American Jobs

Fact is that along with the overall polarization of America – between those with political & economic clout and those without – there is a parallel track of those with solid earning potential and those without. We look at unemployment statistics and find solace when the number goes down. We grimace when we see the numbers on top of the raw 8.3% unemployment rate for July that reveal how many have given up looking or are working part-time but want more. The combined rate is a staggering 15.2%. The greater the skills and educational levels “out there,” the more the better jobs will gravitate overseas as long as the price is right. People argue that erecting trade barriers and high tariffs generate reciprocal restrictions which hurt our exports, protect companies from upgrading and modernizing to be globally competitive, force industries into inefficient local production centers and generally drive up the cost of goods and services to businesses and consumers alike. But then, American workers look longingly at the departure of solid jobs that used to be theirs.

Jobs can leave for other reasons, like healthcare costs, which explains why so many car manufacturers moved their plants to Canada, where hourly wages mirror those in the United States but where the national medical care available to everyone in Canada has dropped that cost of employment by about two-thirds or more, a big number. Even with cost-cutting mandates in the Affordable Care Act (pejoratively “Obamacare”), the lobbying efforts of both the pharmaceutical industry (which manage to continue the ban on buying prescription drugs from foreign countries, including Canada and the U.K.) and the healthcare insurance sector (that didn’t want competition from any governmental alternative plans), Americans pay vastly more per capita than any other country on earth for medical care. And this factors in when business decide whether to stay local or move overseas.

There is a clear reality that the majority of Americans are entering a new era, where expectations and training realities have downsized. The next generations have come to accept that they will not live as well as their parents, that their homes will be smaller, their discretionary income will contract and their retirements will hover around meager. Combine this trend with the likelihood that countries with solidly-growing economies and increasing capacity to provide the high-value jobs of the future, and you are likely to see two factors that may benefit the future American worker: (i) the U.S. dollar will eventually drop in value against those currencies making our labor cheaper and their labor more expensive and (ii) overseas workers will increasingly demand better pay and benefits as their value-added skill-sets increase. For example, corrected for productivity, some economists believe that by 2015/16, the average cost for a Chinese worker will be 70% of that of an American counterpart, a price that will most definitely discourage the export of manufacturing jobs to the PRC behemoth.

So what exactly does that mean for us? Bottom line, we are going to see many of those manufacturing jobs move back into the United States, with tighter supply lines that consume less fuel necessary to bring goods from overseas. The trend is already here, as new car manufacturing plants, once centered in Japan, have moved to cost-efficient states where union contracts have not move the costs beyond the reach of economic sense. “[T]he migration of Japanese auto manufacturing to the United States over the last 30 years offers a case study in how the unlikeliest of transformations can unfold. Despite the decline of American car companies, the United States today remains one of the top auto manufacturers and employers in the world. Japanese and other foreign companies account for more than 40 percent of cars built in the United States, employing about 95,000 people directly and hundreds of thousands more among parts suppliers… The United States gained these jobs through a combination of public and Congressional pressure on Japan, ‘voluntary’ quotas on car exports from Japan and incentives like tax breaks that encouraged Japanese automakers to build factories in America.” New York Times, August 4^th.

Steel is being made in U.S. again, and can electronics-manufacturing return to the United States as well? Not those giant assembly line jobs we see in pictures – we really can automate much of that process – but the local designing and implementation technologies that Americans can do very well. “Companies like Apple, Dell and Hewlett-Packard, which rely on huge Asian factories, assert that many types of manufacturing would be too costly and inefficient in America. Only overseas, they have said, can they find an abundance of educated mid-level engineers, low-wage workers and at-the-ready suppliers.” NY Times. Isn’t that exactly what we were told before the Japanese move their plants to places like Tennessee? We just need to court these American players as if they were the old line Japanese companies, giving them local tax breaks to get them to stay (vs come to the U.S.).

Oh, then there is that seemingly vapid, love to “walk to the edge of a cliff and contemplate a leap” Congress. Think that Congress’ proclivity to polarize doesn’t impact the job market? “A rising number of manufacturers are canceling new investments and putting off new hires because they fear paralysis in Washington will force hundreds of billions in tax increases and budget cuts in January, undermining economic growth in the coming months… The combination of tax increases and spending cuts is creating an economic threat called ‘the fiscal cliff’ by Ben S. Bernanke, chairman of the Federal Reserve…

“The worries come amid broader fears that the economy is losing momentum — the annual rate of economic growth in the second quarter fell to 1.5 percent from 2 percent in the first quarter, and 4.1 percent in the last quarter of 2011. [On August 3^rd], the Commerce Department reported that factory orders unexpectedly fell 0.5 percent in June from the previous month, while data on the labor market released [August 4^th] showed job creation still falling short of the level needed to bring down the unemployment rate.” New York Times, August 5^th. Our credit rating could even take another hit, making our national debt service that much more expensive on global markets.

And one more HUGE factor: we do not tax American corporations with good tax planners who manage legally to keep overseas massive caches of accrued profits out of reach from the IRS and our rather stupidly high corporate tax rates (35%). There are just too many tax benefits for U.S. companies to keep operations off-shore. “However, champions of ‘in-sourcing’ legislation — which takes away benefits from companies moving jobs abroad and provides incentives for those bringing jobs back — said the tenor of the debate was changing. ‘The public by and large has been betrayed by large American corporations that outsource. I think Congress is catching on to that,’ said Senator Sherrod Brown, Democrat of Ohio.” NY Times.

Congress really needs to close that loophole and tax those foreign earnings, trading down to a more realistic 25% rate (perhaps even according a six month reduced 20% tax rate moratorium to get a massive repatriation of those corporate profits), to make it easier to keep manufacturing in the United States. It not only will instantly bring cash to a budget-strapped federal government, it will create real jobs here. If Americans are willing to accept the new, lower-expectation-driven reality, then let’s at least build an environment where we can provide “better-than-minimum-wage” employment for the millions of American workers who need and will continue to need jobs as long as we exist.

I’m Peter Dekom, but I wonder whether logic and desperate need will move the do-nothing House of Representatives to fix the obvious.