Offshore employment - things to think about

[Texas Transplant]

We had a very interesting discussion going in the last couple of days, and comments on insider trading/offshore employment prompted me to put this up.



There is a tremendous amount of discussion within our country regarding the general employment situation within our borders. When will the job market turn? We've lost thousands of jobs overseas - when will they come back? How can we stop our companies/executives from outsourcing jobs/work in other countries.



When a major employer, sees declining market share for their products, and can tie them (through research and analysis), to offshore competition - what are they supposed to do.



Labor in this country (let's use textiles as an example), is at a minimum running at somewhere between $5-6.00 an hour for a minimum wage job. Textile workers, that receive benefits and wages, probably get more than that. I'm not sure how much, but for the purposes of this discussion, let's say $10.00-12.00 an hour.



If they send the work off shore, they have additional shipping costs, but they enjoy less in labor and overhead. Let's say that the labor portion is $2.00 hour (probably less than that), and that the added shipping/handling is factored in at $4.00 an hour. We now have an embalance of approximately $6.00 an hour.



The textile manufacturer here, had 350 employees. That equates to a savings of $4,368,000.00 per year in basic costs. Those jobs are never going to come back. Our labor content cost, for those type jobs is simply too high. Will our labor force work for half of what they made before (of course not - for both realistic and legal reasons).



The other contributing factor here, is our own spending habits. How many of us shop at WalMart, on a regular basis? Regular basis means once or twice a month? Why do we shop there? It's generally not because of the higher quality goods that we buy, but rather because they have decent stuff at cheaper prices.



What has happend is that the American buyer, has demanded goods at a lower price. But of course, we want items at a lower price at the same time that we want salaries/jobs that are at the other end of the scale.



In large part, we (the buyers) have forced many of our companies to send items offshore. If they don't, they will be forced out of business, for we (the American buying public), won't buy it anymore.



It's a terrible problem, that 'we' have brought upon ourselves. I don't see this as a 'political problem', as much as I see this as a reality problem. Sure, we have done some dumb things in the international marketplace, and some of our trade practices really need to be looked at. But as long as Mom and Pop American, keep demanding lower prices - without regard to the effects of our demands, this problem will continue.



Tex

 

[Scott Hammer TOXIC]

I think the free enterprize system causes the competition for lower prices not the consumer. The consumer will go to whatever retailer offers the lowest price without regard to how that price was achieved. If the manufacturers can shave labor costs by offshore, sweat shop, child labor, no benefit, employers then they get market share. It's human nature to go where you will get the best price. I don't think anyone is "demanding" lower prices. If that were so, I wouldn't be paying what I am for gasoline right now. Corporate responsibilty is to blame. Knock Wal-Mart if you will but I know they do not buy or patronize companies that use child labor, etc., or at least that is their claim. Now employing illegals is another story!!LOL My vote goes to corporate greed as the cause not the consumer.



TOXIC

 

[Texas Transplant]

In a free enterprise system, the consumer is the driving force.



All you have to do to get the price of gasoline down, is to stop buying it at $1.76 a gallon. Turn the demand at the spigot off for awhile, and see what happens.



Right now, the demand (and the consumer), is still comfortable with the price. Comfortable means - still paying for it.



I am not as comfortable, therefore, for the first time in my life I have added public transportation to my weekly commute. Though I much prefer to drive my own car. Get up earlier, go to the park and ride, takes 20 minutes longer to get in. Have to wait for a pre-described time to leave at the end of the day.



Tex

 

[Bill McElroy]

What the Gov't needs to do is TAX the bejeebers out of the Corporations on the money they're saving/making by all the outsourcing!! Make it a little more "expensive" to outsource and it won't happen as often IMHO!!

 

[Michael Snow]

I'm afraid it comes down to trade imbalances. We bring in far more from other countries than we send to them. If we'd stop the huge trade deficits, that'd help. If we'd stop financing the war in Israel, that'd help too.



