We’ve already discussed why employment is in trouble in the US.  But, there are other facts- forgetting the politics- that really tell the story.   Many are angry that the US bailed out the banks.  Given how the banks have acted since that effort, one would be hard pressed to not feel that same way.  But, many are annoyed that the US bailed out the auto industry.  Given how that effort has turned out, one is hard pressed to understand those thoughts.

A few facts.  For every 1000 jobs involved in building an automobile, 4712 other jobs exist- from management to transportation to sales.  That means the multiplier for saving an automobile job is pretty darned good.  For saving a services job, like hospitals or bank, the multiplier is tiny-  maybe a total of 1700 jobs exist for every 1000 primary jobs.  This is one of the reason we need to develop manufacturing jobs – to get many more employed.

But, to pick on a favorite company nowadays, that does not mean Apple will lead the way.  A decade or so ago, Apple made its products in the US- and proudly proclaimed so.  Now- virtually nothing is made here.  And, many of the 70 million iPhones, 30 million iPads, and about  60 million other products are produced by plants that we would term forced labor or slave labor here in the states.  (Think about that the next time you purchase an Apple product.)

Part of the reason is the way the current labor force in China is “organized”.  The electronics subcontractor is usually Foxconn, with some 230K employees working in ONE city, 6 days a week, earning about $ 15 a day, with about 50K or so living in “company” barracks.  They have central kitchens and their own police force to insure workers can get to work on time.  This is the way things were in textile, coal mining, railroad, and many other industrial towns in the US years ago.  But, we stopped these practices, since we consider them unfair labor practices, and many folks resent having the company control everything for them.  (I ran into many such a town 30 and 40 years ago, while undertaking  two separate projects.)

Foxconn operates this way not just in China, but elsewhere in Asia, as well in Eastern Europe, Mexico, and Brazil- all developing economies.  But, in China, the government works with the companies.  Want 5000 engineers- no problems, delivered.   But, more importantly, if a manufacturer needs 5000 technically trained high school graduates- it’s a done deal.  We don’t have that level of skill at that education level- willing to work for lower wages- here in the States.

And, given that the large amount of manufacturing that is happening outside the US, it’s dragging semi-finished good manufacture nearby to these new facilities, as well. Given the desire to run just-in-time manufacturing, and the need to scale up or down manufacturing levels on a dime, suppliers can’t afford to make something here to ship there- and get it there on the spot.  (Ocean transportation is notoriously slow, air transportation is notoriously expensive.)

Given these facts, it is not surprising that firms are generating significant profits overseas.  That they want to bring back to the US- without paying taxes.  Finally, President Obama is considering how to let this happen- without the tax holiday the manufacturers so want to reward themselves for firing American workers and employing folks overseas.  Perhaps my proposal (found on this blog on 13 September 2011) to provide a 5% tax rate on $ 200K for every $ 100K of salary afforded new American employees, who are maintained on the corporate payroll for 2 years, will move forward.

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