Long read, but good article. Thoughts?

Copyrighted article removed.

 

Wow someone who actually has an understanding of economics. Good luck in keeping this one open I can hear the mud slinging is about to begin...

 

Wage rates per unit of time are not the same as labor costs per unit of output. When workers are paid twice as much per hour and produce three times as much per hour, the labor costs per unit of output are lower. That is why high-wage countries have been exporting to low-wage countries for centuries.

That's the only part I disagree with. If this was true, the U.S. would still be the leader in steel mills. Most steel mills now are close to fully automated, using only one worker for every twenty they had before. Yet the countries with no wage laws can still be cheaper by employing tons of people, and shipping the steel halfway around the world. Also, just because a worker gets paid more per hour does not mean they produce more per hour. I'd say its the exact opposite. With unions, I'm sure the workers are in no hurry. But when you're making 10 cents an hour and its the only thing to keep you alive, I bet you work pretty hard. And we are losing manufacturing jobs, my county alone lost 3,000 last year.

 

Ok so it's copywrited...can we post a link please?

 

lowering taxes puts more money in my pocket.

 

That's the only part I disagree with. If this was true, the U.S. would still be the leader in steel mills. Most steel mills now are close to fully automated, using only one worker for every twenty they had before. Yet the countries with no wage laws can still be cheaper by employing tons of people, and shipping the steel halfway around the world. Also, just because a worker gets paid more per hour does not mean they produce more per hour.

Yes, but the automation comes at the price of investment in equipment.

So a 10 million dollar piece of equipment could cost 1 million a year in interest payments alone- the equivalent of probably 20 steel workers pay.

That is why despite productivity being better here, it still might be better for a company to pay 20 chinese to do the work without the newest equipment.

 

You've got to be kidding, mods?

Ah well.

Heres the original link but it may not be viewable since it may or may not be behind the our company firewall.

Give it a try

 

The link was gone before I saw it, but the posts here are concentrating on production labor (still a cost per unit) versus automation. Cost of goods sold; labor, materials, marketing and freight drive gross profit margins, which drive operating costs.

If the facility is produced with lower cost labor, the management cost is lower, maintenance is lower and government compliance cost is lower, then target gross profit margins are lower.

You could then take the same piece of equipment to eliminate production labor here and in China for the same product and the Chinese delivered product cost would still be lower.

We're back to our higher standard of living requirements from bottom to top putting us in a non-competitive trade position. Until that changes, we aren't going to be able to compete with any country for manufacturing expansion, and that's what creates jobs.

 

Not, I'm not kidding. Get permission from the copyright owner before posting copyrighted articles -- use links instead. Please see the guidelines agreed to when registering.

 

So a 10 million dollar piece of equipment could cost 1 million a year in interest payments alone- the equivalent of probably 20 steel workers pay.

That is why despite productivity being better here, it still might be better for a company to pay 20 chinese to do the work without the newest equipment.


The other thing that makes a 20 million dollar piece of equipment cheaper is that you don't have to pay for a defined benefit pension plan for 20-30 years after it quits working. The payout for that pension would actually exceed the wages paid while the person was an employee. That's part of what is hurting the Big three so much right now. The importers that assemble vehicles here don't have that massive liability to pay from 100 years of previous retired employees.

For that matter you don't have to pay the 20 Chinese guys a pension either.

 

Unless you are one of the very rich, that is probably not true. Because of tax cuts, the states, which cannot print money or operate on credit withour restrictions, are raising taxes, borrowing money, cutting spending, and engaging in tactics such as speeding up collections and tapping "rainy day" funds. In my case, tax cuts have been more than offset by increased taxes on my property from county and local districts. Since a large portion of the current record deficit is directly related to the tax cuts, it becomes a "pay me now or pay me later" proposition that may be picking your pocket.

 

This also holds true for commercial endeavors. Out of control current federal deficit spending has been accompanied by parallel reduced revenue sharing with the states to avoid federal tax increases. All that does is shift the tax load to state and muni levels where no unlimited credit card is available.

