Job, Jobs, Jobs
The daily rhetoric of columnists and bloggers that criticise President Obama as the obstacle to improvement in the employment rate in the USA misses a fundamental point of economic reality. Namely, it is Corporate America that hires workers and the mangers of those corporations that decide whether the citizens of this country or people elsewhere in the world will be the new workers. Barack Obama is not a hiring manager. Likewise, the government is in the catch 22 position of being criticised for increasing its payroll while it is the only entity dedicated to hiring Americans for its worker rosters.
The culprit in this travesty is Corporate America, not President Obama. It is not in the economic interest of Corporate America to hire people here, and unfortunately it is only an economic interest that drives corporate decisions, i.e. social justice interests are absent. It is only government that can introduce social justice to the equations.
Why should a profit motivated American industry hire a factory worker in the USA for $25 per hour (or more) when it can hire a worker elsewhere for $5 per hour and receive the same productivity, the same product quality, and even expand their market coverage by selling those products in the country where it has set up its manufacturing operations? If the foreign worker productivity were only half the American they could hire two and still be ahead. Indeed in this particular example they could hire five and still break even. Why should they hire an engineer or scientist for $80,000 a year here when they can hire one for $30,000 in China or India and get the same technical skills and productivity? Also, not to mention they can build and operate their labs and research facilities at half the cost of doing the investment here.
There are other factors at work in USA industry. Technological advancements have reduced the need for human labor in the operation of not only manufacturing facilities, but also in R&D and service based operations. Automation and optimized organizational structures have made the need for large numbers of workers a thing of the past. The decline in bargaining leverage of workers unions to protect jobs for employees gives unilateral decision authority to corporate management to reduce employee rosters. Indeed they are very willing and eager to use that as one of the easiest ways to show improvement in their bottom line accounting. Just look at the extraordinary increases in profitability of the Fortune 100 in the past few years as they implemented massive layoffs.
These questions are fundamental to the persistent unemployment situation in this country. Indeed it is very likely that the current unemployment rate is structual more so than a result of economic downturn in things like housing sales, or actions of the banking industry. Actually it may be the reverse process. Economic slowdown has come from the reduction in real worker income over the past 30 years rather than the changes in other economic drivers being quoted by pundits.
The root of the unfavorable employment situation is intrinsic to Corporate America and its managements. Corporate America does not have real economic need for more USA labor and no overarching incentive to build bigger employee rosters as a social benefit to the country. The traditional number for the percent unemployment that might be regarded as "full employment" may need to be adjusted upwards. Whereas in the past that number was around 5%, today 8% to 9% may be appropriate. I am not an economist, but it seems logical to me that such a situation is possible. An accurate number for this should be derived by impartial economists willing to "tell it like it is" and not pander to any particular political agenda.
If unemployment is actually fixed for the long term at those higher percentages then there is a need for paradigm change in how compensation is handled by companies to offset reduced family incomes. Presently it is well established that for a great many families two working members are essential to provide for their living expenses. If only one of them can have regular employment, the other must earn more to offset the lost income. If the working member's wages are fixed and low, the family cannot survive. Business must adjust their wage scales to compensate. If they do not do this on their own, organized labor must undertake measures that will force the adjustment. The alternative to this is very dire to contemplate. Further erosion of the quality of life for middle and low income families will certainly ensue. Government must enact regulations and processes that support the enforcment of appropriate increases in wages. They must do this to ensure that tax revenues are maintained as well as the reality of the social justice entailed in it. Government must also enact regulations and processes that mitigate the advantages of Corporate America's opportunistic activities in gloabalization to the detriment of home based activities in the USA.
The daily rhetoric of columnists and bloggers that criticise President Obama as the obstacle to improvement in the employment rate in the USA misses a fundamental point of economic reality. Namely, it is Corporate America that hires workers and the mangers of those corporations that decide whether the citizens of this country or people elsewhere in the world will be the new workers. Barack Obama is not a hiring manager. Likewise, the government is in the catch 22 position of being criticised for increasing its payroll while it is the only entity dedicated to hiring Americans for its worker rosters.
The culprit in this travesty is Corporate America, not President Obama. It is not in the economic interest of Corporate America to hire people here, and unfortunately it is only an economic interest that drives corporate decisions, i.e. social justice interests are absent. It is only government that can introduce social justice to the equations.
Why should a profit motivated American industry hire a factory worker in the USA for $25 per hour (or more) when it can hire a worker elsewhere for $5 per hour and receive the same productivity, the same product quality, and even expand their market coverage by selling those products in the country where it has set up its manufacturing operations? If the foreign worker productivity were only half the American they could hire two and still be ahead. Indeed in this particular example they could hire five and still break even. Why should they hire an engineer or scientist for $80,000 a year here when they can hire one for $30,000 in China or India and get the same technical skills and productivity? Also, not to mention they can build and operate their labs and research facilities at half the cost of doing the investment here.
There are other factors at work in USA industry. Technological advancements have reduced the need for human labor in the operation of not only manufacturing facilities, but also in R&D and service based operations. Automation and optimized organizational structures have made the need for large numbers of workers a thing of the past. The decline in bargaining leverage of workers unions to protect jobs for employees gives unilateral decision authority to corporate management to reduce employee rosters. Indeed they are very willing and eager to use that as one of the easiest ways to show improvement in their bottom line accounting. Just look at the extraordinary increases in profitability of the Fortune 100 in the past few years as they implemented massive layoffs.
These questions are fundamental to the persistent unemployment situation in this country. Indeed it is very likely that the current unemployment rate is structual more so than a result of economic downturn in things like housing sales, or actions of the banking industry. Actually it may be the reverse process. Economic slowdown has come from the reduction in real worker income over the past 30 years rather than the changes in other economic drivers being quoted by pundits.
The root of the unfavorable employment situation is intrinsic to Corporate America and its managements. Corporate America does not have real economic need for more USA labor and no overarching incentive to build bigger employee rosters as a social benefit to the country. The traditional number for the percent unemployment that might be regarded as "full employment" may need to be adjusted upwards. Whereas in the past that number was around 5%, today 8% to 9% may be appropriate. I am not an economist, but it seems logical to me that such a situation is possible. An accurate number for this should be derived by impartial economists willing to "tell it like it is" and not pander to any particular political agenda.
If unemployment is actually fixed for the long term at those higher percentages then there is a need for paradigm change in how compensation is handled by companies to offset reduced family incomes. Presently it is well established that for a great many families two working members are essential to provide for their living expenses. If only one of them can have regular employment, the other must earn more to offset the lost income. If the working member's wages are fixed and low, the family cannot survive. Business must adjust their wage scales to compensate. If they do not do this on their own, organized labor must undertake measures that will force the adjustment. The alternative to this is very dire to contemplate. Further erosion of the quality of life for middle and low income families will certainly ensue. Government must enact regulations and processes that support the enforcment of appropriate increases in wages. They must do this to ensure that tax revenues are maintained as well as the reality of the social justice entailed in it. Government must also enact regulations and processes that mitigate the advantages of Corporate America's opportunistic activities in gloabalization to the detriment of home based activities in the USA.
posted by Joe | 9:23 AM
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