Free Market Tales

The 'Maximizing Profits Mantra' ads several chapters this week with the Iphone affair and the upcoming Chinese subsidising of auto parts. The opportunity to sell items in this country apparently cannot be self regulated.

Offshore Editorial Comment

The following comment appeared in the January 28, 2012 edition of The Hindu. The subject of the editorial was the U.S. State of the Union address.

These talks are just rhetoric of an incumbent president trying to win
over the middle class who got slammed by the neoliberal economics of
the last 30 years. I do not think a president of US can or will
control offshoring of production or services. There are three simple
reasons none of which is lack of skilled labor or taxation policies. 1. The Chinese yuan is cheaper than the US Dollar by around 6 times, Indian Rupee by around 50 times and the life of a third world laborer is even cheaper.2. The politicians have to spend millions ($730 million for Barack Obama in 2008 !) to get the attention of the distracted population. Only the corporations (which by the way are legally "individuals" and there is no cap of campaign contributions by an individual) can handle that kind of money. 3. The social disease of consumption. The population want more of everything and they are not willing to pay more for anything!

from: Adarsh Jose

Posted on: Jan 28, 2012 at 14:28 IST

I hope that Adare Jose is wrong in his assessment of our population.

Opportunity Knocking

Mark Tomlinson, executive director and CEO, Society of Manufacturing Engineers says that 600,000 manufacturing jobs are unfilled due to a shortage of skilled workers. He also says that programs already exist and are abundant to provide these skills.

Millions of Americans need these programs. Now why isn't this something that we accomplish?

One possibility is to place a tax on each Iphone sold. Another possibility is to create a "Job Skills

Enhancement Lottery."

Finding a need and filling it is pretty exciting stuff!

Extent Of Job Loss Problem

The following information came from a January 9, 2012 press release from the office of Texas Workforce Commission. The extent of the problem is outlined as follows:"From 2001 through 2010, we lost one-third of

our U.S. manufacturing base – that’s five and a half million U.S. jobs that were shipped overseas, outsourced, or

simply went away. Moreover, The Wall Street Journal reported that, from 2000 to 2009, U.S.-based

multinational companies (which account for 20 percent of private sector employment in the United States)

eliminated 2.9 million jobs in the U.S. while creating 2.4 million jobs in other countries. As Austin businessman

David Hartman has noted, the U.S. manufacturing trade deficit in goods totaled $5.4 trillion from 2000 to 2008. We should implement a proposal known as the Hartman Plan in which the U.S. corporate tax system

would be replaced by a revenue-neutral, 8 percent business-consumption tax that would be border-adjusted. All

goods and services coming into the United States would pay the 8 percent tax while all exports would receive a

comparable tax credit or tax abatement as an offset to its company's business-consumption tax. This new

approach to taxing business would raise just as much in revenue as, if not more than, the current system of

taxation."

This past year the U.S. ran trade deficits with nearly 100 nations. " This press release also had a suggestion for a change in the tax laws to address this problem as follow: "

Blue Collar Wages

Which Countries Pay Blue Collar Workers the Most?

• RICHARD FLORIDA
• JAN 09, 2012
• 9 COMMENTS

Reuters

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The United States ranks 14th in the world in wages and compensation for manufacturing workers, according to new data released by the Department of Labor's Bureau of Labor Statistics. That's on par with Ireland and Italy and far behind Norway, Denmark, Sweden, and Germany, among others. American manufacturing workers earn an average of $34.74 in total hourly compensation, just 60 percent of the $57.53 that workers in top-ranking Norway receive. The table below shows the total hourly compensation (including benefits) as well as pay for time worked for the top 20 countries in 2010.

Country	Pay for Time Worked	Total Hourly Compensation
1. Norway	NA	$57.53
2. Switzerland	$34.29	$53.20
3. Belgium	$24.01	$50.70
4. Denmark	$34.78	$45.48
5. Sweden	$25.05	$43.81
6. Germany	$25.80	$43.76
7. Finland	$22.35	$42.30
8. Austria	$21.67	$41.07
9. Netherlands	$23.49	$40.92
10. Australia	$28.55	$40.60
11. France	$21.06	$40.55
12. Ireland	$26.29	$36.30
13. Canada	$24.23	$35.67
14. United States	$23.22	$34.74
15. Italy	$18.96	$33.41
16. Japan	$18.32	$31.99
17. United Kingdom	$21.16	$29.44
18. Spain	$14.53	$26.60
19. Greece	$13.01	$22.19
20. New Zealand	$17.29	$20.57

The U.S. is more comparable to other countries in terms of pay for hours worked, paying manufacturing workers $23.22 an hour on average, more than Italy but less than Ireland or Canada, and substantially less than Denmark or Switzerland.

U.S. manufacturing wages have come under further pressure as large established companies like General Electric, Ford and others have instituted two-tier pay practices, paying newly hired workers significantly less than established ones even as they bring manufacturing jobs back to America, as The New York Times reported last week.

These companies argue that such wage reductions are required to make U.S. manufacturers globally competitive with those offshore. But as the Times notes: "The shrunken pay scale for newcomers — $12 to $19 an hour versus $21 to $32 an hour for longtime workers — threatens to undo the middle-class status of even the best-paid blue-collar jobs still left in manufacturing."

