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Monday, March 21, 2016

The Jobs Aren't Coming Back to America

TRIGGER WARNING:  No, there won't be lots of jobs when you graduate from college.
For John, BLUF.  Nothing to see here; just move along.

Writing at the FiveThirtyEight Blog, Mr Ben Casselman tells us "Manufacturing Jobs Are Never Coming Back".

Here is how it starts out:

A plea to presidential candidates: Stop talking about bringing manufacturing jobs back from China.  In fact, talk a lot less about manufacturing, period.

It’s understandable that voters are angry about trade.  The U.S. has lost more than 4.5 million manufacturing jobs since NAFTA took effect in 1994. And as Eduardo Porter wrote this week, there’s mounting evidence that U.S. trade policy, particularly with China, has caused lasting harm to many American workers.  But rather than play to that anger, candidates ought to be talking about ways to ensure that the service sector can fill manufacturing’s former role as a provider of dependable, decent-paying jobs.

Here’s the problem: Whether or not those manufacturing jobs could have been saved, they aren’t coming back, at least not most of them. How do we know? Because in recent years, factories have been coming back, but the jobs haven’t.  Because of rising wages in China, the need for shorter supply chains and other factors, a small but growing group of companies are shifting production back to the U.S. But the factories they build here are heavily automated, employing a small fraction of the workers they would have a generation ago.

That is pretty grim news.  And I am not sure he is wrong about the fact that while industries may return they may now be more automated.

And, while Mr Casselman is touting Service Economy jobs, the average man or woman from the manufacturing sector is not necessarily prepared to take on a Service Economy job.  You have been assembling cars for twenty years and now you are moving into the Service economy.  What are you going to be doing?  Writing software.  Selling things on the phone?  Repairing computers?  It boggles the mind.  And it is why our U-6 unemployment is double our U-3 unemployment.  People are dropping out.  They are going from tax payers to users of taxes in the form of welfare.

Two other things Mr Casselman didn't deal with are taxes and trade deficit.

The fact is that our taxes on industry are (1) keeping profits overseas rather than being repatriated to these United States, and, (2) causing companies to move overseas to avoid taxes (e.g., to Ireland or Canada).  Given that taxes on corporations get largely flowed down to the consumer, eventually, keeping the US with one of the highest taxes on corporations in the West seems like a losing bet.  It doesn't make sense.

The second part, the trade deficit, is like an iceberg, waiting to sink us.  This is all about The Trade Balance.  Do we buy more goods from abroad than we sell abroad?  If we always have a negative trade balance, how is that made up?  It could be by creditor nations buying our national debt, until a large segment of our Federal Budget goes to paying the interest rate to other nations.  How long can that go on?

Here is a graphic showing our trade balance.

This says that Mr Trump and Senator Sanders are going to have a hard time bringing back jobs.  And it means that Ms Hillary Clinton doesn't have a clue.

Regards  —  Cliff


Anonymous said...

So your argument, as best as I can follow it, is that if there were no penalty for you not paying U.S. taxes but instead paying at the Cayman Island rate or some other tax shelter, and then you didn't pay taxes, that would be an indication that we need to reform the tax system? Isn't it an indication, more directly, that we need to penalize tax avoidance? Inversions should be illegal. These companies aren't "moving" abroad in any non-formalistic/on-paper sense. You seem to be missing the point.

I'll leave this here:

-left of lowell

C R Krieger said...

Hi Left

So Dr Krugman says:

There is, however, one big difference between corporate persons and the likes of you and me:  On current trends, we’re heading toward a world in which only the human people pay taxes.

I find that a strange way of stating the issue.  It is as though he really does believe that Corporations are People and come 15 April they (the Corporations) pay taxes.

All this time I thought that the taxes corporations pay are from monies collected from their customers.  Thus, when Ford Motor Company pays taxes it uses the money it has extracted from me and all the other customers.

Regarding corporate taxes, I am just looking for a practical solution to maximize tax revenues to the Federal Government.

In the mean time, I am not confused as to who ultimately pays the taxes—we the people.

Regards  —  Cliff