A rather jarring piece of animation that a friend sent me today.
The Decline: The Geography of a Recession | 21st Century Labor Union | IAMAW
I'd rather not have people get into a political pissing contest about this. Please try to confine your comments to suggestions about what to do to fix it, or explanations of the specifics of the patterns observed.
Whatever you think, its discouraging.
Yes, it sure is discouraging. With the Fed rates already near 0% (so no more room to go) and too many peoples' spending tied to their house values, and people who are out of work or people with the fear of being laid off spending less, this is going to be a long road to recovery, if ever.
Michigan was already bad in the beginning of 2007.
You reap what you sow. Years of anti-business legislation has slowly driven manufacturing out of the country so that the US has a mainly service based economy today. That doesn't really build wealth, it just moves it around, maybe concentrating it in certain areas or in certain hands.
You simply cannot go about chasing all manufacturing out of the country and expect the maintain a thriving economy.
What can be done about it? Lot's.
The first thing to do is to rescind the so called Stimulous package, the horrendous addition to the national debt will do far more harm than any good the temporary jobs will do. The simple truth is government spending doesn't build wealth. It takes wealth from some and gives it to others, it buries governments in mountains of debt, and it stifles free market economics.
Next is to review all of the anti-business legislation passed over the past few decades and start rescinding that which puts a drag on business. Deregulate and delegislate. Review those things that add burden to the entrepreneur and eliminate them.
Also, tax cuts. Enact a 3 year holiday on corporate income tax and capital gains tax. That will do far more to stimulate the economy than the so called stimulous bill, and it won't cost anything. You have to get that thru your mind first, tax cuts don't cost anything. Tax cuts don't cause deficits, spending causes deficits. Tax cuts actually result in an increase in tax revenues, because of the stimulation to the economy they create. We're not going to get out of this mess without some serious tax cuts. It's time to stop dicking around about it and do it.
Then, we have to bail out completely on proposed green house gas cap and trade legislation. In the first place Anthropogenic Global Warming is unproven and IMO is a figment of the imagination. In addition to that, in the middle of a recession is the worst possible time to enact this kind of anti-business legislation.
And forget government run health care with the added burdens it places on business. If you want to address issues having to do with the cost and availabilit of health care insurance there are a number of free market approaches that can help immensly with the problems, not the current 2000 page 900 billion dollar plans being considered.
A lot of those jobs have gone elsewhere because companies move their jobs offshore in an effort to provide larger ROI (or the promise thereof) for shareholders, the lion's share of which are domestic retirement funds. Americans' and Canadians' expectations that they should be able to live the life of Reilly from 55 onward, merely by moving their money around, is about as pernicious a societal assumption as they come. The promise of unrealistically cheap goods manufactured in places that have looser labour codes, safety codes, environmental controls, and cheaper labour has also made it the case that our insatiable lust for....stuff...and especially lots of new stuff, for ourselves, that we don't wish to share with anyone, has moved all manner of jobs offshore or south.
People want something for nothing, but what they end up with is a lot of nothing for their something.
It's not at all clear that tax cuts work in all instances. Sometimes, yes, they probably do. But not always, and in a recession, tax cuts only stimulate if the company is making the profits that would result in noticeably less taxes. Meanwhile, taxes not collected can be functionally equivalent to borrowing money. Either way, you have no change in government services expected, but less revenue coming in to support them. The government perspective is that if the economy can be stimulated, businesses can at least become profitable enough to have taxes to pay.
Of course, I think we would both agree that it all boils down to the details of the implementation. You can have tax cuts that are targeted all wrong and do diddley squat, and you can have economic stimulus investments that are targeted all wrong. The problem common to them both is that when you see what the linked-to video shows, there is an expectation of rapid response on the part of governments at all levels, and sometimes, it takes longer than that to work out the fine details of an intervention that would work. I don't know that it is exactly the same in your country, but the folks in our Justice ministry put in large amounts of overtime hopping to it when parliament says "Hey, we need a policy that is legal and fully drawn up by tomorrow morning!". I tip my hat to them for being willing to respond to such requests, but the result is usually something not as well thought out as it needs to be. I would not expect the dynamic to be any different on your side of the border, and my conversations with folks in your government do not lead me to believe otherwise. This is independent of administration, because it is simply a product of the magic combination of bureaucracy, public panic, and legislative impatience. If you want wine made in a week, believe me, it will TASTE like it was made in a week.
While I would rather manufacturing jobs not go overseas, the fact is the only way they could return here is if wages in this country (for manufacturing jobs) are reduced. That is the bottom line for shifting production offshore.
