Low-Ball America

When employers and shoppers pay less, everyone suffers.

By Daniel Gross
Posted Saturday, Sept. 11, 2010, at 6:54 AM ET

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The strike of about 300 workers at a Mott's apple-juice plant in Williamson, N.Y., is nearly four months old. Union members walked off the job after Mott's parent company, Dr Pepper Snapple Group Inc., pushed them for concessions. Although Dr Pepper Snapple is highly profitable, a company representative said that it wanted to cut wages by $1.50 per hour and freeze pensions to align factory cost with "local and industry standards." In other words, because its employees were doing better than other workers in the depressed upstate New York region, the company demanded that they do the same jobs for lower wages.

Mott's isn't the only company squeezing its employees during this recovery. With millions out of work, it's a buyer's market for employees. In the economy at large, wages have risen only 1.7 percent in the past year while corporate profits are up nearly 40 percent. A report by the Washington-based Economic Policy Institute found that between the second quarter of 2009 and the second quarter of 2010, men's wages fell 1.3 percent.

Welcome to the low-ball culture. In a world of sluggish growth, excess capacity, and depressed expectations, buyers of goods and services—labor, houses, and restaurant meals, among other things—have come to believe that desperate sellers should take any offer they make. But that kind of systemic bargain-hunting can create a dangerous spiral: Employers short-change workers, workers buy fewer goods—and the overall economy suffers.