Monday, October 11, 2004

The Economy - Observations and comments

Does anyone else find it odd that businesses are finding a Communist government more favorable to capitalist endeavors than a Democratic Republic? Why are businesses leaving the USA for China?

Oddly, the labor alone makes up a small fraction of the overall cost of manufacturing. The bulk of the cost of manufacturing is in the overhead, which includes management, support, utilities, some taxes and countless expenses related to government regulation. Utilities have certain costs associated to regulation as well. So when a business moves to China, they weigh the difference in cost between the additional shipping for being overseas and the savings for taxes and regulation expenses - hidden or otherwise. They often find that they can add the additional capital to automate. Therefore, they save much more on labor than simply hiring cheap labor.

Skilled labor:
China has very little skilled labor. Most of the labor going to China and Mexico is unskilled - despite the claims of some pundits that the US is losing skilled jobs to these countries. We still have the skilled labor jobs. The issue is that public schools are not turning out many skilled laborers anymore. This is why more plants are requiring college degrees for skilled labor positions. We just have less skilled laborers anymore. Businesses find it cheaper to develop ways to automate skilled positions instead of sending potential workers to secondary schools or colleges. They then turn their skilled positions into un-skilled.

A Christian Perspective:
Why should we not hope for a strong financial future for the people of other countries as well as our own? We grudgingly give money to feed the poor of other countries and alternatively speak about them as though they would "steal" our jobs. Why not improve their economic situation by locating businesses in their countries? Their economic health translates into our own as we open up trade with them. Capitalism breeds governments willing to protect their workers (read: freedom). US businesses in other countries also breed governments willing to protect the countries of the business who hire their people. China is on its way, although it has far to go yet. Better jobs in Mexico will keep more people on their legal side of the border.

What to do:

First: Improve education. Don't simply throw money at it. Also, don't simply come up with more asinine testing. The school system is being destroyed from two fronts: 1) parents who challenge the schools to tolerate the children they've raised to be brats instead of backing their school's attempts to create a disciplined learning environment. 2) a bureaucratic machine that is lobbied by the teachers' unions to hold teacher's needs above, and sometimes at the expense of, student's needs. Kill the bureaucracy and support discipline in the schools above parent's unwillingness to teach their kids to obey the rules. This requires - at the very least - legislation protecting the schools from bad parents. This also begs for a turn-around in current philosophical trends that view kids as the arbiters of their own truth - irreproachable by the teachers. (Support homeschooling and you'll see these issues fade into obscurity. As it is, very many will continue to be publicly schooled, so the issue remains key.)

Second: Anticipate manufacturing trends. If automation is the way of the future, someone's got to build automated machines, program them, maintain them, etc. These are where the skilled jobs will be. Those who have the necessary skills will have the good manufacturing jobs. Everyone else will be material handlers. We need to widely publicize anticipated trends in manufacturing and actively recruit so that the needed jobs can be filled. We need to bridge the gap between hiring demands and various curricula.

Third: Create tax incentives and reduce regulation to tolerable levels - especially for smaller companies. It will be the small business owners who will lead the way in job creation. We also need to cultivate people willing to be new business owners. This takes us back full circle to the First thing we need to do: Improve Education.

Just some thoughts in this election season.


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