"They should stop our jobs from going overseas!" How often have we heard that from people in America? What are you suggesting be done? "I don't know, but they should do something and they should do it now!"
Who are "they" and what should they do? "They're the government, the unions, the politicians, and greedy rich people." What should they do? "They should keep our jobs here instead of letting them go to lower-cost people overseas." Maybe we should find a way to produce more for less. "I don't want to work for less. I want high-paying jobs to stay here to support our standard of living."
I've had some conversations with people from high-school education to esteemed Ph.D. economists and they don't seem to get it. Fortunately for America, the production decision makers in Asia seem equally confused.
A side story here: When I heard Isaac Asimov speak sometime around 1975, he said science fiction fans lived in a fantasy world. He pointed out that the sci-fi community expressed their fears about overpopulation, nuclear war, energy shortages, social resistance to technology and science, computers run amok, and environmental destruction decades before they became popular topics. This was the escapist fantasy we were accused of. I sometimes feel I live in a similar fantasy world because I can see the obvious in economics: consumption can only exceed production only for the short term or if somebody else produces more than he consumes.
Let's call our zero point America in 1967. There were 3000 million people out there in Europe, Asia, Africa, and Latin America willing to work for peanuts and yet America's workers were productive and well paid. There were two reasons for this: First, our workers were more skilled and harder working than their foreign competition and, second, there was more to do than the world's entire working population could accomplish. Around the making-things, industrial, blue-collar economy was a service-and-support, professional, white-collar economy. A factory needs workers and the workers need doctors, teachers, administrators, and even (gasp!) lawyers.
This is a fundamental point: A professional community can only support itself when there's a productive community to pay for it. The "service economy" is a myth. There has to be somebody to serve, somebody to produce the goods and services that the service-economy labor force consumes. My own career choice is similarly dependent on productivity: I'm an industrial mathematician making other people's jobs produce more for less effort. If they don't produce, then I don't get paid.
Let's start off with the basic assumption that the path to living better is producing more. Alternative theories of lifestyle improvement go in the taking-something-that-isn't-yours or the perpetual-motion, faster-than-light-travel category.
Porcine unions aren't helping us produce more, squealing, grunting, and oinking at the payroll trough as they dilute the productivity of American workers. Union defenders say, "Somebody had to do something!" There are lots of things we could have done better than having an intermediary hostile to both management and labor. The best way to battle the boredom of poverty is to have more wealth and less poverty. Meanwhile we have pork-barrel jobs like lantern holders for cabooses on trains that haven't had a lantern or a caboose for sixty years. There are exceptions, unions that make their workers more productive and more qualified, but the general effect of unions is to make hiring Americans so distasteful that employers have to look overseas to get work done.
How does a factory work force produce more? To first order people can simply work harder. A fifty-hour work week should produce 25% more than forty hours assuming the worker can sustain his effort for the extra time. The work-more-hours approach to increasing productivity is limited by the number of hours workers have in their day and, besides, most of us work so we can enjoy some leisure time.
To second order workers can control more work. Industrialized nations buy machines that make workers make more while developing nations have labor. As the low-skilled, low-paid labor force becomes higher-skilled enough to earn higher pay, the manufacturing community can afford industrialized-nation machinery to do the underclass work. This evolution makes sense until we run out of things we want workers to do, and I don't see that happening for a long time.
For those jobs that require an underclass, a community of low-skill, low-pay workers, we can employ teenagers and young adults if there aren't really-poor people who need these jobs. Summer resort communities where everybody is well off have kids doing kid jobs like fast-food service, road repair, and other menial tasks. Doing a couple of summers of shit work today may be a good object lesson for the professional worker of tomorrow. An employer like McDonald's or WalMart, for example, hires unskilled people for appropriately low wages. After they work for a year at WalMart, they have some skills and can get decent jobs. Whatever rotten things WalMart may do to its vendors or its labor force, their stores give on-the-job training to a huge community of people who would otherwise have no way to get the skills to get better jobs.
The third order is that the work itself is worth more. A car is worth more than a stagecoach and an iPod is worth more than a transistor radio. Even if it takes more worker hours and resources to make the higher-tech, more-valuable commodities, the ratio becomes more favorable to the workers.
