annually (Lael & Robert, 2004).  If outsourcing and offshore labor are not the cause of job loss, who or what is the real culprit?  In short, the culprit is good-old-fashioned, American know-how.

Since before the creation of the Computing- Tabulating- Recording Company in 1911, the predecessor to IBM (“IBM Archives: 1900s,”), businesses in the United States have sought the means to improve business performance through the use of technology.  From advanced robotics and computers on the factory floor to self-service kiosks at airports and grocery stores, automation has displaced far more United States workers than have migrated offshore (Collins & Ryan, 2007).   Daniel Drezner, Associate Professor of Political Science at the University of Chicago also sees technology innovation as the root cause (2004):

There is no denying that the number of manufacturing jobs has fallen dramatically in recent years, but this has very little do with outsourcing and almost everything to do with technological innovation. As with agriculture a century ago, productivity gains have outstripped demand, so fewer and fewer workers are needed for manufacturing. (p. 27)

Former Secretary of Labor, Robert Reich described a tour taken at a U.S. factory, where the entire plant was run by two employees instructing more than 400 robots on the factory floor (Reich, 2009).

The capitalistic process of creative destruction, first described by Engels and Marx is alive and well as new industries consume the flesh of the old (Marx & Engels, 1974).  For example, the newspaper business is a shadow of its former self because of Internet technologies.  It would stand to reason that if millions of jobs and whole industries were destroyed via the relentless advance of technology throughout the last 30 years, then the total number of jobs in the United States would be shrinking.  Yet, even given the current unemployment rate of 9.6% for 2010, the United States has added nearly 47 million jobs over the last 30 years of technology innovation and achievement; therefore additional contributing factors are likely at work (Bureau of Labor Statistics, 2011).

“Historically, the number of jobs has closely followed the growth of the labor force, despite major increases in foreign trade and the advent of a host of new job-displacing technologies” (Lael & Robert, 2004, p. 3).  U.S. Bureau of Labor Statistics historical data for the since 1980 confirms that the labor force has grown at an annual rate of 1.18% while the number of employed workers has grown at a corresponding rate of 1.09% (Bureau of Labor Statistics, 2011).  “When the U.S. economy gets back on track, many routine jobs won’t be returning–but new jobs will take their place. A quarter of all Americans now work in jobs that weren’t listed in the Census Bureau’s occupation codes in 1967” (Reich, 2009).

It is in the nature of journalists to make the public aware of problems.  Equally so, it is in the nature of politicians to attempt legislative solutions.  Henry Louis Mencken once wrote, “There is always an easy solution to every human problem—neat, plausible, and wrong” (Mencken, 1949, p. 443).  The backlash against offshore and outsourcing is the classic example of focusing on the wrong problem.  Instead of focusing on the relatively few jobs moving to lower cost labor pools, the United States should focus on quickly retraining workers displaced because of innovation.  So the next time your hear the media blast the evils of outsourcing or your local politician suggest some new form of protectionist policy to prevent the use of offshore labor; picture them as the Dutch boy with a finger in the dike, trying to stem the tide of innovation, progress and good-old-fashioned, American know-how.

References

Bureau of Labor Statistics, U. S. (2011). Employment status of the civilian noninstitutional population, 1940 to date. In cpsaat1.pdf (Ed.). Washington D.C.: United States Department of Labor.

Collins, D., T. , & Ryan, M. H. (2007). The strategic implications of technology on job loss. Academy of Strategic Management Journal, 6, 27.

Drezner, D. W. (2004). The outsourcing bogeyman. [Article]. Foreign Affairs, 83(3), 22-34.

. IBM Archives: 1900s. IBM – United States  Retrieved May 11, 2011, from http://www-03.ibm.com/ibm/history/history/decade_1900.html

Lael, B., & Robert, E. L. (2004). Services offshoring: Bane or boon and what to do? Brookings Policy Brief(132), 3.

Marx, K., & Engels, F. (1974). The Communist manifesto. Belmont, Mass.: American Opinion.

Mencken, H. L. (1949). A Mencken chrestomathy ([1st ed.). New York,: A. A. Knopf.