The standard of living expected for relatively non-skilled labor has steadily been rising throughout the past couple of decades, partially spurred on by unions who get what they want in times of plenty (but of course are vehemently inflexible in rough times, like now).
The other way would be if overseas wages go up high enough...maybe we could send union representatives overseas to organize labor as a kind of economic terrorism
Hmmm, am I way off base with my view of pay scales in this counrty? Or am I correct, but no one wants to talk about it?
I was just kidding about sending the union leaders overseas...well, sort of kidding.
Currency is a relevant thing. Since we left the gold standard,($35 per oz at the time), it now takes over a $1000 to buy an oz. Any currency is only worth what the person accepting it thinks it's worth, and is willing to settle for. We have such massive debt here, we're fortunate that the chinese are willing to accept our money at all. I guess if they didn't, they would have nowhere to go with their production, and they would have the unemployment.
My underlying point was essentially that the principal reason why people view lowering wages or looking for places where wage costs will remain low is because they treat stock value as more important than the national welfare and hiring domestic employees at higher wages. In other words, profits trump patriotism, in much the same way that consumerism trumps patriotism when folks go to the store and would rather have more stuff made by foreign workers than less stuff made by their neighbours. It is that very ethic which makes Wal-Mart the largest chain in the world.
Are many people overpaid for what they do? Sure. Hell, I think I'm overpaid for what I do (although I earn a fraction of what folks doing the same thing in the private sector make for the same skills, expertise, and work). Executives and CEOs are highly overpaid for what they do because so-called "top talent" has the effect of attracting investment via the promise of greater profits, the same way that hiring big names provides the promise of attracting more spectators to sporting events.
Do unions these days insist on things that are unreasonable? Yes. That's how I get my raises. But unions aside, is it possible in this day and age when one can find out the salary offered by employers X, Y, and Z with the click of a button, that employers would still feel the need to provide "competitive" wages to attract employees? Sure. So unions shouldn't take all the blame. We tend to focus on unions because of their role in the auto companies' problems, but their problems stem from a whole lot more than what sorts of wages are engineered by unions for assemblers.
Company principals have a fiduciary responsibility to the share holders to maximize profits. You may think of it as profit trumping patriotism, but in reality for the system to work properly a business needs to maximize profits. To carelessly give away company profits creates a moral hazard, and long term leads to failure in the market place as natural market forces take over. That is obviously an over simplification, this is afterall just a message board and we're not writing dissertation, and long term it can actually benefit a company to locate in a place where wages may be higher, but so is productivity and perhaps a more stable, reliable workforce. Those are things companies must decide for themselves, and the market decides who suceeds, who makes the right decisions, who locates in the right places, pays the right wages, etc.
Patriotism comes into play when the government, local and other, does its part in providing for a safe and secure place to do business that is attractive due to things like infrastructure, regulation policies and taxation. Some cities, states and federal governments choose profits (from taxes and fess/fines), and power (regulations) over patriotism. And that's a very large part of this whole problem with the economy right now.
No pissing contest is needed, and probably none is relevant. I'm relatively convinced that it's an expression of economics, not fiscal or political policy.Originally Posted by Mark Hammer
I find it extremely laughable in myself to ever quote Bob Dylan on any serious topic, but here it's appropriate - "Economics is above the law". Or more properly, economics is a more fundamental expression of human psychology than government regulations are.
To me, it appears that one fundamental issue in economics is that given rational, informed, and willing buyers and sellers, and identical things being traded, there can be no significant difference in price unless there is some barrier between the identical things being traded.
We all know about comparing apples and oranges being at least shortsighted or fraudulent. But how about the prices you would ask/pay for one of two oranges which appear to be identical? Or two, say, hen's eggs of identical age, color, size, weight, freshness, etc.? If they happen to be sitting side by side, I contend that the price for one is almost exactly the same as the price for the other for willing buyers and sellers who are both capable of concluding the transaction.
If you want to make one more expensive than the other, you put some kind of barrier between them. Distance or physical transportation difficulty is one good barrier. The orange or egg on the other side of the planet will be more expensive to get than the identical one right here because you have to pay to transport either the object or you to one another.
It can be a social barrier, cultural, or religious barrier, or the governmental expression of such. Pork chops are not worth much to observers of some religions. Beef steak is worthless to practicers of other religions. Some ethnic groups view similar goods made in other places as being tainted and therefore worthless. No buyer would buy one; this bit of common sense is used in the bit of hyperbole which suggests that someone is a good enough salesman to sell refrigerators to Eskimos. It can be even be a simple governmental law - opiates are actually fairly cheap and easy to grow/refine, or synthesize. It takes a massive prohibition effort by governments to keep the prices as high as they are. Differences in prices need barriers to maintain them.
