Here’s Really the Biggest Problem in the American Economy – What nobody wants to say Part #2

A continuation of our earlier discussion in response to yet another attack on a free market economy.  In the first discussion, Here’s Really The Biggest Problem in the American Economy – What Nobody Wants to Say Part #1 we tackled the notion of redistribution.  In today’s post we will continue by discussing the impacts of globalization.

“One reason corporations are so profitable is that they don’t employ as many Americans as they used to”
-Henry Blodget, Business Insider

global map test

global map test (Photo credit: aleutia)

Demographics are changing.

I would estimate close to 25% of the people on my floor at work are “immigrants” representing almost every continent in the world.  Some might be first generation; many are work visa or green card holders.  A decade ago, there was a growing concern that all the science and engineering jobs were going to recent graduates from other countries who were getting degrees in sciences and math.  Well, here is a wakeup call – it is not just the science and engineering jobs anymore.  Or medical jobs.  My colleagues are all in “business administration” – marketing, accounting, finance, procurement, supply chain, and sales. Most of these positions are entry level; new hires.

I applaud these colleagues; it is inspiring actually and makes for a more robust, interesting workplace.  However, let me point out that all these are jobs that did not go overseas.  And they aren’t getting “underpaid” either.  These are all jobs that could be had here by any of us.  The inconvenient truth behind this is that the demographics of employment are changing.  High wages or job growth for unskilled labor is a thing of the past.  The global workplace is also a knowledge based workplace.  We need to stop blaming the laborer snapping a widget together in some overseas sweatshop for unemployment here.  Let’s stop spending time railing against the terrible white collar employees and managers, or college kids that earn technical, science, math or other challenging degrees and encourage children to choose a path of knowledge.  Stop the demonization of professional positions.  Slamming on “college kids” and education comes across as sour grapes – and the impact is more than just you.  The children are listening.

“Globalization” has opened up a vast pool of billions of workers who work for much less than Americans.  This, in turn, has resulted in companies shifting formerly middle-wage-paying jobs overseas.

-Henry Blodget, Business Insider

While more products are being made overseas and certainly there are jobs that have gone overseas as well, let be fair – globalization has brought much production and jobs here to the US as well.  Companies like Toyota, BASF, Nestle, BAE, Bayer and many others all have operations here in the US employing our citizens.  Let’s not try to blame globalization for the loss of “good” paying jobs.   And if we continue to vote for the candidate who simply tells us what we want to hear, we will still be sitting on our collective sofas lamenting the “loss” of employment and opportunities while the good jobs both here and overseas are populated by…well, everyone else.  Some of our politicians are trying to create an economy of a select few political overlords who know what is best for 300+ million dependent serfs with a victim mentality.

In the coming days I will continue to discuss:

  • Globalization
  • Technology
  • Stagnant wages
  • Business Profits

Let me know your thoughts.

The original post from Henry Blodgett of the Business Insider can be found by clicking here

Who are the Job Creators?

I recently read what I must admit was a well written opinion on who creates job in our economy – who are the real job creators. The writing style itself was clear and easy to follow. The post did a surprisingly fine job at avoiding insults and outright attacks on a person. The core message, however, was that businesses don’t create jobs, the consumers do. A little bit of the chicken and egg argument, but well expressed, wrong though it might be. The writer opined the business owners unfortunately had the luxury of sulking around, hoarding their money, and waiting for better times. Our writer goes on to express that if the writer and the writer’s followers had some extra incremental income, a couple hundred or thousand dollars a month, “they” would pump that back into the economy on dinners, or movies, glasses or shoes for their kids, not speculating and investing in derivatives, which is to be assumed what all the “job creators” do with money when it falls into their hands. So instead, they would use this extra money to create extra jobs by, well, spending it.

Now it isn’t perfectly clear where this windfall would come from, but with a reference stating that the author and residents of this particular neighborhood probably haven’t moved any of their excess wealth into offshore tax shelter, we can guess the money would be transferred from the current owners to a new breed of job creating consumers. After paying the sales and local property taxes and income tax, the occupants are just short on “excess wealth”. Evidently, there would be more if they didn’t have to pay these onerous taxes.

One of the points made is allegedly by a business owner who when asked what was important to keep his small business afloat responded without hesitation, “Customer Demand.” The author inquired about the impact of tax breaks, and small business owner rightly responded that tax breaks don’t encourage hiring of more people or expansion of business. The point was followed by a disdainful comment regarding the “sanctity of small business and job creation”, leaving little question where the author’s point of view on the topic is.

I have to pause for a moment here and comment. I have a number of friends and colleagues that are current or former owners of small businesses. My spouse and I have also been owners of small businesses and are well aware of what it takes to own, operate or keep a small business afloat. The small business owners I know are interested in fewer paperwork and administrative burdens. Simpler codes. A less aggressive anti-business stance by the government. And yes, taxes are an issue. If you have run a business, you are well aware of the dizzying array of taxes and programs that you must comply with. And just because a tax credit isn’t what drives hiring and expansion, a tax increase can certainly suppress it by reducing cash flow and adding administrative burden.

I don’t understand why there appears to be so many people right now who believe that small businesses don’t create anything. Or why small business owners didn’t build their business. Job creation comes from government support? And now it comes from the consumers if we would only give them a little more of the “excess money” people have lying around. It seems job creation comes from everyone but the business owners. The perception is that everyone has handed everything to the small business owners, they just happened to be the poor souls running the businesses. If they were but a little more intelligent, they could work for the government and really create jobs. Or better, get an income redistribution and create jobs. On a blog response the other day I actually read a comment where a reader stated that they couldn’t help it if a struggling business owner is “too stupid” to just apply for an SBA loan. In this particular commenter’s opinion, everyone who applies gets a loan! The fact of the matter is large businesses almost always had to start as a smaller business. And small businesses are run by people who put everything on line to get ideas going. They make sacrifices to follow those dreams, often exceptionally long hours, risking their savings, giving up many of the things everyone takes for granted, sometimes going through long stretches of time without a paycheck. Only to face the derisive comments that prevail today – they didn’t build it. They don’t create jobs. They make too much money. They don’t pay enough in taxes. This is simple. People go into business to make money, and they start a business in hopes that the risk and effort pays off for them. There also must be a demand for the product or service. If not, the business will not exist. This is in no way supportive of a position that businesses do not create jobs, nor is it supportive of position that we should tax businesses further to redistribute wealth.

Who are the job creators? Do you believe that it lies in the hands of consumers? Do you believe that if we simply handed a subset of the population couple hundred dollars a month more, that would drive robust economic growth?

Don’t forget to click on comment below and let us know your thoughts.