Middle class America is dying. It has been a slow death but the death race is gaining speed. It is sad but true. There are several economist that will cringe on what I am about to write but I believe this will sum it up in a brief, concentrated fashion that you might be able to endure. If you were to read an economist dissertation on this subject I am sure your eyes would glaze over and you would not get past the third paragraph. This short article will attempt to tell you why we are where we are and what could be done to breathe life back into the middle class. Unfortunately, the fix aint quick.
Manufacturing jobs is the lifeblood of a strong middle class. Why? Because these are the jobs that offer the highest wages, group benefits, 401K plans and in some cases even retirement funds. In the last 30 years, there has been a mass exodus of manufacturing jobs in America. Why the exodus? This is an elephant, but to put it in simplest terms I will use an acronym (CODB) or cost of doing business. What affects the cost of doing business? Many things such as labor costs, energy costs, raw material costs, regulatory costs, transportation costs, taxes and on and on……
In America the CODB has gradually risen so that manufacturing jobs have been in a slow migration out of the country. It would seem as the lower the technological requirements, or the easier to automate, to produce the product the quicker these industries and jobs leave the country. An example would be the textile industry which has been all but completely decimated here at home due to cheap labor and automation allowing for the relocation overseas, typically Asian countries. Look at other industries such as the automotive, computer, steel, printing and on and on.
When you hear anything about increasing the productivity of the American worker, almost always this means a loss of jobs. Why? Because when a company invests to modernize they almost always automate to lower the number of employees required to produce the product. Example: Look at how much of an American automobile is now produced by robot labor. Technologically it is incredible, but it means fewer jobs. However; it lowers the CODB and allows the manufacturer to keep the price competitive and still generate a profit.
Now let’s look at what some would call the greedy ass capitalist pig corporations and their exploitation of the American worker. Hang with me now. Remember, there are two sides to every story. Let’s look at everyone’s lovechild, Apple. That’s right Apple. Do you know where all of their products are manufactured? Not California. China is where their products are made. Some would say in a high stress environment and also a low paying job. Read this article about the Apple facility in China: http://www.dailymail.co.uk/news/article-2103798/Revealed-Inside-Apples-Chinese-sweatshop-factory-workers-paid-just-1-12-hour.html. Does this make Apple a greedy ass capitalist pig corporation? No, not really. P.S. I used Apple because Apple is the liberal’s vestal virgin and walks on water frequently. Apple is no different than any other multinational manufacturer. Who does Apple and every other major corporation report to? The CEO, not hardly, in reality they all report to Aunt Bee, Worker Joe, Granny Get-a-Long, and PaPa. Who are these people, the stockholders. They have their savings in equity investment companies that buy stock in Apple, Exxon, Intel, GM, Ford and so forth. These people are looking to receive payments in the form of dividends from these companies. They live or expect to live on these dividends. In order to pay these dividends, these companies must sell their product and must make a profit. They must operate their manufacturing facilities where the lowest CODB exists.
So let’s get down to the very essence of what it is going to take to bring back manufacturing jobs to America.
First let’s do a short analysis of some basic questions:
Do you think the American family will accept a lower lifestyle to bring back jobs? Not no, but hell no.
Do you think investors or stockholders will accept lower dividends to bring back jobs? Not likely
Will companies accept a lower net profit to be patriotic to return jobs? Not happening
A myriad of things go into the CODB but what levers are left to pull to get jobs headed back to America? Really there are very few. I mean entire books could be written on the different incentives available but really the biggest lever is the corporate tax rate. It’s really all we have left to convince a company to return manufacturing jobs home. Also, it is important for companies to be able to count on these savings for an extended time period no matter what political party is in power. Why, because it takes a huge investment to relocate these facilities. It cannot and will not happen overnight. So, if a corporate tax rate reduction bill is proposed it must include a rate guaranteed for a 25 year time period and it must require a 75% majority vote from the House and Senate to change the rate before that time period expires. Current observations would indicate this should make the bill almost bullet proof.
After passing this bill would corporations move back? If the reduction is sufficient to warrant them moving back they will. Sufficient meaning will it improve their return on investment (ROI) for an extended time period. Trust me when I tell you this, CEO’s live and die (stay or go) on the ROI of the company under their leadership and the same with the stock price.
So, when a legislature proposes a corporate tax rate reduction you now understand why they are doing it. You must have a long term vision to do this. We got ourselves into this mess over a long time period and there are no quick fixes. If someone tries to tell you there is a quick fix, they are being less than genuine.
I will let you figure out for yourself who is most likely to do this going forward. November is critical if we are to stop the exodus of good jobs and the constant lowering of our way of life.