Where are the jobs?

19 Aug

They might be coming back to America if big businesses have their way.  Their way is not what one might hope for, however.  The big corporations are not willing to give up high corporate CEO and management pay, or the bonuses.  Nor are they willing to cut into profits, at now unprecedented levels, by diverting some of that into labor wages.  No, the plan is to lower wages in the US to the point where they compete with China’s wages.

The big question is: just how little are Americans willing to work for?  How desperate are we?  Already, wages are at a stagnant level and have been for the past 30 years.  Currently we see report after report of increased “worker productivity”; that means simply that Americans are working more hours for fewer benefits and less pay.  In some cases, it also reflects technological advances that result in replacing humans with machines.

One might wonder at the long-term effectiveness of this “plan” – after all, what is the point of paying workers so little that they cannot buy the products they are making?  That is the wrong question.  We are dealing with people who don’t have the capacity for long term planning, first of all.  If the long term were of interest, they simply would not operate this way; it is obviously antithetical to any sort of “long term plan”. The only plan, such as it is, in operation today is the earning of money for the top tier of management at any cost to the population.  If Americans can’t buy the stuff, the company will sell to some other country.  When some of those other countries can’t afford the stuff, they will move on to others and so on.  Naturally, they will eventually run out of countries to sell to.  Then what?  There is no then what, no end plan.  “Then what” is that the company folds and the CEOs walk away with an unfathomable amount of money.  That is the whole purpose.  Unbelievable greed at the top.  That’s it.  And here you are, looking for a “long term plan”.  This is the second thing; you cannot imagine the the scope of as-yet-unsatisfied avarice at the top of these companies.  We don’t just have millionaires any more, we have billionaires.  And what will they do with it all?  Even they don’t know and they don’t think about it.  They just want it.  They do not think about the average American, they don’t even know what such a thing is.  They don’t wonder how society will hold up with most of the population unable to afford food, housing, or electricity, such thoughts do not even enter their heads.  In the world these guys inhabit, there are no “people”, no “society” – there are brute worker animals and there are the owners.  They are the owners.

As Jane Slaughter points out in this article:

…They’re predicting that within five years certain Southern U.S. states will be among the cheapest manufacturing locations in the developed world — and competitive with China.

For years advisers like the Boston Consulting Group got paid big bucks to tell their clients to produce in China. Now, they say, rising wages there, fueled by worker unrest, and low wages in Mississippi, Alabama, and South Carolina mean that soon it won’t be worth the hassle of locating overseas.

Wages for China’s factory workers certainly aren’t going to rise to U.S. levels soon. BCG estimates they will be 17 percent of the projected U.S. manufacturing average — $26 an hour for wages and benefits — by 2015.

But because American workers have higher productivity, and since rising fuel prices are making it even more expensive to ship goods half way around the world, costs in the two countries are converging fast.

Dan Luria, research director of the Michigan Manufacturing Technology Center, says many of the big-name consultancies, which until a year ago were advising their clients to “Asiafy their footprints,” are now telling companies to think twice.

BCG bluntly praises Mississippi’s “flexible unions/workers, minimal wage growth, and high worker productivity,” estimating that in four years, workers in China’s fast-growing Yangtze River Delta will cost only 31 percent less than Mississippi workers.

That’s before you figure in shipping, duties, and possible quality issues. Add it all up, says BCG, and “China will no longer be the default low-cost manufacturing location.”

Actually, employers deciding where to produce the next generation of widgets may not need to look to the South. Plenty of factory jobs in Northern states — even in the former high-wage stronghold of auto — are already “competitive.”

Ford’s flagship Dearborn Truck plant outside Detroit, for example, contracts non-union workers to do inspection and repairs — long the coveted jobs, that workers could get only with many years’ seniority — at $10 an hour with no benefits….

At a GM plant in Lake Orion, Michigan, north of Detroit, contractors hire young third-tier workers at $10 an hour or less to gather parts for assemblers, work done very recently by GM employees…

Many of the union assemblers are themselves second-tier workers paid less than the U.S. manufacturing average, with wages of $14.60 and no pensions.

“It makes it hard to do anything for the second tier when the third tier is so bad,” said Theisen, a dissident who’s spoken against lowering GM wages…

After experiencing lengthy transit times from Asia, CEO and North Canton native Ben Suarez painstakingly put together a chain of suppliers from within the U.S. In a former IBEW Hoover vacuum factory, abandoned in 2007 in favor of Mexico, he’s now contracted with two companies to supply the plant with labor.

Wages will run from $7.50 an hour (general labor) to $10 (assemblers) to $16 (programmers). Federal minimum wage is $7.25.

