The Labor Tour and Rust Belt By: Gabriel PotterMBA, AIFA® 2014.09.09

I hope everyone had a good labor day.  To capitalize on the extra time off, my wife and I took an extended road trip through seven states in the Rust Belt.  Apropos of the holiday, we found ourselves at key sites – Wheeling, West Virginia, south-eastern Michigan, and Pittsburgh  – where the story of labor’s relative power, its greatest rise and starkest fall, was written.  For instance, on Labor day itself, we visited Homestead, PA:  site of the Homestead Riots between labor unions and Steel mill owners.

Beyond a fascination with American history, why is the story of the Rust Belt still relevant to modern audiences?  Well, the Steel Belt was forged in the geographic confluence of easy energy (from river power and coal), access to raw materials (coal and iron via river and rail), and an eager work force (the western and southern migration of population).  So, the trends of labor’s leverage – stronger or weaker - were most manifest in that region.   In modern times, there are still manufacturing and industrial hubs in the US (and around the world), but there is less of a need for geographic efficiency since potential employees are mobile and the raw materials are relatively easy to transport.   In other words, the forces that weakened the strength of raw labor – global competition and sophisticated automation – affect economies more broadly, but the results are essentially the same. 

The past twenty years have seen great advances in global engagement and competition.  Asia and South America are openly regarded as the current standard bearers of global economic growth.  The continent of Africa, which had previously been written off as a lost cause, has seen meteoric growth and is now seen as a potential source of raw materials, potential customers, and trading partners.  Furthermore, automation looks to take another quantum leap forward as low level retail and basic service positions to the next generation of robots, in the form of fast food kiosks, retail cashiers, driverless trucks and taxi-cabs, etc.  In short, the forces that weaken the relative strength of labor – particularly low level labor which values machine-like consistency over human-level thought – are stronger than ever. 

 

 

 

Gabriel Potter

Gabriel is a Senior Investment Research Associate at Westminster Consulting, where he is responsible for designing strategic asset allocations and conducts proprietary market research.

An avid writer, Gabriel manages the firm’s blog and has been published in the Journal of Compensation and Benefits,...

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