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Better Working Conditions Lead to Better Economy

By Don Monkerud  Posted by Rob Kall (about the submitter)     Permalink
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Which states are better for business? Colorado and Montana that received a top rating from the CATO Institute? Idaho and North Carolina that had the best metro areas in Forbes annual rating of Best Places for Business and Careers? Or is it South Dakota or Florida where the Tax Foundation found the most tax friendly climates?

Compared to this confusing and contradictory listing of business-friendly states, the Political Economy Research Institute(PERI) at the University of Massachusetts/Amherst recently completed a study, "Decent Work in America," to compare the treatment of workers with the overall business climate in each state.

Viewed in this light, Delaware, New Hampshire and Minnesota rank at the top, while the bottom includes Arkansas, Texas and Louisiana.

Additionally, PERI discovered that states with better working environment s have higher economic growth and lower poverty rates, while states with poor working environments have slower economic growth and higher poverty rates.

"We created reasonable measures of what constitutes a decent overall economic climate," said Robert Pollin, professor of economics and co-director of PERI. "You can't make a case that bad working conditions for workers are good for business. The correlation is stronger, that good working conditions make for a better business climate."

The study ranked each state in three categories: Job opportunities, including unemployment and part-time work; job quality, including average wages, adjusted cost of living, and health and retirement benefits; and workplace fairness, including gender equality, minimum wages, collective bargaining rights, and right-to-work programs, to form a work environment index.

States at the bottom of the ranking, Pollin suggests, are in the South where workers are successfully divided along racial lines and have no history of workers organizing for better pay and working conditions. In addition, Texas has a large number of undocumented workers who can't join unions or struggle for their rights, and immigrant labor pushes wages downward.

Officials in Texas immediately attacked the study when their governor charged that the study has "a liberal bias." Pollin denies the indicators are biased. "The Texas ranking is low because the conditions for workers are bad in Texas," Pollin said. New Mexico's officials also thought they were given a poor rating because a large portion of their economy comes from mining, but Pollin said accident rates were excluded from the study because mining has a larger proportion of accidents than other industries and would bias the study. Rather than defending their states, Pollin would like to see states consider a different perspective on economic well-being and consider the implications of the results.

For example, the study doesn't address globalization directly, although Pollin has studied the issue extensively. Currently, globalization is framed with a perspective that living standards for working people in the U.S. are too high and must be driven down for the U.S. to become competitive. This study proves that premise false.

"The states that have good work environments, higher wages, more job equality, and more rights for workers are not suffering from low job growth, fewer new business startups, or low economic growth rates," said Pollin. "They are doing better on average. You can build decent institutions that support decent livelihoods in rich countries like the U.S. and still have healthy job growth, good business startup rates and economic growth."

Overall, conditions are not good for working people these days.

Household income set a record this year when it failed to increase for the fifth straight year in a row. Workers kept their income from falling only by working longer hours in 2003 and median pay for full-time male workers declined two percent in 2004.

Compared to their bosses' pay, workers also fell behind last year, earning a dollar for every $431 their bosses made, although their bosses made over $500 for every dollar workers made during the High Tech Gold Rush in the 1990s.

Compounding the situation, living expenses increased. In San Francisco, for example, a family of four with two working spouses needs $55,740 a year, according to the California Budget Project, to afford housing, food and other basic necessities, while a family with one employed adult needs $40,544 in the less expensive Central Valley.

In September, the Economic Policy Institute found that basic family budgets for a two-parent, two-child family required an annual income of $31,080 in rural Nebraska and up to $64,656 in Boston, Mass.
Unfortunately, 28 percent of families fall below the basic family budget after being adjusted for type of family and section of the country. Working people face outsourcing, globalization and corporate bankruptcies, which force them to take lower-paying jobs at large chains like McDonald's and Wal-Mart.

Business studies rarely consider the conditions of employees.
Priority is given to what's best for business in studies by Fortune Magazine, The Small Business and Entrepreneurship Council, the Tax Foundation and the Cato Institute. Although these studies radically disagree in the ranking of states, they generally consider low taxes, low wages and lack of government regulation as beneficial.

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