We (us humans) have spent the last century or so tearing down barriers of distance, knowledge, time, access to capital, access to markets, communications, and so on. And we are now surprised to find that with fewer and lower barriers, the price of human labor, whether unskilled or highly-trained professionals, is also governed by economic law. If you have access to the work of engineers or programmers in Germany, Ireland, the USA, Canada, Japan, China, India, and any other place you can find engineers, all of whom are equally well trained and experienced, which one do you hire? You hire the least expensive one. Skilled labor, absent barriers of communication and training/skills is a commodity too. Manufacturing labor is too. Some medical specialties like reading X-rays are.
I'm quite certain that governmental action and policies have made economic situations worse, and may be doing so now. Governments can try to repeal economic laws, but in the end they merely distort them, example being the former USSR experiment. If governments are capable enough to force economic unreality, eventually the people simply stop and the distortion stops. There is a huge cost in human misery for these distortions, but governments are not always able to see that far, nor care very much about that misery as long as the political heros do not themselves share the misery.
It should certainly be something that you aim for, but in the grand scheme of things, it is merely a necessary condition, and not a sufficient one. Keep in mind that things like Bhopal and the Love Canal and all of those wonderful toxic sites in Louisiana are byproducts of the "fiduciary responsibility to maximize profits" without regard to broader issues like welfare of the community. I wish business well, but it cannot be a shark that eats everything in its sight. Eventually, it will eat its mate, its children, itself....and its shareholders.
Your examples are of companies whose decisions on how to conduct their business resulted in massive financial losses (besides the horrendous los of human life and suffering), these were not wise decisions, and they cost the company dearly (maybe not dearly enough). The point is, the decisions were unwise in all ways, they did not maximize profits for the company, they resulted in massive losses.It should certainly be something that you aim for, but in the grand scheme of things, it is merely a necessary condition, and not a sufficient one. Keep in mind that things like Bhopal and the Love Canal and all of those wonderful toxic sites in Louisiana are byproducts of the "fiduciary responsibility to maximize profits" without regard to broader issues like welfare of the community. I wish business well, but it cannot be a shark that eats everything in its sight. Eventually, it will eat its mate, its children, itself....and its shareholders.
I've not said business should operate with no regard for responsibilities to the public, I just said business will and should conduct business where it does the most good to maximize profits for the owners/share holders. I've also said that the cheapest labor is not always the best labor, and using it is not always the best strategy for a company. I just don't think it's correct to challenge the patriotism of a company for relocating to a place where the climate is more favorable to business, particularly when the locale where they currently exist is inhospitable. And I do challenge the patriotism (and wisdom) of those governmental authorities whose decisions and actions work to make their climate inhospitable to business.
My examples were of companies that believed they were honouring that responsibility fully, and who eventually got caught. Lord knows how many companies are doing the same thing and simply haven't been caught yet. That's not to say they are all bad. Rather, when there is a perpetual need to appeal to shareholders to be able to support big business risks, it can lead you to do some stupid and unethical things, and it takes more thoughtfulness than some folks are willing to invest in order to avoid that slippery slope.
Here in town, we have/had Nortel and JDS Uniphase, both of whom were once upon a time huge. There was a time when I suspect a great many local citizens had shares in Nortel, but were probably under the mistaken belief that what Nortel "did" was simply acquire value for shareholders. I doubt many knew what the company produced, or who its clients were. What they cared about was that the company presented the image of something that would make big bucks for them. Every day, the hourly news would report stock values of local companies. In the case of Nortel, they created the impression of big promise by cooking the books and doing a bunch of other stupid things, like expanding way too fast for themselves (most of their former immense real estate empire is now government buildings).
The profit motive is not evil or misguided in itself, and neither is the motive to keep shareholders happy. It just isn't enough to assure that the outcome is ethical or helpful. I'm quite confident that for the last 20 years both GM and Chrysler boards of directors thought they were doing all the right things to keep shareholders happy and (eventually) make profits. Quite clearly, it caved in on them, and the reason they needed the bailout they did was because those motives may be necessary, but are not sufficient.
You know, it IS possible to have a business that provides jobs for Americans (or Canadians in my case), does not leave an objectionable environmental footprint, and makes a profit. Certainly being clever is part of it, but not being greedy is another part. Profits are good, but there are profits and there are obscene profits.