Reich, R. B. (2009). Manufacturing jobs are never coming back. Forbes. Retrieved from Forbes.com website: http://www.forbes.com/2009/05/28/robert-reich-manufacturing-business-economy.html

Sealover, E. (2011). Colorado House kills bill about overseas jobs. Denver Business Journal. Retrieved from Denver Business Journal website: http://www.bizjournals.com/denver/news/2011/05/04/house-kills-bill-about-overseas-jobs.html

 

 


Movements for Social Change in an Integrated Global Economy


Image by jaybergesen

Income inequality between the rich and the poor continues to be a significant concern in the United States, prompting national headlines and serious political debate regarding governmental policy.  Historically, economies based on capitalism tend to have a pro-business stance, implementing pro-business policies to spur economic growth (Zinn, 2010).  The typical role of the labor union has been to help improve economic equality between workers and the companies that employ them; however, unions have also helped their members pursue political action and influence the electoral process to achieve their aims as well (Hodson & Sullivan, 2008).  Beyond unions, non-governmental organizations also pursue political action to address broad social issues like income inequality.   Increasingly, both unions and NGOs are spanning national boundaries to deal with inequality issues that effect workers due to the increased influence of multinational corporations and the issues that arise from the globalization of work and trade.  As NGOs and unions grow beyond national boundaries, what advantages or disadvantages are at play, that influences their effectiveness?  How beneficial are NGO programs that attempt to deal with income inequality issues?

The rise of large multinational corporations has resulted in a situation where, “two hundred of that largest corporations control over 80 percent of the assets of the Western world” (Hodson & Sullivan, 2008, p. 388).  Multinationals have tremendous influence in both their home countries and the less developed countries where many plants are located.  Additionally, multinationals have a single duty or aim, which is “simply to maximize financial returns for investors” (Bibby, 2004, p. 16).  Their nearly singular focus on maximizing financial returns has led work being exported to countries that have lower labor costs and in many cases do not afford the same legal protections for workers as developed countries.  For example, child labor produces goods in sweatshops located in developing countries; goods that make their way into the supply chains of major multinational retailers (McDougall, 2008).  In addition, when work moves to developing countries, there is an impact on the workers in developed countries that lose their jobs to lower cost labor pools; namely costs that are transferred to the public sector like unemployment or retraining for workers (Bibby, 2004).

To more effectively deal with issues raised by multinationals operating in an integrated global economy, there are a growing number of international labor organizations including UNI Global Union, a global union that represents 900 trade unions and 20 million workers (“UNI Global Union,” 2011).  There are several advantages in using a global, federated approach to labor unions, namely a larger pool of workers that provide the basis for union influence, greater coordination on issues that span national boundaries and the resulting ability to influence the policy and business decisions of large multinationals.  The most significant disadvantage to a global, federated approach to unions is the increased scope and complexity of problem that arises from the requirement to represent a large diverse constituency with diverse needs.  For instance, in the case of outsourced jobs, the recipients of new jobs may not appreciate interference, while the workers whose jobs are moved may desire intervention.  Therefore, global unions are required to focus on larger policy issues like poverty, equality, and exploitation; and do so by negotiating principle-based, framework agreements (“UNI Global Union,” 2011).

In their focus on policy issues, global unions are much like NGOs that focus on income inequality, although NGOs like results.org, United for a Fair Economy (UFE), and inequality.org tend to focus on programs that seek to enable and build grassroots movements, educate people on inequality issues and advocate policy positions, particularly on issues of taxation.  As an example, UFE has a projects that advocate for the reintroduction of the estate tax as a mechanism to continue funding of programs to benefit the poor (“Estate and Federal Taxes | United for a Fair Economy,” 2011).  Should UFE advocate a successful policy change and influence estate tax legislation to garner additional tax revenues to continue or grow funding for government benefits programs, there could be a positive impact on low-wage workers, providing supplement benefits that help those workers survive; however, it is a significant causal chain between UFE influence and benefits being provided to workers.

Global labor unions and income inequality NGOs are needed organizations that serve to fill the representation gap left by pro-business governments and large multinationals that operate strictly on the profit motive.  Both seek to educate people and advocate for change to address a growing income gap, while global labor unions actively seek to negotiate fundamental workers rights with large multinationals.  However, neither is well suited to address individual or regional workers issues.  As a result, many organizations seek to operate on the principles of federation and collaboration, or as representatives of UNI Global Union suggest, “Act locally, organize globally” (Bibby, 2004, p. 25).

 

 

References

Bibby, A. (2004). The Global Mobiity Revolution. In U. N. International (Ed.), (pp. 25).

. Estate and Federal Taxes | United for a Fair Economy. (2011)  Retrieved 22 May, 2011, from http://faireconomy.org/estatetax

Hodson, R., & Sullivan, T. A. (2008). The social organization of work (4th ed.). Belmont, CA: Wadsworth.

McDougall, D. (2008). Child sweatshop shame threates Gap’s ethical image. The Observer. Retrieved from guardian.co.uk website: http://www.guardian.co.uk/business/2007/oct/28/ethicalbusiness.india

. UNI Global Union. (2011, 20 May 2011)  Retrieved 22 May, 2011, from http://www.uniglobalunion.org/Apps/iportal.nsf/pages/homepageEn

Zinn, H. (2010). The Twentieth Century : a people’s history. New York, NY: MJF Books.

