In a previous article, I wrote Dems need to focus on creating high paying jobs in order to build a long-term governing majority. There were several comments asking how to accomplish this. This is a very logical question and deserves an answer. I propose a two-pronged approach. The first involves prevention of outsourcing and the second is to focus on industries that have strong long-term potential to create high-paying jobs.
First, why do we need to create jobs? The unemployment rate is 5%. The economy is rocking!!!! Well, that’s not entirely true. According to the Bureau of Economic Analysis, the US has lost 3.4 million high-paying jobs between 2000-2003 (the last year they have statistics). Comprising that total are: 100,000 Information and data processing jobs, 200,000 Broadcast and telecommunications jobs, 205,000 Computer System Designer jobs, 2.8 million manufacturing jobs and 121 publishing jobs which include software. The jobs we are creating are lower-paying jobs, specifically in health care and social assistance (+1,279,000 ), government (+791,000) and food service and drinking establishment jobs (+465,000).
As a result, real wages aren’t increasing. According to the Bureau of Labor Statistics, the average earnings increase from 2000-2004 was 3.86%, 3.22%, 3.12%, 1.71% and 2.39% respectively. However wages have to be compared to inflation to determine the real rate of wage growth. For the same years, annual inflation was 3.4%, 2.8%, 1.6%, 2.3% and 2.7% respectively. When inflation is subtracted from wages, overall wage growth becomes .46%, .42%, 1.52%, -.59% and-.31% respectively for 2000-2004.
In other words, good-paying jobs that can support a family are not being generated in the current economy.
Here’s how not to solve the problem.
First, free trade is here to stay. There is an economic theory called competitive advantage which essentially states that because some countries perform a certain job better than other countries, the world economy should be structured to permit this to happen. The reality is this makes sense at the global level. Some countries do some things better than others; let them do it so all can reap the benefits. Can trade agreements use fine-tuning? Sure they can. But don’t destroy them because in the long run that is not the right approach.
Secondly, It’s easy for the left to fall into the “all corporations are inherently evil” types of arguments when discussing outsourcing. Don’t. If you’re truly part of the “reality based community”, you have to accept that corporations are an important part of the world. Like anything, they are good and bad. On the good side, they pool physical, investment and intellectual capital to produce something we need or want. Personally, I like my laptop, CDs, stereo and truck. I couldn’t build these things on my own and I don’t want to. On the bad side, they can be treacherous, selfish centers of power that corrupt all involved. But painting them with broad socialist or communist language will only alienate a majority of voters.
Here’s how to deal with the problem.
Outsourcing occurs when a company moves some or all of its operations to another country. There are numerous reasons why a company would do this, but a primary reason is the company does not have to pay employees in another country nearly as much as they pay US employees.
There is no way to completely eliminate outsourcing. As the world becomes economically and technologically smaller, it will probably increase. Simply put, this is the way it is and will continue to be. What the US should do is find and implement policies that make outsourcing less advantageous while not being so draconian to prevent beneficial domestic economic development from occurring.
Here are some ideas. These are basic ideas that need fine-tuning (which I encourage you to do in the comments). Also, add your own.
First, start talking about the issue. For too long outsourcing has flown below the radar screen. Talk and write, talk and write. (Thanks to Lou Dobbs for talking about this for the last few years).
The AFL-CIO has a great proposal. There are numerous companies that outsource American jobs that also get large government contracts. Take the contracts away. You don’t want to play in our sandbox? Fine. We won’t give you any money. There will probably have to be gradations based on number of domestic employees etc…, but you get the basic idea. (Thanks to RenaRF for this link)
The foreign tax code (26 USC section 900) allows US companies who pay foreign taxes on income earned outside the US to deduct those foreign taxes from domestic taxes. (The rules are a bit more complicated, but you get the idea). I would add a provision along the following lines: If said company outsources US jobs to a country, a certain percentage of that deduction will go away. I realize this will be difficult to implement, but there has to be a way to make this work.
Create a tax break to allow for the wage differential. Suppose country A has wages that are 50% of US wages and company X is considering moving some of its jobs to country A. Give Company X a tax break of say half the difference between the wage differential to keep the jobs in the US. This will increase Company X’s tax deductions related to US taxes.
Deal with health care expenses. A majority of our trading partners have health care expenses under control. Therefore, health care expenses are not part of their labor costs. By not having health care expenses under control in the US, we are at a serious competitive disadvantage. For example, suppose Company X is thinking about Country X that has national health insurance. If company X moves to country A, Company X does not have to include health care expenses in its cost projections for country A. Compare this to the US, where Company X will have to include health care in their cost projections. By dealing with health care, the US will make its labor cheaper and more competitive versus our international competitors.
In addition to slowing outsourcing’s pace, it is important to develop industries that are somewhat immune from outsourcing. While it is impossible to eliminate the outsourcing risk, it is possible to narrow the competition with other countries so companies in a specific industry will have fewer countries to choose from when making location decisions.
Here are some industries the US should develop at all costs: Alternate energy, stem-cell research and applications, US infrastructure (such as a new national power grid), nanotechnology, and aerospace. This list is by no means exhaustive; I am sure that readers have plenty of their own ideas which they should present in the comments section. Why these industries? Because they are the industries of tomorrow, not today. While there are other countries aggressively building infrastructure to appeal to companies in some of these areas, the US can compete with these countries to get some of the pie.
To develop these industries, we need to develop local alliances between government, financial and industry to create jobs in our communities. This should occur at the local level because the national party has no interest in creating jobs. Screw them. Dems should focus on local political races to advance this agenda – city councils, country commissioners and the like.
Here is an example. I live in Houston, Texas. The Houston medical center is one of the leading medical facilities in the US. Let’s see…leading medical center plus stem cell research and applications = local jobs. I think I made a connection. Try it with your area. Remember how I mentioned we should avoid hard-left anti-corporate rhetoric? This is why. Local governments have to work with businesses to develop strategic areas of job creation. Imagine if Democrats did this all over the country in their respective locations, concentrating on developing jobs in their cities.
The reality is the phrase “think globally, act locally” should be our motto. We know the attributes of each of our respective localities. This knowledge is key. It’s time to put it to use.
Feel free to add you own ideas below.