2019-08-24 The Economist Latin America

The EconomistAugust 24th 2019 Finance & economics 61

S

hawnearosserearnedupwardsof

$29anhourwhensheworkedfor

GeneralMotorsinDayton,Ohio.Butin

2008 thefactoryclosed.Yearslaterthe

buildingwasboughtbyFuyaoGroup,a

Chinesemultinationalcompanythat

makesglass.ThenewAmericanmanag-

erspromisedthatthe“historic”project

would“givepeoplejobs,andgivea future

toyourkidsandmykids”.Soundsgreat.

ButMsRosser’snewjobpaidjust$12.84.

TheplightofMsRosserandherco-

workersiscapturedin“AmericanFac-

tory”,a documentaryreleasedonAugust

21stbyNetflixthatexploresthetensions

thatarisefromthefactory’sforeign

ownership.Thereisdiscontentamong

Americanworkers,butthesourceis

unclear.Couldit simplyreflectthepost-

crisisrealityofAmericanmanufacturing

work?OrarethedifferentChineseem-

ploymentpracticestoblame?

A newstudyofferspartofananswer,

byaskingwhobenefitswhenforeign

investorsopenupshop.Onaverage,

foreigncompaniesinfactpayworkers

around25%morethanAmericanones.

Butthatcouldbebecausetheyemploy

relativelyskilledworkers.BradleySetzler

andFelixTintelnotoftheUniversityof

Chicagomatchanonymisedemployee

andcompanytaxrecordstoestimatethe

truewagepremium.

Theeconomistslooktoseewhat

happenswhenAmericanworkersmove

betweencompanies.Theyfindthatwhen

someonehopsbetweentwoAmerican-

ownedfirms,theirwagesbarelybudge.

Butwhentheyskipfroma domestically

ownedonetoa foreignone,theirwages

goupbyaround7%.Andwhenthey

jumpfroma foreign-ownedfirmtoa

domesticone,theirwagessag.

MessrsSetzlerandTintelnotalsofind

thattheboosttowagesfromworkingata

foreign-ownedfirmisskewedinfavour

ofthehighlyskilled.Theyderivea mea-

sureofskillsbyadjustingpayforage,

firm,industryandlocation.Basedon

thatmeasure,peopleinthebottom10%

oftheskillsdistributionsawnopay

premiumatallforworkingata foreign-

ownedcompany.

Theresearchersalsoaskwhethera

firm’scountryoforiginmightmatterfor

thewagepremiumonoffer.Unsurpris-

ingly,richerhomecountriestendto

meanfatterAmericanpaypackets.Com-

paniesfromNorwayandNewZealand

paybest;thosefromMexicoandTaiwan

givebarelyanypremium.Onlyone

countryseemstooffera paypenalty(see

chart).Onaverage,theycalculatethat

between 2010 and2015,Chinese-owned

firmspaidaround4%lessthanAmeri-

canonesforsimilarjobs.Thatisnota

hugegap—certainlycomparedwiththe

dropinMsRosser’shourlypaybetween

gmandFuyaoGroup.Butwhenyouare

notpaida lot,it isbigenoughtohurt.

Unequalpartnerships

Foreigninvestmentandwages

WASHINGTON,DC

Whowinswhenmultinationalcompaniesmovein?

Foreignrelations

Source:“Theeffectsofforeignmultinationalsonworkersand

firmsintheUnitedStates”byB.SetzlerandF. Tintelnot,NBER

UnitedStates,wagepremiumassociatedwith

workingata foreign-ownedfirm,2010-15,%

-5 0 5 10 15

Nationality

ofowner

Norway

NewZealand

Ireland

Britain

Germany

Russia

Taiwan

Mexico

China

F

inding theOne is never easy. Plenty of

candidates are attractive at first, but

their charms are deceptive, or simply fade.

Others for whom you pine spurn you. As

with love, so it is with credit cards. Bonus

offers are tempting, but also fleeting. Re-

ward points pile up, yet linger unused. Un-

expected fees sting.

But now there is a sexy new stranger for

Americans to eye up. On August 20th Apple

launched its long-awaited credit card, in

partnership with Goldman Sachs, a Wall

Street firm pushing into digital consumer

banking. Signing up takes about a minute.

Approval (or rejection) is often instant. The

card, delivered to the iPhone’s wallet app,

may be used at once. (A physical titanium

version will arrive in the post.) There are no

fees for using the card, or even for missed

payments. Instead of making you wait un-

til the end of the month for rewards, Apple

pays cash daily.

The allure goes on. What starts off as a

blank white oblong in the app is slowly

shaded in rainbow colours as you spend:

blue for transport; orange for food; pink for

entertainment. Bills are paid by sliding a

circular dial, which turns a friendly green if

you pay in full, an uneasy yellow for less

and an alarming red for the bare minimum.

Any interest you will owe, shown in the

centre of the dial, changes with the pay-

ment. When you clear your bill, the card

wipes itself white again.

This is all lovely. But the card’s financial

attractions may not match its technologi-

cal beauty. The lack of fees for missed pay-

ments and the transparency of its billing

and interest due should appeal to people

on lower incomes, who are most likely to

carry credit-card debt. (Half of Americans

fail to pay their credit-card bills in full each

month.) Goldman is willing to approve

subprime borrowers. But such folk are less

likely than richer people to own an

iPhone—and without an iPhone, you can-

not get the card.

At the same time, the card may not ap-

peal to the better off as much as established

competitors. It pays 2% in daily cash on all

purchases made using Apple Pay, a contact-

less mobile payment made through the

wallet app, and just 1% when using the tita-

nium card. These rebates are hardly mar-

ket-leading. Citibank, for instance, offers

2% cash back on all purchases. And only

two-thirds of merchants accept Apple Pay.

The card does pay 3% cash when used to

buy Apple products, but compared with

other retail store cards this is a little stingy.

Amazon, another technology titan, offers

5% back on its store card (including pur-

chases at Whole Foods, its trendy super-

market chain), which is issued by JPMor-

gan Chase. Other retailers, such as Crate

and Barrel, a homewares store, offer as

much as 10%.

These perks may improve. On launch

day Apple announced that spending on

Uber, a ride-hailing app, and Uber Eats, its

food-delivery service, would also qualify

for 3% cash. More may be added, the tech

company has said. But the Apple card has

some catching-up to do.

For Apple fans, this may not matter

much. But it may be that Apple, by trying to

please everyone, will end up pleasing too

few Americans to break into the fiercely

competitive credit-card market, in which

there are already 1bn active cards. The gor-

geous design, and the cachet of Apple and

Goldman, will surely seduce many cus-

tomers into trying the card. But when it

comes to cold cash calculations, the geeks

and the Wall Streeters may not have done

enough to secure their lasting devotion. 7

NEW YORK

Apple and Goldman Sachs launch a

seductive credit card

Credit cards

Love at first byte