We've made ourselves dependant upon gasoline. We continue to do so. Let's take 2-stroke outboards. The common argument against DFI motors is, that they are $1800 more than the EFI counterpart. Sure it uses less fuel, but $1800 buys a LOT of fuel. That's the argument and the mentality that we're up against. Heck, even the 2-stroke vs 4-stroke debate argues less performance at higher cost. BUT, you're not burning 2-stroke oil, which I believe comes from the same crude oil that gas does.



I'm FAR from a tree-hugger, but until our spending habits change, the Middle-East owns us on gas. We refuse to tap our own reserves.



Illegal (and unfortunately legal) immigrants also pose a big job market problems for us. US companies are bringing in programmers from India, etc. They're cheaper than the US counterparts. And, if they do it for (I think 5 years), they get citizenship.



I LIKE my standard of living and don't want to see it change. How long before my job goes elsewhere?

 

[Scott Hammer TOXIC]

TT, you give the consumer too much credit and so do the economists. We have an entire division assigned to research and statistics on economic factors and I can tell you, consumers are sheep. We have very, very, few educated consumers. Most consider them the driving force because in the free enterprise system they make the money and they spend the money. Very little attention is given to "Why" and "Where" they spend when in fact, that is where the real power is.



People won't boycot gasoline because you could never round enough of the issue educated general public up to make a difference. Come to DC where we have Rail, Subway, Bus, Carpool lanes, organized Vanpools, shuttles, HOV lanes with their own exits, etc. And the roads are a mess....Why? Because alternative transportation is more costly in time and money. I can't get anywhere more reliably, faster or cheaper. As a matter of fact it is more expensive and slower using mass transit. Most consumers won't buy into that. Sheesh, I'm lookin at a diesel for my new truck....$5,000 add on (to get better mileage and save fuel)!!



TOXIC

 

[Texas Transplant]

Tox,



I will tend to agree with you. Most consumers, just buy what they have in front of them, and don't think through the process/consequences - until they get into a money scrape of enough proportions to think/look at alternatives.



A good example is that of computers. The consumer is the one that is primarily responsible for the downward trend in computer prices. Not the manufacturers. The general consumer would not pay $2-3,000.00 for a home computer. But they will buy them by the truckload, under $1,000.00, in general.



I still need my car, because I have to get to the Park N Ride. However, it really came down to $$$ for me. I work in a downtown environment, so I have to pay to park. I'm not willing to park 8-10 blocks away, and then walk to work from there. I parked within 3 blocks of my building. Costs were originally $120/month, then went to $135/month. If I add in gasoline (1 1/4 tanks a week - about $35.00), I'm up to around $250.00 a month. This obviously doesn't include upkeep and maintenance on additional mileage.



The consumer, by shopping more at Wendy's, forced many others (including McDonald's), to lower the cost of many items. Now even McD's has a dollar menu. While it was Wendy's that tried it out, it was the consumer that drove the business.



I now drive approximately 12 miles a day, to get back and forth to the park n ride. About a tank a month. I pay $58.00 a month for my bus fare, riding a nice 'touring coach' type of bus. It would cost more, but my company subsidizes my purchase. I figure that I'm saving a good deal of money. It's obviously not available to everyone, or practical for everyone.





Tex

 

[Bud Martz]

Oh what a topic for discussion. I think that the consumer is bound to the amount of money he or she makes as it relates to the current cost of living. The cost of living has increase exponentially over the last 20 years, but continues to outpace the raises or money we receive for our jobs. I make a decent living since I am in the IT market, but the blue collar folks are still hovering in the mid-high 20's per year. Ever try and buy a house, car, have kids, pay taxes, etc.. on money that is less than needed. The reason that jobs are leaving is not because we don't have the people to fill them, it is because the people cannot afford to work them and still live the American dream. You need a job that pays a decent wage to just get by these days and that normally includes a two income household. Now you have all sorts of additional expenses associated with a two income family. You pay more taxes, childcare, transportation, etc. The consumer will continue to buy goods at the lowest price, because that is what they can afford and still have money left over for their families. Many are still out of work from the tech boom/bust. These people have either cross trained into another career or simply taken a lower paying job until something else comes along. The reason you see a big issue forming with off shore labor is that companies lost so much money, they are trying to get it back with trimming the budget anyway they can. The execs are still getting paid, but the lower end folks are the ones that suffer. Gas is another issue. The gas prices are not affected as much by the Middle East as people might think. I looked it up and about 28% of our oil is middle eastern, the rest is from other countries. Venizuela comes to mind, they are having civil issues that are putting a kink in the lines, but that is only one. The oil companies are in the same boat, to make their inflated profit margins, they increase the price of gas until we get upset and then it goes back down for a few months. No boycott or other idea would ever work in this country, too much corporate demands, airlines, buses, etc. The average driver of a large SUV like me is only part of the puzzle. This problem will only increase until the bottom falls out and people can't afford to buy anything.