 

 


Why the Service Economy is Good for US


Imag from : psyberartist

Over the course of the last 60 years, the U.S. economy largely become a service economy, with services growing from 52% of jobs in 1950 to nearly 78% of jobs by 2006 (Hodson & Sullivan, 2008).  While many in the mainstream media appear to bemoan the loss of manufacturing jobs and view the loss as an indicator signaling the decline of the U.S. economy, many see the shift to a service economy as normal process of economic maturation.  Additionally, the shift to a service economy has occurred largely during a period of sustained economic growth.  While typical processes of economic maturation are at work, the U.S. shift to a service economy has unique features that are concerning, like manufacturing job loss, outsourcing, and a shrinking middle class.  Additionally, the pervasive use of information technology in the service sector is a unique feature of the economy that may portend additional economic and wage growth. The shift to a service economy likely has lasting implications for the U.S. economy and may have a lasting impact on U.S. economic power on the global stage.

The economic shift from agriculture to manufacturing and eventually to services describes the well-known evolution of a maturing economy.  According to the World Bank, “these two consecutive shifts are called industrialization and post-industrialization”(Soubbotina, 2004, p. 64). These economic shifts occur as a result of gains in per capita income; as individual income grows, the requirement for food reaches a limit and more is spent on material goods and as the demands for goods are met, more income is spent on services (Soubbotina, 2004).  In a sense, per capita income growth resulting in changing patters of consumer spending is a significant driver of the shift to a services economy.  Bureau of Labor Statistics economist Mitra Toosi (2002) found more than 60% of U.S. employment is generated by consumer spending “with consumers increasingly shifting their purchases to a sophisticated array of personal services” (p. 1).

In addition to shifting consumer needs, increased manufacturing productivity and globalization have also influenced the shift to services.  The popular press often decries the loss of manufacturing jobs and the resulting impact on the U.S. economy, frequently laying blame on outsourced manufacturing to developing countries.  However, Collins and Ryan (2007) found technology-driven manufacturing productivity improvements created more job loss than outsourced jobs.  Former Secretary of Labor and Chancellor’s Professor of Public Policy at the University of California at Berkeley, Robert Reich (2009) vividly described the impact of manufacturing technology on a factory floor:

I recently toured a U.S. factory containing two employees and 400 computerized robots. The two live people sat in front of computer screens and instructed the robots. In a few years this factory won’t have a single employee on site, except for an occasional visiting technician who repairs and upgrades the robots. (p. 1)

Of course, globalization plays a minor, albeit increasing role in the loss of U.S. manufacturing jobs as well, because of the advantage achieved because of inexpensive transportation, lower trade barriers, and cheap labor. However, a Congressional Report found that only 20% of manufacturing job loss since 2000 were a result of trade deficits caused by forces of globalization and those losses were likely ameliorated by job gains elsewhere or reclassification of manufacturing jobs into service jobs (Elwell, 2004).

Of more concern to the service sector is the growing divide between rich and poor resulting in a shrinking middle class.  Some might argue that the shift to a service economy itself is the cause of the growing divide, because service sector jobs appear to be split between low-paying service industries and high-paying service industries (Hodson & Sullivan, 2008).   Low-paying service industries include “retail trade, repair services, personal services, entertainment and recreation services” (Hodson & Sullivan, 2008, p. 249).  There is likely a variety of causes for low-wages in some of the specific low-paying occupations in the service sector.  Personal services, entertainment and recreation services all typically utilize discretionary spending, which are often the first services to be cut during tough economic times.  Another potential cause of low wages in some low-paying service sectors is lack of unionization.  Unions have had some success targeting lower-tier jobs, like janitors and hotel workers (Hodson & Sullivan, 2008), but have struggled with corporations like Walmart, that use strong, anti-union, tactics to prevent unions from gaining a toehold into their organization (Greenwald, 2005).  While low-paying service sector jobs clearly have an influence on service wages as a whole, recent Bureau of Labor Statistics data from May of 2011 show that average wages of private service sector jobs are now slightly higher than average wages of manufacturing jobs (U.S. Bureau of Labor Statistics, 2011).  Therefore, service sector wages are not a sufficient cause of the growing gap between rich and poor.

