Help Answer a Nagging Question About Jobs and Economics

[sundance43.5]

I, for the life of me, cannot grasp how the exportation of jobs from America could in the long run benefit the U.S. and the middle class. President Bush has come out in support of outsourcing, so how can he say he understands and supports the middle class?

Can someone please explain how America can survive when jobs are being lost by the hundreds of thousands and aren't being replaced?

This may sound like a flame, but it's not. I would just like an explanation or some information.

Thanks

Chris

 

[atek3]

totally not gun related.

http://www.mises.org/fullstory.asp?control=1443

http://www.mises.org/fullstory.asp?control=1429

those two should get you started.

atek3

 

[Mulliga]

I assume we're talking about tech sector stuff, since unskilled labor has been outsourced by almost every business in America.

Here's an explanation I recently read:

Other countries, like India (most infamous), have large supplies of technically minded people who like programming and other jobs that require skilled labor. These people are trained engineers, and good at it. Nothing wrong with that.

Notice, however, that American companies, currently, reap all the benefits. Eventually, Indian companies formed by savvy Indian engineers/scientists, will rise up to compete for this skilled labor pool. With demand for skilled labor rising, Indian workers can then ask for higher wages, until eventually supply and demand meet.

This current "job imbalance" is temporary. Indian people aren't freakish aliens that hate money - they want the best for their families as much as Americans do. Eventually the wages worldwide will stabilize, and I have full confidence that American workers can compete in a global marketplace...don't you?

 

[BowStreetRunner]

yeah i doubt bush came out to support outsourcing (political suicide defined???)........one of his economic advisrs said it wouldnt be all bad in the long run and the dems jumped all over it...."Bush wants to send jobs overseas!"
no one WANTS that, but its capitalism and thats how it works
BSR

 

[Pendragon]

I am curious as to where the president has come out in favor of outsourcing.

Perhaps he came out in favor of NAFTA or free trade?

The fact is, if you are a large company and employ 1000 Engineers at $50,000 per year, that is a $50 Million payroll.

If you move 50% of the jobs to India, you pay them $5,000 per year - a net savings of $45,000 x 500 (no calc handy).

Its simple economics.

 

[7.62FullMetalJacket]

What Mulliga said , and

These are not "our" jobs. They are not sKerry's jobs. They are not Bush's jobs. Business has a fiduciary duty to run a company to maximize the benefit for the stockholders. If a job can be done in another location just as well for less money, then that is where the job is created. If a job done here costs too much, then the job is not created. Outsourcing merely creates jobs in the larger pool of jobs.

The turn the US gets is that those techies in India will start to desire better goods of the American variety and we sell them to the new workers. Industries that create jobs here expand to meet that demand. True, some of this stuff can be manufactured anywhere, but the US is still the engine that pulls the world.

Over 2 million jobs have been created since Bush took office despite 9/11 and the tanking of the stock market. Unemployment is about 5.6%, right around the low average for the Klinton "boom" years.

Presidents can make policy to encourage growth and economic freedom which will in turn create jobs. Congress can make laws to support the endeavor as well Neither ever really does. Entrepeneurs keep pulling the wagon despite the governments best efforts to load down the wagon.

Neither of them creates any jobs (except in the dead hand of government).

 

[Jim March]

Well, I think this IS gun related.

I really think that there's an element among US business and gov't leaders who think that US labor costs are too high to allow long-term profitability and economic survival. The "solution" is to slowly ratchet down US income levels - but it must be done slowly enough to prevent social chaos.

Some large segment of that group in turn thinks that gun control will help prevent that chaos as this major social shift happens.

THAT in turn is what's really behind US gun control, in a financial/PR sense.

-----------------------

History lesson: starting around 1870ish, a bunch of well-meaning but incredibly stupid ladies started the "Women's Christian Temperance Union". They were ignored as utter twits until shortly after WW1, when they suddenly started making political and PR progress towards prohibition.

Why the change?

They convinced major industrial figures such as Henry Ford, Kaiser (Kaiser Steel) and the like that banning booze would cause a worker productivity increase of about 10%. That in turn would help with global competitiveness. So the ladies got a boatload of money all of a sudden, and eventually caused more crime and chaos than any other political movement in US history.

Gun control is following the same pattern, folks!

We have useful idiots fronting for big corporate money used for dim-witted amateur-hour social engineering. It's happened before and it's happening now.

 

[Oleg Volk]

More on this topic: http://www.gmu.edu/departments/economics/wew/articles/03/jobs.html

 

[atek3]

Walter williams is definatly my favorite black econ professor. How many others are libertarian besides He and sowell?

atek3

 

[atek3]

come on...where are the protectionists...I know they are lurking, ready to spew garbage about "sucking sounds" and 'darn Furiners takin' our jobs that pay fair wages'

atek3

 

[cracked butt]

really think that there's an element among US business and gov't leaders who think that US labor costs are too high to allow long-term profitability and economic survival. The "solution" is to slowly ratchet down US income levels - but it must be done slowly enough to prevent social chaos.