We're not going to get good wages by redistributing fat-cat, executive salaries, no matter how egregiously we're overpaying idiots in management. There just isn't enough to go around when you divide the total executive pay by the workforce in this country. The stockholders of these companies have an obligation they have shirked for many years to make these people do their jobs responsibly, but carving up their paycheques isn't going to do much to solve our lousy-jobs-with-low-pay problem here.
At our 1967 zero point, America produced a lot of stuff. We imported a lot of raw materials and some cheap labor and exported a lot more including massive amounts of foreign aid. By 2007 we came full circle so we produce far less. If there's a vigorous manufacturing effort in the United States, then it sure is hidden from plain view. If I believe the numbers in The Economist, then we import five percent of our total economy more than we export, maybe more.
A person in the street sees nothing wrong with that, "We pay for all that stuff we import." Really? What do we pay with? "We pay with money." Fine. What can they buy with that money? "They can buy anything they want." Okay. What do they want that they can buy with our dollars? We don't make stuff they want to buy, we don't have raw materials to export, and our real estate is only worth something to people who come here to America to use it. They can buy our corporations, but without a productive infrastructure or good management, those corporations aren't worth very much.
An educated economist also sees nothing wrong with it. "They have to continue exporting to the United States." Really? Why would they do that? "They need the jobs." Fine. What is paying for those jobs? "They can't stop exporting and have all those people out of work." Okay. They need to keep working, but why would they keep sending stuff here? They could make the same goods and throw them into the ocean. They would get paid just as much and they wouldn't waste so much money on shipping costs. (While that would save all the oil used in shipping, it would pollute the sea floors to have all that cheap consumer electronics clutter.)
If people get paid by productivity, a productive United States benefits by having 5000 million productive people in Asia and Latin America. (Europe has its own economy producing and consuming at about our level and Africa is another story entirely.) The notion that their productivity takes away our jobs is based on some other notion of how people get paid.
There are two scenarios where somebody can take away your job. One is when there's less to do than there are people to do it. If there's something limiting our ability to enjoy the fruits of people's labor, then it's pretty well hidden. There are clearly things not getting done that we wish were getting done.
The other scenario is when something stops people from working. This could happen from resource limitation. When we run out of elephants, we run out of tusks, we run out of ivory, we can't have any more pianos in our living rooms, and that means the people who build, move, and tune them are out of work. Rather than throw its hands in the air or defend the ivory industry, the piano industry found a way to make pianos without ivory keys. Over and over again we see resource limitations being cause for innovation and improvement rather than loss of opportunity.
The big thing, the Hiroshima bomb, that stops people from working in the western world is regulation. Safety, product, wage, and environmental legislation are limiting factors in the job market. Construction workers may or may not be better off with strict safety-on-the-job requirements, but there will be fewer jobs with expensive safety requirements. We may be better off with smoke-free restaurants and workplaces, but curtailing cigarette abuse means fewer tobacco jobs. Minimum wage jobs don't get minimum-skill people better paid, it simply means they now have nothing to do.
The other big bomb, the Nagasaki second punch, in the U.S. economy is environmental law. Rather than use environmental pressure to get to cleaner solutions, we have used it to move the pollution to another place. We have productive mines in the United States, but think of the environmental issues between a mining need and a new mine here. We have productive oil fields, but think of the environmental issues between our need for oil and new drilling. When our Environmental Protection Agency (EPA) passed air pollution laws, our automobile companies put dangerous and expensive catalytic converters on our cars to clean the exhaust while Honda simply designed a cleaner engine that ran just fine on the fuels that were already available. The EPA response was to require the catalytic converter, presumably to reduce Honda's position in the market.
Global warming, whether real or not, has limited the productivity of the United States and that limits our job market. Since we're not limiting our consumption of what those people used to make, we're simply moving those jobs to China along with their pollution. If we want those jobs, then we're going to have to live with their consequences. In the meantime, at least let's put a gag order on whining about it.
Look, I'm not in favor of pollution any more than I like paying tolls to drive on the highways back east, but I like things that require pollution to make just as I like driving on well-maintained, safe roads.
You want plentiful, good jobs in the United States? The price is a business-friendly environment, minimum taxes, a lot less regulation, and well-thought-out environmental law. Otherwise, it's time to start learning Chinese.
Today is 2021 April 14, Wednesday,
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