Some CEOs will say "Well, if we didn't move to another country, we might not be exist in 2 years". If there is no market for what they do, how will use of cheaper labour help them? If there is a market, then why do they not expect enough customer loyalty or faith in the product to be able to retain that customer base? What is increasing their production costs and why can it not be controlled? I have a feeling that in a great many of these cases, the company has simply not been content with remaining a certain size and felt the need to expand to an unreasonably degree. The relocation of work is somehow excused by the magnitude of risk that the company took. Why was the risk taken? To achieve bigger profits rather than steady ones.
Again, bigger profits are not a sin, but you always have to ask what the cost of those bigger profits is or might be, and often the cost is high. Bhopal is one example, and Flint is another. The current unemployment rate is another. You know, sometimes, by simply wanting less, you end up with more.
No, your examples were of companies that ignored their responsibility to their workers and to the communities in which they operated to perform their work in a safe and honest manner. You're confusing unethical actions with the ehtical and moral actions of maximizing profits using legal means. You cite examples of companies that experienced huge failures and equate them with normal business practice, but someone that just got caught.
In the case of GM and Chrysler, this should be an example of exactly how the system works, and it would have been had they not been bailed out. You have to allow companies to experience failure, or at least the threat of it, to maintain a properly functioning free market. In this case the government bailout subverts natural market forces, and there will be unintended consequesnces down the road. For the market to function properly there has to be risk & reward. Entrpreneurs take a risk, and if they are successful they are rewarded with profit. If government takes away the risks, there should be no profits either. To allow profits with no risk invites moral hazard. There will be consequnces to be paid at some point, and they will be negative.
And let's be clear about what really went down with the government bailouts of those companies, it was really a bailout of the unions, they bought off all those union jobs using tax payer money, taken by force (or the threat thereof).
Regarding companies that locate offshore to access cheaper labor, if it eventually leads to a reduced market for the products, that is natural market forces at work. If markets shrink, because customers can no longer afford to buy the products because they have no money because they have no work, then the company suffers doesn't it? In that case the decision to relocate production offshore wasn't successful, and the company loses, there is no reward for losing. So natural forces eventually seek equilibrium, and government policies and regulations cannot subdue them forever.
But again, the onus is on the government to provide a decent climate so that business's don't seek a better operating climate elsewhere. And eventually it all comes back to the voters in a democratic republic such as the US. We get the government we deserve, if we consistently elect leaders that do not understand basic economics, and how their actions and the policies and regulations they enact effect the business climate, or they know it but ignore it to placate special interest groups that funnel money to them by way of campaign contributions, then the voters suffer, and that's exactly what we see today. Don't like what that map shows you? Think about how your voting has influenced it. Think about the Community Reinforcement Act, think about Fannie Mae and Freddie Mac and the moral hazard they create in the financial markets that lead us into this recession. Think about how the politicians you supported were involved in supporting those things. If you don't know, than you need to do some research into it, you need to learn about those things and you need to see who the politicians were behind it all.
Last edited by hasserl; 12-05-2009 at 11:14 PM.
Some of what is in this thread is a little over my head. The discussions on all sides seem to be able to be justified by any certain amount of explanation. So my take on some of it wouldn't be worth much. But the blaming of unions bothered me so I'm gonna tell a short story. I am a union worker in a small municipality and feel very fortunate to have a job that gets my bills paid, a few refreshments and takes care of my children. My better half works and we get "by", if not ahead. What I find funny about the unions beeing blamed for some of these problems stems from an experience I have had since becoming part of the negotiating team for our local. Three years ago we went to Federal mediation and made our city an offer , for a five year contract with a very modest wage increase and no other changes. The mediator asked us if we were sure we wanted to do that and that we could and should ask for more. He took the offer to the city and with no discussion, they responded 'No". Well we ended up in arbitration twice since then and have ended up with almost double what we asked for. This last summer the city needed some work done on a project and saying we didnt have enough people, bid it out to private companies, took the low bid and then after a fight to let us do the work found out that even when they paid us at overtime wages, the project was completed under budget and ahead of schedule. Let me say that again-----The union had to fight to do the work under budget and ahead of schedule! I'm not pro union or anti management or anything like that. I do however think that more problems are caused by time wasted finger pointig rather than working. DO unions do bad things? They are made up of humans and humans do bad things. Fortunately humans also do very wonderful things like share knowledge and thats why myself and probably anyone who gets to read this are here because this forum is full of good people working together to share and pass on knowledge. I like this place. Just MTC.
Henry Ford was a pioneer of "welfare capitalism" designed to improve the lot of his workers and especially to reduce the heavy turnover that had many departments hiring 300 men per year to fill 100 slots. Efficiency meant hiring and keeping the best workers.