In the long run, inflation will make the adjustments naturally.





Most of what we hear is propaganda.
When I graduated from college in the mid '90's it was difficult to find a job, I did not blame this on Bill Clinton. The buzzword of the day was that big corporations were "downsizing" which makes the big corporations look like the ogres ruining people financially. Since GW has been in office, the word "downsizing" has left our vernacular and has been replaced by the words "jobs moving overseas" in an attempt to pin the blame on the government, specifically the POTUS.

You tell a lie loud enough and enough times, it becomes the truth.

 

[sundance43.5]

You can say what you want about corporations trying to turn a profit, but corporate profits are at an all time high, and corporate taxes are at a low.

Chris

 

[Waitone]

When companies move production to lower cost centers they do so for one and only one reason. The cost of production ("production", not "labor) is too high to compete in selected markets which this day and time is global. This thread falls right in line with public thinking as to the reason for offshoring and this is labor costs in the US are too high.

Riddle me this bat persons. How can you economically justify relocating you production centers to a lower labor cost center when your cost of labor is a fraction of your total cost structure. Run the numbers and you can.t. You can if you are attempting to escape additional costs far beyond labor costs.

Real reality is American business are bailing out of the US because the cost of production in the US is far too high to compete in a world economy. When a US company outsources it reduces its labor costs (minor component) , it avoids health costs (both workplace health and healthcare), environmental costs, safety costs, and litigation costs (threats and judgments. US companies have to fund their own healthcare and retirement plans which generally is pawned off on the government of other countries.

In case you think I make this up, the National Association of Manufacturers commissioned an economic study to determine the true costs of production in the US due to government mandated "benefits" imposed by our glorious government. The NAM study determined the government places a mininmum 22% tax on US labor.

Lowering of barriers to exit from the US permits US companies to remain profitable FOR A SHORT PERIOD OF TIME. It allows them to recover some degree of profitability until the market re-establishes itself. Offshoring does nothing to fix the underlying problem which is the cost structure of producing in the US is too high for a global market. In a commodities market low cost winner will win every single solitary time.

Conclusion to which no one in government wants to come to: in a global market the US worker and US companies can no longer afford the socialist leviathan which is firmly attached to our back.

 

[Chris Rhines]

Waitone put it through the ten-ring. I know only a few business owners who have outsorced jobs, but they have all said the same thing - 'It's not the lower labor cost that makes overseas investment attractive, it's the suffocating government regulations that businesses operate under in the U.S.'

- Chris

 

[Art Eatman]

sundance43.5, you're confusing "profits" in terms of gross dollars above the cost of production with "profitability" in terms of percentage return on investment. This latter has been falling for over twenty years.

If you have a million-dollar ranch, and at the end of the year after production costs, taxes and cost of living you wind up with $10,000, you have a one-percent return on your investment. That sucks. But, if the year before had only gotten you $5,000, you've doubled your profits! Ain't that neat? But your local paper will tell the world that your profits doubled, not that your profitability isn't worth crossing the street for...

Art

 

[Jim March]

Waitone and others are correct. It's not just "US versus other countries" - socialistic STATES like California have massively higher production costs due to over-regulation than, say, next-door Nevada. Calif's shift of high-dollar workers out of the state is the real cause of our financial crisis.

So what do we do?

Either turn the state's .gov in a Libertarian direction, or watch it go completely down the toilet.

A *really* serious LP candidate with the kind of media access (probably via "star power") that Ahnuld has could maybe get this point across.

Sigh.

Kurt Russell in '06?

 

[atek3]

I can seem them now, "Waaahhh, race to the bottom, don't repeal the 'Rights' of working peoples." Really, what is it with socialists.
California won't reform, it is doomed. Actually, it will do what europe did in the late nineties. Elect Neo-liberal leadership that understands you can't afford govn't programs without businesses to tax, and so the state will reform some of the most onerous things about california's business climate. Electricity costs, workers comp, the state's overtime law (if you work two twenty hour days in the rest of the country you earn 40 hours of pay, in california you are owed 16 hrs at normal and 24 hours of overtime , not to mention CalOSHA, the biggest jerks around.

atek3

 

[316SS]

waitone wrote:

National Association of Manufacturers commissioned an economic study to determine the true costs of production in the US due to government mandated "benefits" imposed by our glorious government. The NAM study determined the government places a mininmum 22% tax on US labor

So, assuming things like workers' comp insurance and health insurance weren't mandated to be paid by employers, would this essentially be a pay decrease? I'm not saying that's bad or inappropriate, just clarifying.

