Lost and Found: Where’s the US Middle Class?

November 17, 2013 at 12:14 pm

Deloitte Consulting has published studies outlining the bifurcation of the consumer in the US.     Retailers are focusing on the high end or the low end.   The middle class is disappearing.  Looks like it may have moved India.  In India, the middle class is being created.  Headlines  recently indicated that  British retailer Marks & Spencer is planning to double its store count to 80 making India its second largest market.  Pepsico is planning on investing 5.5 billion in India.     The international business community sees a lot of problems in investing in India including political corruption, poor infrastructure,  retrospective law changes, and general lack of transparency.  Even so, the middle class is growing.   In an interview in The Economic Times of India ( 12 Nov 2013),  Pepsico’s India-born CEO indicated that companies just have to deal with those issues in order to participate in what will be one of their strongest markets.


When I was here in early 2005, there were few cars on the road.  All our employees were driving motor scooters.  Now the roads are increasingly jammed with cars that the infrastructure cannot support.  Not only are young professionals buying cars,  but also electronics,  buying homes, furniture,  etc.  New restaurants and clubs are opening every day.  There are now a handful of  malls that remind me of the US.  The malls stand in stark contrast to the millions of open air storefronts that are shuttered at night by metallic  doors similar to garage doors.  This transformation reflects the huge investment US companies are making here.  Clearly, the discretionary income that we have created is a job multiplier.  What do I mean?


The Times of India indicated that a number of consultancies have increased their headcount in India.  Since 1997, IBM has grown its number of employees from 73,000 to 130,000 while the US count has decreased from 127,000 to 91,000.  1 in 3 of IBM’s global headcount is in India.  India also accounts for a third of Accenture’s headcount with 90,000 employees which is 2x its American number.  CapGemini has also grown its workforce here by 50% the past two and one-half years to 44,000.  CapGemini’s CEO  stated there is a surplus of talent here and salaries are stable.  “For the foreseeable future, India will be our key centre of delivery.  In fact, all our freshers from around the world come here for 6-8 weeks of training.”      India is viewed as a talent pool for engineers that has attracted much of this investment.  It does not help that in the US, engineering schools are a field of attrition.  I am sure that these  US academic programs redeploy a lot of our capable assets to other areas such as business.


At this point in my stay, I cannot really judge how accurate  this perception of an innovative and well trained pool of resources is in general.   I will say that I am very impressed by the individuals with whom I work and that  part of my mission is to enhance the critical thinking skills of our people.  During recent employee performance meetings, our managers had very  insightful assessments of their resources and displayed a clear eyed view of our business and its requirements.   On the other hand at  a gathering of expats that work at other companies, I have heard them express frustration that would challenge the perception of an innovative labor force stated above.    Arguably, this frustration may reflect that the workforce is just emerging and has not matured.  Isn’t to be expected that when you initially invest in a new country that the apprenticeship period may last longer?  It will certainly take some time to develop the leadership team.   I remember attending a meeting here in early 2005 when we just hired about 1600 people.  Unlike in the US, there was an absence of role models who had been in the business 6-30 years.  It makes a huge difference.


There is hope.  The Jesuits came here in the 16th century.  They have great leadership here that is all Indian and incarnates the Jesuit charism of active contemplatives.  I am sure that it did not take 400 years.     Of course, a religious group is composed of long term thinkers unlike the business community which is focused on short term results.


Does globalization create winners and losers?  Potentially.  However, the mega force of  change wrought by this revolution of technology that enables us to work across oceans also creates all kinds of opportunity for all of its participants.    It also knits us together.  The US and India are becoming great friends as Indians go to the US for education and often stay to work.  Also, many Indians are returning to India after spending 10-20 years in the US.  I have made 6 friends at the Boulder Hills golf club that all fit that description.   I am sure that the same can be said of China.  A wonderful fruit of our superior system of education.


None of that addresses the disappearing middle class, the working poor, or the underemployed.  The answer to that may be found in one of our leaders who addressed the problem of hunger:


“ It is a scandal that there is still hunger and malnutrition in the world.  It is not just a question of responding to immediate emergencies, but of addressing together, in all areas, a problem that challenges our personal and social conscience, to achieve a just and lasting solution….the fruits of a “throw away culture” often lead to sacrificing men and women to the idols of profit and consumption; a sad sign of the ‘globalization of indifference’ which makes us ‘accustomed’ slowly to the suffering of others, as if it were normal….”    Hasn’t that been happening?  And isn’t that indifference all too frequently expressed as part of a political agenda in our time?  He goes on to  challenge the barriers of individualism, of being shut in on ourselves, of the slavery of profit at all cost.  He describes instead a  solidarity with others that means “to build a society that is truly human” and puts “the person and his/her dignity at the centre, and never sells him/her off cheaply to the logic of profit…”  Pope Francis on World Food Day 16 Oct. 2013.


I find his comments disconcerting and a prophetic challenge.