Ford announced his $5-per-day program on January 5, 1914. The revolutionary program called for a raise in minimum daily pay from $2.34 to $5 for qualifying workers. It also set a new, reduced workweek, although the details vary in different accounts. Ford and Crowther in 1922 described it as six 8-hour days, giving a 48-hour week,[15] while in 1926 they described it as five 8-hour days, giving a 40-hour week.[16] (Apparently the program started with Saturdays as workdays and sometime later made them days off.) Ford says that with this voluntary change, labor turnover in his plants went from huge to so small that he stopped bothering to measure it.[17]
When Ford started the 40-hour work week and a minimum wage he was criticized by other industrialists and by Wall Street. He proved, however, that paying people more would enable Ford workers to afford the cars they were producing and be good for the economy. Ford explained the change in part of the "Wages" chapter of My Life and Work.[18] He labeled the increased compensation as profit-sharing rather than wages...
maybe this guy was on to something 100 years ago?
What you say is true about Henry Ford, but skip ahead to the part where someone smelled money and organized the folks that Henry was happy to pay a decent wage to. All of a sudden, he's exploiting the working folks, and owes them more money,(of which their leadership collects dues for).
As an employer, I've had all sorts of employees, and I can ususlly tell in a few weeks whether we can work together. I currently only have 1 tech, but most weeks he makes more money than I do, and when it's slow, (October was terrible), I pay him a guaranteed salary to try to keep him here. If I had a union mandating what I paid, and what I had to furnish each employee, regardles of worker output, I would have to charge a lot more for the work we do. I joke with some of my good union customers, that they can pay as much as they want to get their car fixed, if they're willing to pay my help as much money as they make per hour. The more I spend on labor, and parts, the more I am forced to charge. I am bound by the marketplace in what I can spend, and charge for labor.
I think it's admirable, and possibly unique in this day that guitaraddict's union was able to to underbid a job in the market. Of course some of these federal jobs specify that prevailing (union), wages are paid whether the company is union or not.
We no longer have a closed market here in the US, so all of us are competing with the whole world, I don't know where things will stabillize, but the days of high priced semi-skilled labor are long gone.
I don't disagree with any of your points, however the part about being able to "buy what you produce" still has some merit IMHO. Now as then I think some of the decision makers at the top don't see the logic in that.
Cookin' books to give stockholders a warm fuzzy is short term thinking with long term consequences
Bill, you sound like the kind of boss a man would be proud to work for. A boss who treats his employee(s) as assets, not detrements. On jobs over a million dollars they must bid prevailing wage. The job I mentioned was an $88,000 dollar job. I went to 6-7 council meetings to try and have the union do a $500,000 dollar job that we figured we could do for less than $300,000(wages, benefits, retirement, etc. figured in). We were not alowwed to do that job and the private company had only to complete 93% in a year. The union will do the last 7%. Is it unique? I'm not sure but it is frustrating. Don't get me wrong, we have some typical lazy workers but some of us actually want to do a good job. you mentioned the smell of money and I so agree with that. That is what greed smells like and is probably what is clouding the vision of some "people at the top" . Anyway Ijust wanted to commend you for being the type of boss that most people would be lucky to work for.
One of the perpetual challenges is that the patience of the electorate is often shorter than the time it takes to resolve something properly.
The late Jane Jacobs felt that the Great Depression was something that America never quite got over. That it was a sort of traumatic event in the life of the country that it would, from then on, always react in response to. And the nature of the trauma was that it would do anything in its power to keep unemployment as low as possible. Such was the impact of all those citizens to whom "Buddy, can you spare a dime?" was dedicated.
But does the desire to do something, anything, as fast as you can lead you in the "right" direction? Many here will complain about government interventionism, and even point out various examples of how it ended up working contrary to the original intent. The question is, would you, as an unemployed, underemployed, or about to be laid-off worker want the government to sit back and say "Don't sweat it, things will self-correct in a couple of years?". At the macro-level, that might be incontrovertibly true. If you happen to be one of those who is supposed to wait the 2 years until the self-correction kicks in, that pronouncement is not exactly consolation.
So governments butt in. I'm not saying they do it gracefully, thoughtfully, competently, or any of that stuff, but they butt in because the nation, as a whole, is unwilling to stand idly by...and never will be. And no amount of cumulative ineptitude on the part of government is ever going to stop that urge, because the desire to help out is the chief reason why people got into that line of work in the first place, regrdless of the level at which they are involved.
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