Thursday, June 19, 2014
Random ruminations from your resident curmudgeon...
Economics is often referred to as the "dismal science" and is viewed as a murky and inexact study. It's true that economics can be arcane, complicated, and obtuse. But it doesn't have to be.
Today, we will engage in a simple economics lesson.
One that highlights the plight we now find ourselves in as a nation.
What do these cities have in common: Detroit; Akron, Flint, Gary, and Reading, to name a few?
At one time, these cities were bustling manufacturing hubs that offered numerous well paying jobs to workers that used their income to become comfortably ensconced in the middle class.
Today, these cities are decaying and mostly in deep financial trouble.
The manufacturing jobs that under girded the economies of these cities has largely disappeared.
And with those jobs gone, so has the economic health and vitality of these cities.
After World War II, the United States had the most vibrant and robust manufacturing economy in the world. Our country emerged from the war with a skilled workforce and the facilities to employ those workers. Our products were the best, made by the best workers in the world.
Over time, however, our labor force had to compete with the global labor pool. That pool of workers included men and women from countries that could get by with paying what amounted to slave wages to produce the products that we as consumers wanted at a cheaper price than U.S. workers.
And we as consumers voted with our wallets, choosing to purchase our televisions, electronics, and cars from factories overseas, made by workers that were paid far less than their American counterparts.
The result has been devastating to our economy.
Since 2001, the U.S. has lost 56,000 manufacturing facilities and the accompanying jobs. In 1980, over 20% of all jobs were in the manufacturing sector. today, that number is 9%. One of every six men of working age does not have a job. The percentage of working age Americans that are not participating in the work force is 37.2%, a 36 year high.
The result of this is that there are now no shoe manufacturers or television manufacturers, to name a few industries, in the United States.
Now we know that every economy experiences ebbs and flows in jobs. And I certainly do not begrudge a consumer for seeking out the best price for a product they want to buy. We all do that.
But when a sector of the economy contracts, the hope and expectation is that other sectors will create jobs that will absorb those workers that were displaced.
That is not happening now.
Our economy is struggling to create jobs, and the jobs we are creating are of a lesser quality than the manufacturing jobs we have lost. The result is that 50% of all workers earn $27,520 or less from their jobs according to the latest census statistics.
Now, here is the economics lesson.
We cannot consume our way to prosperity.
For an economy to be healthy, it must produce quality products that are competitive.
How do we get there?
This is a complicated answer, but there are several things our country can do.
First, we have to change the current regulatory environment. Currently, the burden and cost of regulations on all businesses is onerous. This has to change and we need to make it more conducive for existing business to operate and new businesses to start up. The regulatory environment in this country does not make it easy to do business.
Next, we have to stop punishing producers with higher taxes. The United States has the highest corporate tax rate in the world. This is not an environment that fosters growth in manufacturing or any sector.
Finally, we have to change the educational system in this country. We are not producing high school- and many college- graduates that are equipped to function in a competitive global environment. De-emphasizing math and science skills is not a formula for turning out graduates that are employable in this global environment.
This problem has been building for years. It will take years to reverse these negative trends.
If we fail to do so, our economy will continue its steady decline.
And that is not good for you and me.
And that, my friends, is my view.