Bud

 

[Michael Lyons]

I think the Corp greed thing is a major influence. The ford managers who got fired have millions of dollars for compensation???? If I got fired income = $0.00, American Airlines VP proudly gave up his salary for one year explaining how this would help the airline after 9/11, Check the bonuses he was provided and you find he made 3 million more than his salary per year, great gesture, proof is how very hollow that gesture really was. (happenned in the last 2 years, reported on FOX News)



Michael.

 

[Texas Transplant]

Personally, I have no problem with a top Executive getting their money, based upon performance. That is, if they in fact perform. Public companies are owned by the public. People invest in those companies to make money, not to help provide a public service.



If I invest in Ford, then I expect them to help me make money on my investment. If upper management negotiates a contract (most upper management operate on contracts, they are not really employees), that pays them bonuses and separation monies, more power to them.



I realize that my immediate prior statement will not be shared by all (maybe not by many), but it's what I believe.



Each one of us, would love to be able to negotiate a similar deal. However, most of us can't. Most separation deals are constructed so that top management will be less likely to listen to other offers. In exchange for their 'loyalty' and staying with a company, they ask for some assurances that if they are asked to leave, they will be compensated. It's an agreement between both parties.



Tex

 

[Rich Kulakowski]

Everything is sold for what the market will bear. I sell my labor to an employer, it choses to purchase that labor, and also fill a "job" that it owns, for as much as the employer and I agree it is worth. In essence, I buy the job in return for the pay. The employer does not have to buy me at $50 if the labor can be accomplished by someone else for $40. If the employer decides it can produce the product for less it will do so. If there is no market for a product at a specific price, the manufacturer will not be able to sell, just as I can probably not sell myself for $500/hr. No one would pay. We are all prostitutes.

The $50,000 boat will only sell so many because not everyone attaches the same value to the car. It is not worth that much to the other party in the transaction. Using $50/hr, it is not worth 1,000 hours of my life to be able to fish from it. I set how much I am willing to pay/work for every transaction I make and having to work the 200 hours to buy my tin boat was enough. I considered that to be a fair trade. I did not buy a $20,000 one because I wanted to use the extra 200 hours enjoying the one I did purchased.

Cheap goods are available from WalMart because that is what the market will bear. We won't go to another store and pay $20 for one brand of jeans when we can go to WalMart and get something that we value equally for $15.

So, corporations, act just like you buying jeans. If it can get what is needed to produce a product somewhere else down the street for cheaper it will. If it could buy labor in the US for $2 and not have all the other costs that our regulations add, they will.

Yes, there are cases where corporate greed comes to play. That $50,000 boat is one indication of it. By controlling production of that boat, they force it to cost more. Why are some boats more expensive? You perceive that it is worth more of your labor because of what? Does the expensive, pretty metal flake catch more fish? They all are made of the same 500 lbs of fiberglass and goop, 10 yds of carpet and a 5 lbs hotfoot control.



Sorry to ramble. The link below is a guy that explains some of this better than I can. I suggest the following of his: "Offshoring" and "Minimum Wages". Skim through some of the others too.



Rich.
http://angry-economist.russnelson.com/archive.html

 

[David Butler]

Wow this is heavy stuff.

Dave