Those state level tax increases are shared by all employers through ownership or renting of facilities (unless you're a foreign manufacturuer given a free ride to get the jobs), adding to operating costs which require larger gross profit margins to sustain net profit levels. That makes our products even more expensive.

When interest rates go up on the federal debt from current spending funded by deficits it'll be more like armed robbery than pickpockets.

An interesting number is the $200 billion of social security collections that go into the general fund this year. We're using tax cuts to stimulate a consumer driven economy, which means circulating the same dollars taking a chunk out on each pass, when in four years the baby boomers will start collecting social security. This is truly financial madness that would land any corporate head in the slammer. Tax cuts = political rhetoric for slide now and pay twice later.

 

If you give people back their money, they are more willing to spend it and create sales tax revenue.

People, even JFK (not John F. Kerry) was wise enough to think that out. Give him credit.

Anyway, point being, if you know you are going to get raped on taxes--school taxes in my district are about $2000/year and have gone up FOUR years straight(!), you are going to be saving up and NOT putting that money into circulation. Obviously, it's better not to bend over to lose your money.

Everyone loves to bash taxcuts, but no one ever bother to realize how the deficits got this way! If those ESTIMATED surpluses weren't so generous, spending might not have gone through the roof. Dubya had to spend because Clinton let our military and intelligence go to the pot. No secret, but you have to bite the bullet sometimes. As for the lousy overgrowth of our equally lousy social programs that have never worked.......

As for manufacturing jobs going away for good: Look, they are disappearing EVERYWHERE on Earth. Even China. People produce more in part because of better manufacturing techniques. When I had my restaurant, my manager and I figured out how two other workers (including us 2) could do the same job a 7-9 people would do before I took the biz over. It happens, move on, train in another field, get with it.

Stop crying about job losses. Even the Dept. of Labor understimated the number of people working for themselves or going to work for other "independent contractors". No one dim candidate or news network will tell you how many jobs have been created since the alleged loss of "2 million jobs" that everyone hears about.

My stepdad might moan about welding jobs from his Boilermaker union being so sporadic, but no one told him to be only a welder his whole life. He's gone out of union now to find work!

I've gone from restaurant owner, to inventory, to delivery driving, to offshore hand (coming soon) since last Labor Day. People adjust IF they want to.

 

Unfortunately, most do not. When you look at how closed people's minds are in regard to current social issues, their lack of interest in understanding fiscal responsibility and demands that the government do something about creating jobs, few even have a clue as to what tax cuts mean in a period of rapidly declining tax revenues, record deficit spending and government expansion with dangerous trade imbalances due to a reduced industrial base. And few are capable of adjustment.

Bush went to war with basically the same military he inherited from Clinton, reduced through Pentagon concentration on technology. Bush, Cheney and Rummy have repeatedly stated no military expansion is necessary beyond requirements for Iraq. The new spending is for redundant conventional military systems in a period of terrorist threat.

Our feet on the ground intelligence has gone to pot because both Clinton (during his presidency) and Bush rely on the CIA's leader, a career bureaucrat who is easy to control for political purposes and has turned that agency into just another CYA federal bureaucracy. The CIA post in Baghdad is far larger than the Saigon CIA post during the Vietnam era and accomplishes nothing. It experiences constant expansion from staff recruited and molded to fit the civil service mentality of mediocre management.

 

I disagree. I spent the first 5 years of my professional career (1978-1983) in and out of US steel mills and they were amongst the most inefficient use of manpower that I had ever seen. In addition, they received huge chunks of vacation time. IIRC, every 5 year anniversary, a worker was given 17 years of vacation. Imagine that, 17 weeks. I've seen US steel mills get bled complying with EPA emission requirements and not having the cash to modernize in any way OTHER than emissions.
Now, I see the US auto industry bleeding any semblance of profit from the few remaining (jointly-owned with foreigners) US steel producers.
Steel production in the US is way behind on modernization as a result of all of the above and it isn't getting any better. The only money coming into US steel production is from foreigners buying up former US producers.

You live in a particularly hard-hit area. Just about every US Steel mill in your area is gone now and I'm not sure how much of the R&D Center in Monroeville,Pa is still around.