What leads to the disconnect between the impressions of the public, that corporations are motivated by blind greed, and the point of view of waitone, that companies are simply looking for a way to maintain economic viability?

Lastly, what is the pure theoretical libertarian view of collective bargaining, both with employers, and , e.g. labor forces buying group health insurance without the intervention of the employer?

Jim March-

Your views of how this relates to gun control seem awfully sinister! Coming from you, though, they deserve further contemplation.

316SS

 

[Gordon Fink]

After all the manufacturing and technical jobs have been outsourced overseas, Americans will still be able to work in the post-industrial service economy. You know … selling imported goods to each other, clerking for retailers, cooking hamburgers, etc.

~G. Fink

 

[Waitone]

Americans will still be able to work in the post-industrial service economy. You know … selling imported goods to each other, clerking for retailers, cooking hamburgers, etc.

And that, Sir, is the crux of the matter. Wealth is created by farming, mining, and manufacturing. Services merely realocated wealth previously generated.

Try a little mind experiment. Take a services, any service, ranging from Mickey D's to Wall Street. Follow the services from destination to its source and at some point you will bump into something mined, grown, or manufactured. Services do not generate wealth. Services reallocate wealth.

Outsourcing is not trade. Ouytsourcing is direct substitution of low cost production. The end result is the US is transferring wealth out of the US to other areas of the world. Is that what we want? Are we prepared as a society to pay the social price? Don't know simply because there has been no public debate.

 

[bountyhunter]

I, for the life of me, cannot grasp how the exportation of jobs from America could in the long run benefit the U.S. and the middle class. President Bush has come out in support of outsourcing, so how can he say he understands and supports the middle class?

Here's the technical explanation: you're RIGHT, he's WRONG.

He supports outsourcing because it makes businesses more profitable, at least in the short term. In the long term it destroys the middle class and reduces their buying power, increases unemployment and generally lowers the standard of living. But short term profit is all business cares about, and business is all King George cares about.

Bush claims in the long run it will force US workers to train into other jobs: that's true, and they will be at much lower wages. because any job that pays a decent wage will (say it with me) get OUTSOURCED so the company doesn't have to pay a decent wage.... and the cycle continues until you have only two classes of people, similar to Europe in the 1800's.

 

[JohnBT]

"the cost of production in the US is far too high to compete in a world economy"

So how do all these 'foreign' companies get away with running factories in the U.S. of A.? If it's so bad here why have FN, Honda, Subaru, Toyota, H&K, Beretta and aw heck, there's a French condom factory here outside of town. Why do they have factories here?

They've outsourced here, why don't they out-outsource to someplace else if it's so advantageous? What do they know that 'our' corporations don't?

Maybe they know how to manage and run a business. It's not enough to make products cheaply, you have to develop and keep a customer base.

John

 

[Jeff White]

There are several states that still have business friendly state govenments. They can compete globally in many cases. The rust belt and the old industrialized North, plus the peoples workers paradises in California and places like Washington state are unable to compete because it simply costs too much to do business there. The for the most part democratic statehouses (although Illinois is in deep trouble after 30 years of republican rule) have sealed the economic doom of their states.

I'm afraid that until the average American understands that business owners don't sit on vast piles of cash ion their homes that this trend will continue. Take government out of the equation with it's minium wage, OSHA, EPA and other regulations and you'd see the country boom again.

Jeff - resident of New Appalachia (Southern Illinois)

 

[7.62FullMetalJacket]

Bravo, Mr. White.

 

[bountyhunter]

Take government out of the equation with it's minium wage, OSHA, EPA and other regulations and you'd see the country boom again.

Sure. Bring back "piece work" and child labor and it will be productivity at it's most efficient. You will excuse me if I don't stand and applaud your Reaganomic expositions about how the EPA has ruined America. When that moron was governor here, he gutted cal OSHA and did his best to pull their enforcement teeth.... and we inherited his legacy.

Guess what happens when it becomes cheaper to pay the fines than dispose of toxic waste properly? We and our children get to drink it. IBM and fairchild Semiconductor dumped thousands of gallons of toxins into the groundwater here. I have seen the cancer patients who worked in the "clean rooms" with the chemicals. cancers so rare that they occur one in a million, and yet five of eight people in a single production shift died from them. Women whose rates of miscarriage went up 1000% due to exposure to toxins.

You'll excuse me if I don't subscribe to the good old days of "leave business alone", because we saw it close up from 1964 to 1972 while that policy was in force. Our cemetaries are full of the victims of that policy when reagan was governor and the massive poisonings of the water tables have yet to be cleaned up (if they ever could be).