Generally speaking, American workers receive a relatively lower level of benefit compensation than workers in European nations, even though cost of the American health-care system is relatively high. Benefits make up about a third of total compensation in the U.S. compared to 40 percent in many European and Scandinavian countries.

A quick look at the table above suggests that the level of compensation provided to manufacturing workers reflects a nation’s overall level of economic, social, and human development. And that is indeed the case, according to a simple statistical analysis by my colleague Charlotta Mellander.

Manufacturing compensation is closely related to productivity (measured as economic output per capita), global economic competitiveness and overall human development as well as my own Global Creativity Index. This is all in line with basic economics. And manufacturing compensation and wages are higher in nations with higher levels of education and where greater shares of the workforce are employed in knowledge, professional and creative jobs. In other words, manufacturing compensation and wages rise as nations become more post-industrial. Higher manufacturing compensation is also related to lower levels of inequality and higher levels of happiness.

Manufacturing workers are paid the best in the most advanced nations, places that boast advanced safety nets, generous benefit systems and high productivity. Post-industrial economies might not have the most manufacturing jobs, but their workers are the best paid. Instead of adopting a low-road strategy of trying to reduce manufacturing costs and wages in order to compete with China or other emerging economies, the U.S. would be better off with a high-road one, promoting policies that improve innovation, skills and productivity.

Richard Florida is Senior Editor at The Atlantic and Director of the Martin Prosperity Institute atthe University of Toronto's Rotman School of Management. He is a frequent speaker to communities, business and professional organizations, and founder of the Creative ClassGroup, whose current client list can be found here. All posts »

More At The Atlantic Cities

Best Approach To High Paying Jobs

David Rohde is a columnist for Reuters who recently wrote an article on this subject in the January 6, 2012 Atlantic with the title "Here Come the Jobs! (How's the Pay?)". I have included the last paragraph of his article as a goal that each of us can try to foster and bring about.

"Study after study shows that a dearth of high-paying jobs is dividing our society, politics and middle class. We are falling behind the Canadians, British, and Europeans, as well as the Chinese and Indians. An honest debate over what mix of approaches might save us would be a godsend."

Renaissance

Needed: A U.S. manufacturing renaissance

George Leopold

1/4/2012 12:25 PM EST

WASHINGTON – With the pox that is the U.S. presidential election campaign upon us, it’s a good time to begin looking at concrete proposals for reviving the U.S. economy and identifying a new engine for economic growth. I submit that the incumbent and all of his challengers begin by focusing on what could be called a U.S. manufacturing renaissance.

Simply put, the United States must significantly increase the amount of stuff it makes, be it mobile devices, commercial jets or construction equipment. It’s one obvious way we can extract ourselves from the decade-old pattern of economic stagnation and declining wages that threatens the continued existence of the American middle class.

Electronics technology fueled several generations of U.S. innovation and economic prosperity, but electronics manufacturing and the jobs it created are long gone. U.S. companies like Apple remain global leaders in consumer product design, but an economic revival requires domestic manufacturing jobs.

Some technology entrepreneurs are trying.

During a recent visit to XCOR Aerospace, an entrepreneurial company looking to send tourists to the edge of space and satellites into orbit, company co-founder Jeff Greason told us he had a stack of engineering resumes on his desk and all the aeronautical engineers he could use. What the company needs, and what it is still unable to find, are machinists and electricians who can manufacture the guts of XCOR’s rockets.

Like software engineers in Taiwan, machinists in the States are worth their weight in gold and can take their pick of high-paying jobs. A high school graduate with a lot more on the ball than this correspondent would ensure a bright future by taking up a vocation like welding or structural engineering. A recent report about the growing need for workers with basic technical skills found that highly skilled airplane mechanics were being snapped up left and right by energy companies expanding their natural gas distribution networks.

When those trained workers leave, it’s difficult, if not impossible, to find replacements.

So why isn’t the U.S. education system responding to this shortfall? One reason is that a growing number of strictly for-profit colleges are siphoning off as much as $26 billion a year, according to Bloomberg, from U.S. student loan programs. In many cases, unsuspecting students are left with meager job prospects and crushing student loan debt.

One political reform would be closing loopholes in federal student loan programs that allow companies like Goldman Sachs (yes, Goldman Sachs!) to enter the tech school diploma racket. The Wall Street giant owns about 38 percent of Education Management Corp., parent company of the Art Institutes. The sole requirement for admission to AI and a growing list of for-profit colleges appears to be a pulse.

Fixing the student loan program would allow those funds to be more effectively used for vocational training programs that could create the next generation of skilled U.S. manufacturing workers.

The Obama administration paid lip service to manufacturing over the last three years as more manufacturing jobs were shipped overseas. In December, the White House finally acted by creating a cabinet-level Office of Manufacturing Policy. Why did it wait this long? Is it mere coincidence that the initiative has arrived just as the administration is ramping its reelection campaign?

Policy-makers within the administration “increasingly realize that a robust national recovery in the long term is impossible without a manufacturing sector," Rob Atkinson, president of the Information Technology and Innovation Foundation, told the Milwaukee Journal Sentinel. "It's taken a while for them to come to that conclusion, but I give them credit for getting this far."

If nothing else, creation of a White House manufacturing office will compel presidential candidates and policy-makers alike to get cracking on a viable national manufacturing policy. Whatever the election’s outcome, America needs a coherent manufacturing plan that gets our engineers and technicians back to work.

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