Jobs, jobs, my Kingdom for jobs (with apologies to Steve...)

This whole jobs thing has been bothering me for quite a while. Is the US a manufacturing giant? Are we a consumer-driven self-licking ice cream cone? Are we the breadbasket of the world? What exactly are we????

This question was driven home recently when International Paper announced the closing of the Franklin, VA paper mill, forcing 1100 people to lose their jobs by early 2010. IP cites "Too much capacity in the paper manufacturing sector" as the reason for closing the plant, while they have busily been opening new plants around the world. Are they creating plants where they are going to be selling the product, thereby lowering both shipping costs as well as labor costs? Or are they just greedy? IP will not sell the plant to another paper manufacturer since they want to reduce capacity (read competition). They supposedly will be removing all of the mill machines from the plant to further dissuade any comers from making paper again (and likely shipping the machines overseas to their other plants.)

This closing will devastate the city of Franklin. In many ways, it is the consummate mill town. Paper and logging are the major reasons for the town's existence. It will be impossible (my words) to replace the paper mill and any hope toward that end is just that... hope. One worker was quoted in a news article that he had been working there for 25 year, "where else could a person with a high school education make $26 per hour?" That is a wise observation. And there is the rub.

Be honest with yourself. If you need your yard maintained and you had a choice between a professional lawn service for $75 per week, or you could get the kid down the street to do the same job at the same quality for $20 per week, would you hire the professional just so you could help maintain his quality of life and allow him to employ 16 other workers? Or would you hire the kid down the street, who will pocket the Jackson each week, never telling the Feds or the state that he made $800 per year on each of the 6 yards that he maintained?

C'mon. Be honest. You will go with the kid (you would do it yourself for 'free' but you just don't have the energy anymore...)

Explain to me how this is different from an international company deciding to have the kid (China) do the work for 1/4 the price of the professional (Franklin paper mill)?

Some have mused that this wouldn't have happened if the Camp family (who opened the mill back in the '30s) hadn't sold it to IP 10 years ago. Maybe. Since the Camp family has deep roots in the local area, they may not have been so harsh in their handling of the plant. Maybe they wouldn't care about profits as long as they made a comfortable living. Maybe... But I doubt it. Because IP is a publicly traded international company, their number one concern is maximizing profit which benefits their stockholders. Is IP concerned about anything else? Is ANY publicly traded, multi-national, multi-function company concerned about anything else? When the stock of a company can rise or fall 10% based upon whether they had a $0.14 per share dividend and the prediction was $0.15, shows that the market is the driving force of ANY publicly traded company. If it isn't the number one concern, then the CEO will likely be fired (with a very nice golden parachute to soften the blow.)

The Asterisk's point in all of this? It is easy to sit back and wax philosophically about how cruel big companies are and how they 'ship jobs overseas' if you don't have any skin in the game. Heck, the dominant political party in the US makes this point a cornerstone of their platform. But let's look at the flip side of this argument.

What if we did NOT have cheap Mexican labor tending house for the limousine liberals? Would they pay the full price for professionally managed nannies? (You can't even get them to pay FICA for these people.) What about Juan the poolboy? Or Jose with the leafblower? We are shocked now when green peppers are $1.49 each at the grocers. What if they were grown by 'real workers' and sold for $3.00 each? Would we buy them, in spite of the fact that the field workers are making $15.00 per hour with all federal holidays off, full medical benefits, FICA, FITW, SITW, Medicare, 401K, worker's comp, Family Leave, all being paid by the grower? Plus the grower is paying a water depletion allowance for irrigating his fields, state and local property taxes, local business taxes based on gross income (not net), sponsorships for the local symphony and county fair, taxes and insurance on the new, energy efficient farm vehicles that meet the Kyoto protocols for CO2 emissions, not to mention the Federal Corporate Taxes and personal income taxes paid by the business owners since they are 'rich' and they make over $250,000 per year.