Rather, government policy is a more likely culprit.  For decades, the U.S. Government has consistently chipped away at the social safety nets put in place by FDR and later by Lyndon Johnson.  In 1996, Clinton passed the Personal Responsibility and Work Opportunity Reconciliation Act, forcing millions of former welfare recipients into the workforce (Wolf, 2006).  Moreover, the taxation policies of the last 30 years have favored the wealthy and placed additional tax burdens on poor and middle-class workers.  Reich (2011) describes the shift in tax policy:

It halved the top income tax rate from the range of 70 to 90 percent … to 28 to 35 percent; allowed many of the nation’s rich to treat their income as capital gains subject to no more than 15 percent tax; and shrunk inheritance taxes that affected only the top-most 1.5 percent of earners. Yet at the same time, America boosted sales and payroll taxes, both of which took a bigger chunk out of the pay the middle class and the poor. (p. 1)

Accordingly, government policies have had a much higher impact on the gap between rich and poor than low-paying service sector jobs.  However, it is important to note, that even with the current challenges in the U.S. service sector, there are bright spots as well.

For example, many of the new service sector jobs are based on what we might call the knowledge economy, a specific class of jobs in the service economy whose value is rooted in information and oftentimes makes use of information technology to innovate.  Bell (1976) describes the post-industrial importance of information in a services economy by indicating, “what counts is not raw muscle power, or energy, but information” (p. 127).  The World Bank considers technological innovation in the knowledge economy as the primary source of productivity, competitive advantage, and the resulting economic growth in the service sector(Soubbotina, 2004).  As a result of both the opportunity space that low productivity inherent in services provides (Hodson & Sullivan, 2008) and continued technological innovation, the services economy is likely to be a continued source of economic growth.

Because of the continued technological innovation and progress, the United States remains a force to be reckoned with on the world stage, although there are signs that U.S. economic standing is weakening.  Recently, Standard and Poor’s, issued negative outlook because of the government’s failure to deal with the national debt in a productive way.  Additionally, some worry that China’s economic rise means a decline in U.S. economic standing.  However, a 2007 Congressional Report found that China’s meteoric economic ascendency will likely have little negative impact on U.S. economic power and may actually grow the U.S. economy (Elwell, Labonte, & Morrison, 2008).

In conclusion, the growth of the service sector has been a boon to U.S. economic growth and the trend will likely continue.  There is little evidence to suggest the service sector is the cause for the growing gap between rich and poor, nor has the service economy negatively influenced U.S. economic standing in the world.  Rather, the continued innovation prevalent in the service sector will likely be a continued source of U.S. economic growth.  Of course, there are significant economic challenges facing the United States, largely wrought by government policy, including a taxation policy that favors the wealthy and a national debt that is affecting U.S. economic power abroad.

References

 Bell, D. (1976). The coming of post-industrial society: a venture in social forecasting. New York: Basic Books.

Collins, D., T. , & Ryan, M. H. (2007). The strategic implications of technology on job loss. Academy of Strategic Management Journal, 6, 27.

Elwell, C. K. (2004). Deindustrialization of the U.S. Economy: The Roles of Trade, Productivity, and Recession. (RL32350). Washington DC: Congressional Research Service Retrieved from http://www.policyarchive.org/handle/10207/bitstreams/2016.pdf.

Elwell, C. K., Labonte, M., & Morrison, W. M. (2008). Is China a threat to the U.S. economy? New York: Nova Science Publishers.

Greenwald, R. (Writer). (2005). Wal-Mart: The High Cost of Low Price [Video]. In B. N. Films (Producer). United States.

Hodson, R., & Sullivan, T. A. (2008). The social organization of work (4th ed.). Belmont, CA: Wadsworth.

Reich, R. (2011). The Truth About The American Economy. Huffington Post  Retrieved 24 June, 2011, from http://www.huffingtonpost.com/robert-reich/the-truth-about-the-ameri_b_869033.html

Reich, R. B. (2009). Manufacturing jobs are never coming back. Forbes. Retrieved from Forbes.com website: http://www.forbes.com/2009/05/28/robert-reich-manufacturing-business-economy.html

Soubbotina, T. P. (2004). Beyond economic growth : an introduction to sustainable development (2nd ed.). Washington, D.C.: World Bank.

Toossi, M. (2002). Consumer spending: an engine for U.S. job growth. Monthly Labor Review, Novermber 22, 22.

U.S. Bureau of Labor Statistics. (2011). B-2.  Average hours and earnings of production and nonsupervisory employees(1) on private nonfarm payrolls by major industry sector,

1965 to date. In empsit.ceseeb2.txt (Ed.). Washington DC: Bureau of Labor Statistics.

Wolf, R. (2006, 17 July, 2006). How welfare reform changed America, USA Today, p. 1. Retrieved from http://www.usatoday.com/news/nation/2006-07-17-welfare-reform-cover_x.htm