Exporting Jobs

Exporting Jobs

John Deere recently announced another operation is moving to Mexico. They explained it will keep some jobs here. These will be higher skilled jobs and integral to the company’s success. I get it, it is a business decision. Every company wants to keep costs down, but Congress does not seem to care about factory worker jobs (or other jobs). I have worked in a factory, it is tough work. The question we, and Congress, should be asking is what can we do to keep jobs here.

It is not only jobs.

With each job moved out of country, capital investment moves with it. Deere will create a new “line” to manufacture whatever was being made here (in Iowa). These lines create jobs for local vendors and manufacturers. These are lost opportunities for U.S. suppliers. In addition to creating this new line, foreign (in this case, it is Mexico) companies will not only staff the manufacturing facility, back office functions, and other ancillary functions, but foreign local companies will supply the maintenance, and reap the benefits of every dollar spent by those employees. It is called an economic multiplier. It is complicated and can be somewhat unbelievable in certain displays.

But it is real.

As has been noted in prior posts, the U.S. has been leaking jobs for decades. A couple of hundred here, several hundred there, a plant closing, partial relocation and other cost saving measures have been going on for a long time. It saves money. Labor is cheaper in Mexico (China, Vietnam, and a host of other countries) and as the infrastructure, technology, education system and other first world applications become ubiquitous, these places will produce more of the world’s goods. It was the same way when we were seeking our Independence from England. It is not a new revelation but has been going on since the dawn of time. Move to where resources are abundant and cheap.

It is a no brainer.

If anyone dares to mention a tariff, they are immediately labeled a xenophobe, or worse, an isolationist. This moniker is convenient since business (at least most businesses) do not want excessive tariffs since many of its goods are produced overseas. The consumer just wants cheap goods. Why spend $1,000 for a television when $500 will buy the same set. It has been explained to people, time and time again, moving production out of country may result in less expensive goods, but also results in job losses. People don’t care, they just want the cheap tv, but Congress should care. It should evaluate policy to assess tariffs on items produced overseas.

If companies’ want to close plants here and establish supply chains in different countries, that should be a business decision, but when Congress creates incentives for these actions, the people should be angry. Move production elsewhere, but with this move should come a penalty. I would argue a very large penalty, on a per item basis and from an overall tax basis. If tariffs were imposed on each item brought into the country that removed the labor differential (easier said than done!), it might encourage good old fashion competition. That is what capitalism is supposed to be about. Goods and services competing against each other to win over the consumer. In our current situation, it is fewer companies competing against each other. In some cases, they appear to be in cahoots. A small group of companies working together to take the consumers’ money. The barriers to entry requested by business, and enacted by Congress – and Executive Branch –  are working against consumers.

Congress needs to create policy to encourage competition.

Categorized as Policy

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