Do a Column A / Column B comparison. As a producer, do you just buy the green peppers from Argentina in a box at $X per case or do you deal with everything in the previous paragraph and try to make the same amount of profit? What if you are Safeway? Do you do the 'responsible' thing and charge $3.00 per pepper when the guy down the street (Food Lion) is charging $1.49 for the ones from Argentina? Remember... be honest. You don't have to answer to me. Just be intellectually honest with yourself.

Let's bring it home, shall we? Do any of you honestly think that that 50" LCD screen you got at Costco for $1,499 (minus $150 mail-in rebate) could have been produced in the US for less than $5,000? It wasn't more than 5 years ago that plasma screens were selling in specialty A/V shops for $30,000! Without competition from China do you think that ANY of you would have a flat screen TV, or a $49 DVD player, or a $189 DVR? What would Apple sell an iPod Touch for if the thing was made in a factory in Cupertino? Would you pay $800 for an MP3 player???

So, what is it going to be? Do we keep our inefficient manufacturing facilities here in the US and try to shove our products into other consuming countries at inflated prices? Go ahead and try it. This global economy is much too smart to allow that to happen. If Fruit of the Loom didn't put their underware factories in Haiti, Viet Nam and Guatemala, do you think that some French company wouldn't do it and export those cheap products into the US to compete with skivvies made in Danville, VA? Oh... that's right, just put up import restrictions and tariffs to stop it. Works so well with sugar doesn't it? Retaliation is a double-edged sword.

AND, show me anyone that really liked working in a factory in a non-union job (meaning, market wages vs. forced high-end wages) back in the day. Why do you think that manufacturers worked so hard to mechanize their process? That's right, to squeeze the cost of labor out of their cost of goods. Easier to hire 15 mechanics and engineers to maintain the machines and run the plant, than to have 200 disgruntled, irritated, vaction-taking, sick-time-using line workers. The only way we will get manufacturing back in the US is through efficiencies and machines. They won't have labor intensive factories built anymore. And those that are left will be slowly winnowed away. And what the labor costs don't kill, the environmental costs will finish off.

Is it really that difficult to see how we got to where we are today?

Does anyone really think that we can put the genie back into the bottle?

When China has run its course (like Japan, Taiwan, and Southeast Asia before them) as a cheap repository of labor and lackluster environmental laws, what will be next? I don't think the Arabs will do the work, at least as long as their sheiks are selling oil (now there is a tough product to produce...) I think that Africa will become the final producer of products with cheap labor. After that, who knows.

But I do know this, competition rules and efficiency wins in the end. You just cannot stop it. So, where do we Americans fit into this harsh, fight-back world?

Can we truly expect to have full employment with great paying jobs ever again? I honestly don't think so. The boom of the 90's and 00's was an aberation. Companies held onto people that they really didn't need as long as the bubble was expanding. Once it popped, those jobs were gone, most never to return again.

I don't have the answers, but I think I have a clear view of the problem. Do you think that your President, Congressperson, Senator, Governor, Councilperson, etc. does? If so, prove it! If not, let's get some new ones that do!

Comments

infocyde said…
One word, Tariffs. We got along without cheap 3rd world labor after WWII, we can do so again. If we don't, we will be a gutted wasteland. We don't have to go that way, and the fix is simple. We also need to account for stolen intellectual property cost, the cost of developing technology that was subsidized by tax payers, the cost of retraining workers, the cost of welfare, the national security implications of trade, closed markets or merchantalistic business practices by our economic competitors, etc... in our trade practices. To not do so, and simple declare that Austrian economics rules the day, when we are the only nation playing by those "efficiencies", is national suicide. We can still trade, but free trade rather then fair trade, needs to happen. Else we will become a world of masters and serfs, and all the worker regulations fought so hard for by our ancestors will drift away forever.
infocyde said…
And Americans are discovering, unfortunately too late, that buying a foreign Plasma TV for 1500 instead of a domestic one for 6000 today (and if proper competition was in place in America rather than Oligarpical "competition" the cost would be lower, even if made here) means that they will not be able to buy either tomorrow.

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