Some brilliant economical mind, please, please, PLEASE enlighten me

[theclemsonkid]

*** First of all, I don't claim to be an expert in international policy, economics, tax codes, or anything else of the like; so what I am about to say comes from a limited knowledge of the situation***
With that being said, how in the heck are we ever going to dig our way out of this hole we're in? I suppose I see it like this:
American company has two choices in manufacturing. One, you can stay in the states, and pay a minimum of $7.65 an hour (plus all applicable payroll taxes) and sell your product for a higher price than your competition to cover your costs. Secondly, you can build a plant in China, pay your workers $3 American dollars a DAY, for the same work, and sell much more of your product at a competitive price.
Let's say you have 1,000 employees. Using that math from above, you'd spend $15,912,000 in labor and $3,182.400 in payroll taxes to set up shop in the US. So a little less than 20 million dollars.
Now in China, let's say you have 1,000 employees. You'd spend about $780,000 in labor, and let's say another $5 million to build your plant. So in China, you're looking at a little less than 6 million dollars.
If you sell the same amount of product, you can obviously do the math.
Everyone wants to talk about unions/taxes/welfare/medicare/social security etc, but doesn't that seem to be small potatoes when compared the to 800 lb gorilla in the room that is cheap foreign labor?
There are only so many service and retail jobs out there, and without at least some form of manufacturing, is there really any hope to turn around this economy?

 

[snakeblitz33]

Americans, regardless of how much money they make, have to learn how to make their dollar stretch, rather then living on credit and live within their means. I'm completely debt free and proud of it.
That being said - we are a free market economy - and when it costs less to produce a product oversees, to make a substantial gain in profit, then that is what we are going to do, regardless if it is the ethical/moral thing to do.

 

[mantisman51]

I agree Clemson. The key to returning our economy is in structuring corporate taxes that it rewards the companies that produce here and punishes those who produce elsewhere. Now let's here the Limbaugh Institute for Advanced Conservative Studies side.

 

[reefraff]

If they ever figure out a way to economically overnight cup cakes you're screwed Clemson
Taxes, unions and regulations are all part of the reason. High labor costs are part of the reason jobs are sent overseas. With the industrialization of China they are going to start losing their labor cost advantage. Their workers are asking for more than half a rat and a bowl of rice so the labor cost is rising.
Another is government regulations. If you listen to many business owners it isn't so much the standards they are asked to meet, it's the absurd hoops they have to jump through to meet them.
I believe 0bama should unleash natural resources production as a way to jump start the economy. It's one thing that can't be outsourced. End the war of coal. Why throw money into unreliable wind or solar which is inefficient when coal works. If they put the R&D money and subsidies they've thrown at "green power" towards improving the emissions of coal plants our air would be cleaner on power would be cheaper.

 

[snakeblitz33]

But if you ditch government regulations, there would be flame throwers in babydolls. Hehehehehe
I think that if you give tax breaks to major companies that produce in the US and then TAX all imports (that are non-essential, etc, etc,) that are produced by American companies oversees, ... that will increase the price on all foreign made products. There would then be a demand for cheaper domestic products and companies would come back to America. It sounds good on paper, but doesn't make a bit of sense in real life.
Heck, I'm sorry but I'm out of this conversation, lol. I only went up to Econ 202 in college. haha

 

[reefraff]

Quote:
Originally Posted by SnakeBlitz33 http:///t/387752/some-brilliant-economical-mind-please-please-please-enlighten-me#post_3414117
But if you ditch government regulations, there would be flame throwers in babydolls. Hehehehehe
I think that if you give tax breaks to major companies that produce in the US and then TAX all imports (that are non-essential, etc, etc,) that are produced by American companies oversees, ... that will increase the price on all foreign made products. There would then be a demand for cheaper domestic products and companies would come back to America. It sounds good on paper, but doesn't make a bit of sense in real life.
Heck, I'm sorry but I'm out of this conversation, lol. I only went up to Econ 202 in college. haha
I didn't take economy in college. However I do know we would have to ditch all the free trade agreements to be able to tax foreign goods AGAIN.

 

[ironeagle2006]

This would be a better Idea but a bill into law that Allows us to Mirror Image the other Countries Trade Polices. They tax our stuff that comes into their nation we can tax the stuff we are importing. Called trade Recripracty and it is Legal as SIN.

