Vanishing Middle Class

Mounting evidence shows that CSR pays off. However, it is difficult for many companies to do the right thing when faced by intense competitive pressure to reduce costs. As the Washington Post writes in The Vanishing Middle, Delphi Corporation’s recent bankruptcy will probably force them to lay off thousands, and serve as an excuse to lower their worker’s salaries and benefits in the future. This is a glaring example of America’s disappearing blue-collar middle class. The economic argument is simple: When labor costs are roughly ten times cheaper in Mexico or China, companies must decide whether to pay their workers a good wage with benefits – the kind of system that saw the rise of America’s great middle class in the 1950s, or to slowly but surely loose ground to competitors who don’t face the same labor costs. What can we do?

I am by no means advocating that we turn back the clock on global trade, as a growing number of countries are taking advantage of an increasingly open and more fair trading regime to lift millions of their citizens out of the kind of crushing poverty Americans cannot imagine. While trade should be carefully managed so that we limit social and environmental damage, it is improving countless lives. I have seen this first-hand in my travels and work in developing countries.

Until Washington decides to take a tougher and more proactive stand with regards to trade, the question still remains, what can we to do?

One answer is to promote those companies that are doing right by their workers, by, for example, paying them a living wage. While this may mean their products are not competitively priced as they do not externalize their costs on to you and I – as we have to pay more to cover the cost of Medicaid, which growing numbers of out of work or under-employed people have to turn to – many consumers who care about such issues are willing to pay more. In economic jargon, this is known as “willingness to pay.” A large number of Americans are willing to pay for products and services from socially- and environmentally-responsible companies. However, what companies like these need is an advocate to help level the playing field, by letting consumers know where they can choose to spend their money. That’s one of the things the Washington DC Sustainable Business Network aims to do – promote those companies that are doing the right thing.