The debate over the minimum wage, both in Maryland and nationally, and related concerns over income inequality have provoked some unpleasant and ongoing side effects. The recent trend of billionaires flaunting their perceived superiority over the less-economically-well-endowed while simultaneously decrying "class warfare" and even invoking a comparison to Nazi persecution being among the worst.
Yet the very parameters of the conversation seem flawed. Many people assume, for instance, that raising the standard of living for the working class necessarily takes away from those on the highest rung of the ladder. On the other side of the equation, critics of capitalism wrongly suggest that only the visible hand of government can provide a remedy to this inequality of opportunity.
The issues are complicated, of course, but here's one recent experience that offers hope: The decision of Lion Brothers Company Inc., an Owings Mills maker of embroidered patches, logos and uniform insignia, to expand production in Maryland. Such a move runs counter to conventional wisdom that would ship such textile jobs to Asia or Latin America where labor is cheap, but it also makes perfect sense when put in proper context.
In a recent interview with The Sun's Jamie Smith Hopkins, Lion Brothers CEO Suzy Ganz acknowledged that her company has been part of the off-shoring jobs trend since the 1980s. It employs about 500 people, 60 in Owings Mills but the rest overseas (the reverse of the company's employment circumstances a quarter-century ago, incidentally) and did so to reduce labor costs. Then came a wake-up call.
The company learned it was likely to lose its share of a long-term federal contract to supply uniforms to the U.S. Department of Homeland Security (the insignia on Customs and Border Patrol agents, for example). A change in federal procurement standards would now allow the uniform contractor to buy supplies from outside the United States.
Lion Brothers might have shut down its production line in Maryland as a result (so critical was that contract to paying the bills for it). But Ms. Ganz had another idea. She explained to her other customers that bringing manufacturing back into the United States was in their best interests. At least one has already agreed, and the "re-shoring" process has already begun, preserving those domestic jobs.
Why the change of heart? Part of it, Ms. Ganz says, was recognizing the consequences that shipping jobs overseas has on local communities — and ultimately, the nation. It's not a sustainable business model. Job losses translate into loss of customers with purchasing power which translates into more job losses, etc. Manufacturing jobs are particularly important to keep as they serve as job multipliers — Lion Brothers is committed to buying raw materials domestically, too, and that translates into more jobs.
But it also required the company and its clients to look years ahead and anticipate a time when China's low wages (Lion Brothers' line workers overseas start at $2.50 per hour compared to $15 in Maryland) will no longer be so low comparatively and production will be less reliant on labor costs anyway. Thus, it's in the self-interest of those in the apparel industry to invest in a responsive, flexible and reliable domestic supply chain if they want to remain competitive. Ms. Ganz expects many of her clients will follow suit.
The lesson here is not that sneering plutocrats have taken over the country or that capitalism doesn't work anymore but that business leaders must look beyond quarterly profit-and-loss statements to see the long-term consequences of their actions. Raising the minimum wage is largely irrelevant to Lion Brothers' business model; they expect future employees will interact more with technology (think more lasers and digital printers and less needle and thread), earning substantially more, not less, in wages than they do today.
That doesn't mean there isn't a legitimate debate about the minimum wage or privileged fat-cats, but the serious conversation ought to be about enabling more entrepreneurs to follow Lion Brothers example and look 25 years ahead, not a quarter-century behind. This requires not only having a longer view but a broader one recognizing that exporting high-paying jobs overseas is ultimately a self-destructive and unsustainable choice.
Lower domestic energy costs, the increasing reliance on robotics and other technologies and rising costs of foreign labor have set the stage for an important economic opportunity in the manufacturing sector. It's important that Maryland recognize this and make accommodations — investing more in education and infrastructure, for example — because the payoff could be the kind of dynamic economic growth that truly benefits everyone.
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