 

[reefraff]

One serious problem we have is China. They own so much of our debt we can't do something that is obviously directed at them, They could start unloading their US debt and really screw us up.

 

[bionicarm]

I've been working with a company on their network security for about a year now. They manufacture wiring harness for vehicles (Ford, GM, Kenworth, Artic Cat, etc.) They began their opeartions 20 years ago with all their plants in the US. They manufacture every component of the harness - make their own wire, plastic molded connectors, and metal pins. About 10 years ago, they bevag moving their manufacturing operations to Mexico, mainly due to labor costs. As of today, they have only one plant in Michigan making pins, and everything else has moved to Mexico, including their Customer Service Dept, Accounting, and Finance Depts. They have these big molding injection machines that make all those plastic connectors that connect the harness to the various parts in the vehicle. In Michigan, they were paying employees $70K/year to run these machines. They now pay a person in Mexico to do the exact same job $22K/year. The line workers that build the wiring harnesses get $8/day. Computer technicians that I associate with make $23K/year. Their IT Dept. in the US that supports the main infrastructure has wages averaging $80K/year. Their import tariffs for their materials that do come in from the US are around 10%. Their export tariffs for their finished goods from both Mexico and US Customs is about 25%. It costs them to make a complete wiring harness for an F-150 about $200, parts and labor. After paying import/export taxes, Custom fees, etc., the cost is around $350. They sell that harness to Ford for around $2,000. If they had to move their manufacturing operations back to the US, that harness would easily cost them $700 to produce, even without the tariffs and other import/export fees they pay getting the materials and finished goods in/out of Mexico.

 

[reefraff]

Ford builds a lot more than harnesses in Mexico. Fender builds a lot of Guitars there and I believe Maytag appliances are built there. If this keeps up it will be Mexico building a wall.

 

[mantisman51]

I seriously doubt that. There is a component factory for Ford and GM cars in Agua Prieta just across the border from Douglas, Az, it's top jobs pay $3.50 A DAY in U.S. currency. And it's not like it was 20 years ago where it was so much cheaper to live there than here. A $10 pair of shoes here is 110 pesos there. If a 3 bedroom house in Douglas costs $800, it is 8800 pesos there. The costs are almost identical and the pay microscopic.

 

[stdreb27]

Be careful asking questions like that, you'll start voting republican if you honestly answer that question...

 

[stdreb27]

Here are some things to consider.
Until about 4 years ago,we had 4-5 % unemployment. Level's maintained since the 90's.
During the industrial revolution, average saleries for industrial workers in today's numbers were around 10k a year.
We still manufacture more dollar wise than we did during the industrial revolution. Maybe not as many marbles...
Think about it, jobs outsourced , aren't anywhere near the job losses reflected in unemployment numbers.

 

[mantisman51]

Quote:
Originally Posted by stdreb27 http:///t/387752/some-brilliant-economical-mind-please-please-please-enlighten-me#post_3414396
Here are some things to consider.
Until about 4 years ago,we had 4-5 % unemployment. Level's maintained since the 90's.
During the industrial revolution, average saleries for industrial workers in today's numbers were around 10k a year.
We still manufacture more dollar wise than we did during the industrial revolution. Maybe not as many marbles...
Think about it, jobs outsourced , aren't anywhere near the job losses reflected in unemployment numbers.
What you may not be aware of is software and and programming are considered "manufacturing" now. So the $ value of manufacturing is skewed and manufacturing jobs are still leaving en masse as real industry, the only reliable source of national strength, is shipped everywhere else. I personally think that anything having to do with programming and software ought to be counted as service rather than manufacturing.