The plant will soon employ 100-150 workers in full-time jobs. As production ramps up, others will be guaranteed seasonal work, October through March. The plant received 3,000 applications, according to the company’s Lauren Capo…

…various consultants are now telling their clients to consider the U.S. They’re the same consulting class that “popped up around the time of NAFTA with ‘yes you can in Yucatan,'” he said…

But, Paul notes, if companies choose to build in the lowest-cost states — as Japanese automakers have done for nearly 30 years — “it quickly becomes a state vs. state competition, a race to the bottom. If South Carolina can offer lower wages, so can Mexico.”Will factory jobs flood into Michigan and Mississippi at just above minimum wage? Or is that still not cheap enough? The fact remains that the decisions are all made by corporations seeking the greatest profit in a dog-eat-dog world.

As Michael Zinser, one of the co-authors of the BCG report, told Labor Notes, “Location is agnostic. It’s a question of what the market will bear.”…

Mostly, of course, the Obama administration has taken a hands-off approach to what business should do, instead providing cash on request in the bank and auto bailouts.

UAW dissidents said the auto bailout was a giant missed opportunity to steer their industry toward clean products built in the U.S. at decent wages. Unions and consumer groups protested because the banks were saved but stiff regulations were not attached to their checks.

Paul notes that government policies to promote industry are the norm elsewhere, in old capitalist countries as well as in new ones like China. He fears the absence of such government help leaves U.S. workers with only one bargaining chip — and that’s not a happy one.

“Low wages won’t be the factor that compels companies to locate in the U.S.,” he said.

“But absent a national economic development strategy where there is a focus on manufacturing, that’s what we’re left with.”

Next low wage haven: USA
by Jane Slaughter

And how about the benefits packages?  Here is an interesting article about public pension funds from last week.  Amazingly, after the crash in ’08, the guardians of the pension plans are still trusting public pensions to Wall Street.  This is remarkably stupid and has produced the inevitable: a massive loss of value for the pension trusts.  Who could have foreseen such a thing?  No-one likes the “hide it in the mattress” plan, but at least that has the benefits of incurring no loss of principle and protecting the cash from the criminals.

From article, HuffPo:

Wall Street’s volatility has hit state pension funds just as they were beginning to recover from the recession, turning what was merely a troubled forecast into a potentially stormy future for taxpayers who are on the hook for billions in unfunded liabilities for government retirees.

As for the millions of government clerks, engineers, janitors, teachers and firefighters in the retirement systems, they are protected by law or, as in New York, by the state constitution, to be backed up by tax dollars if necessary. Their benefits remain safe for life in guaranteed “defined benefit” pension plans that are disappearing in the private sector, where most employees are left to fend for themselves with 401(k) plans that they mostly or entirely fund themselves.

California’s main public-employee pension fund, the nation’s largest, has lost at least $18 billion off its stock portfolio since July 1, about 7.5 percent of its $237.5 billion total asset value on June 30.

Florida’s pension fund has lost about $9 billion since June 30, a decline of 7 percent for a fund valued at $119.4 billion on Thursday, while the Virginia Retirement System shrank from $54.5 billion on June 30 to about $51 billion by week’s end, a decline of 6.4 percent, said its director, Robert P. Schultze.

New York’s state comptroller will not say how much the state pension fund has lost during the latest Wall Street roller coaster, but the fund was 5 percent below its pre-recession value before the recent losses and remained nearly $8 billion below its pre-recession value.

And Kentucky, which has more than $20 billion in unfunded pension liabilities, has seen the value of its public pension fund decline $1.7 billion – or 15 percent – since July 1, falling to a total value of $9.7 billion.

Nationwide, states have a combined $689.5 billion in unfunded pension liabilities and $418 billion in government retiree health care obligations, according to data collected earlier this year by The Associated Press. Those benefits are protected by state law or, as in New York, by the constitution.

Pension fund managers say there is no risk current government retirees will miss a monthly check and that they are remaining calm and taking the long view in their investments. Some say the market plunge is even providing a great opportunity to buy stocks at fire-sale prices.

Kentucky Retirement Systems Chief Investor T.J. Carlson said his fund has not made significant changes to its investments in response to the market turmoil.

“We haven’t changed our long-term strategy in any way,” he said. [In perhaps one of the more idiotic responses to Wall St. theft ever uttered.]…

E.J. McMahon, a senior fellow at the conservative Manhattan Institute for Policy Research, said the asset levels of virtually all public pension funds are below 2007 levels despite the recovery of the market in 2009 and 2010…

After a strong showing last year in a rebounding market, many state pension fund managers are confident they will ride out the latest gut-churning gyrations on Wall Street. [No explanation given for this belief.  It is like believing the lion doesn’t really want to eat that little baby gazelle; he just wants to watch it frolic for awhile.]…

Even with the steady-as-she-goes response from pension fund managers, critics of the system say taxpayers should be nervous about their future liabilities to government retirees, said Jim Waters, vice president of the Bluegrass Institute, a nonpartisan group that has pressed for a defined contribution system for government employees in Kentucky… [The idea is clearly to get the public to turn on each other – those with little being hated by those with even less, while the power brokers, ignored by the stupefied masses, continue to grow sleek and fat.]

Now begins the culling of the herd in earnest.


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