 

[stdreb27]

Quote:
Originally Posted by mantisman51 http:///t/387752/some-brilliant-economical-mind-please-please-please-enlighten-me#post_3414404
What you may not be aware of is software and and programming are considered "manufacturing" now. So the $ value of manufacturing is skewed and manufacturing jobs are still leaving en masse as real industry, the only reliable source of national strength, is shipped everywhere else. I personally think that anything having to do with programming and software ought to be counted as service rather than manufacturing.
I'm just pointing out this information. This idea that we aren't making anything is completely false. The real question is, whether today's manufacturing brings the same benefit that it did 100 years ago.
As far as this idea you just proposed goes, well that is just silly. What is the difference between some domestic working sitting at a keyboard writing code for a CNC machine, vs some domestic worker sitting at a keyboard writing code for a custom software suite? It may not be creating a car. But it still is creating a product, which in turn is sold, creating money which is the end game anyway. This romanticized notion that somehow manufacturing is the great end all to economic malaise is just that, a romanticized notion.
I'm in the manufacturing business. It is my observation that we still build things, if it needs to be a quality product, and we absolutely can build things bigger, better and cheaper. It is when we start dealing with disposable products that we no longer have the competitive advantage. We, quite frankly, just don't have the people willing to work for what it would take for it to be economical. I don't think this is a bad thing... IMO it reflects the increases in standard of living of our society as a whole (sure there is a lazy slice of the pie). This thought can be summed up with this cliche. Begger's can't be choosers. And even with the crap that has gone on over the last couple of years, we're still choosers, not beggers...
Another way to look at this is, say you're quite wealthy, when you work you earn 300 dollars an hour. You need to mow your lawn, if you do it on your own, it takes you 2 hours. Or you could call up Juan's lawn care, and they can mow it for 50 bucks. What are you going to do, mow it yourself and lose out on 600 bucks, or just pay the 50 and clear 550 dollars. It is the same concept, for us as an economy.

 

[mantisman51]

Well, in general I am not disputing what you wrote, but the caveat is when we are building real, durable goods that people need for their modern existence that is a solid and real economic engine. Things like high tech are luxuries and the first thing to crash every economic downtown.

 

[stdreb27]

Quote:
Originally Posted by mantisman51 http:///t/387752/some-brilliant-economical-mind-please-please-please-enlighten-me#post_3414706
Well, in general I am not disputing what you wrote, but the caveat is when we are building real, durable goods that people need for their modern existence that is a solid and real economic engine. Things like high tech are luxuries and the first thing to crash every economic downtown.
I don't know what is the spread, but software isn't luxury, every single company has a website, most larger ones have some sort of customized program, whether is be a cell phone companies billing system, call center software, databases etc...

 

[reefraff]

What creates more jobs, a guy sitting at a desk writing software code that will be sent to Singapore, burnt on a CD, packaged and shipped back to the US to sell for 159.00 or a guy sitting at a desk designing a 22 riffle that will require wood grown, harvested and milled in the US and Steel mined, milled and machined in the US that will sell for 159.00?
It's the loss of labor intensive jobs that is killing us. When we were exploiting our natural resources to build value added products we were the envy of the world.

 

[stdreb27]

Quote:
Originally Posted by reefraff http:///t/387752/some-brilliant-economical-mind-please-please-please-enlighten-me#post_3414736
What creates more jobs, a guy sitting at a desk writing software code that will be sent to Singapore, burnt on a CD, packaged and shipped back to the US to sell for 159.00 or a guy sitting at a desk designing a 22 riffle that will require wood grown, harvested and milled in the US and Steel mined, milled and machined in the US that will sell for 159.00?
It's the loss of labor intensive jobs that is killing us. When we were exploiting our natural resources to build value added products we were the envy of the world.
Personally, I can't afford a US made Kimber....
But more to the point, sure selling an office suite in a box packed in god knows where isn't that awesome. But that isn't where the money is. There are different types of software. Web development, many times is a custom labor intensive job, that is done at the local level. Then you have custom software that companies buy, these many times are 6 figure pieces of software that require a team to role out and implement, then another team of people to run. Think about it, in the oil patch, a company like exxon would have numerous custom pieces of software, anything from human resources database and payroll, to scheduling, to well tracking such as locations, production, projection of production, document control software, a website, an internal website. The list goes on, most of these then require people to run them full time. It is a significant labor intensive undertaking.
I've been involved in purchasing 100k+ software for engineering, they have a team that built the software, they have team of salesmen, and they sent several people to come customize it to our requests, install and inegrate it into our system. Now that our company purchased it, they've hired a couple guys who can use it, and they in turn support the engineers who needed it. Who use that to design things... It is a very labor intensive, (and we're not talking a 20k a year job) jobs.... To top that off, it is used for designs that were built domestically.

 

[reefraff]

Yeah but 10 25K a year jobs are a lot better for the economy than 1 250K one.