What it means is that we will need less manufacturing and more of other types of labor. Not necessarily that we'll just need less labor. With that in mind some people think the corporations that are moving manufacturing jobs over seas are evil, and greedy. Well to them I say: You do realize that the point of a corporation is to make money for it's shareholders don't you? Oh wait, apparently a significant percentage of you do not. So, let me lay it out for you.
It is the job of the corporation to provide profit for the shareholders. There is really nothing more complicated than that. A company, any company, exists solely to generate cash which the company owners use as their pay check. A corporation is merely a company that is owned by a group of shareholders who all want that same thing. Payment for the corporation using their investment. But under ZERO circumstances are publicly traded corporations in business for any other reason than to generate profit. Sorry if that's to politically incorrect for you, but that's all they is!
The vast majority of shareholders want a rising profit year over year. Not as a measure of greed, but usually as a measure of a healthy company. You see a stagnate or dropping profit margin is typically a sign that company is starting to degenerate. And if you have your hard earned dollars invested in that you don't want to see a degeneration or devaluing of your investment. And it can happen to the largest and oldest of companies. Montgomery Wards went from having raised it's dividend for 50+ straight years to out of business in less than 3. So just as your mom watched your temperature when you were sick as a child, you watch the profit line as it is the single quickest way to judge the health of a corporation.
This brings us to profit. There are exactly two ways to produce that profit increase, and only two ways to produce that profit increase:
- Increase revenue (money in)
- Decrease expenses (money out)
That's it there ain't no more.
Revenue is set by the market. You are only going to pay so much for any item before you decide you don't need it that bad. That goes for everything from that AC/DC shirt that you bought at that drunken concert in 1982 to your house. And, there is only so many units you can produce and sell in a year. Once those maximums are reached the company must start looking for ways to lower expenses.
Typically the single largest line item on any companies expense ledger is labor. Oops, gotta hate that one. But it's true. Employees and their related expenses are typically the single largest expense of any corporation. So they tend to get looked at first when cutting expenses comes up. Because the single easiest way USUALLY to cut expenses is to cut labor costs either by lay offs or moving to a climate that has cheaper labor
It is not the corporation's job to supply jobs. Jobs are merely a necessary expense that happen to benefit the employees. That's right folks. As I've shown so far the company doesn't exist to pass out jobs, it exists to make money for the shareholders. As an employee you are only going to be around as long as you bring in more than you take out. Live with it. It's the way it is.
And, the government can't do a darn thing about it. While the government can control cost via taxes and regulatory expenses which are usually the 2nd largest item on expense sheet. It can't change the market nor make employees profitable except through taxes and regulation.
Labor costs are also set by the market. If labor here in the US won't build widgets as cheap as labor in foreignstaniland then it is the corporations DUTY to its shareholders to move to foreignstaniland. That's right, those evil corporations that must now do their job and move to foreignstaniland. Like it or not.
So, who is to blame for all of this job exportation. Well, frankly you and I are. You see WE are the vast majority of shareholders either directly or through our various retirement plans. Hmm, bet you never thought about that did you. But it's true. Most stock is held by investors of some sort or another. Mostly through mutual funds that you invest in through your 401k or other retirement plan. Even those currently politically correct to vilify multinational oil companies. You own these companies as sure as you own (presumably) the shirt on your back. So if you penalize these companies you are in essence ripping your own shirt. Kind of a silly thing to do to a vintage AC/DC concert shirt if you think about it that way isn't it?
The corporate officers that are lambasted as greedy bastards are usually merely employees trying to give us what we want in order to keep their job. That's right, mostly they are paid with a more complicated package than the average joe. Which includes stocks, and special retirement incentives etc, but the bottom line is that their usually hired hands brought in to do a job. And most of them are conscientious about doing that job as well and as ethically as they can. Are there some exceptions? Sure, but they are just that exceptions. That's why you hear about them. Kind of like why you don't hear about the 10,000 flights a day that land safely, but let one airplane go down and you can't get away from it on the news for weeks. Same with corporations. You'll hear about the Enrons, but not the SAICs of the corporate world. And yes SAIC is a real company and it's listed in the Fortune 500. But odds are you've never heard of it. Why? Because they do their job well and ethically with a minimum of fanfare except to their stock holders.
Now some say, “But we have no power as shareholders.” And to some degree that's right. You are not going to be able to go into the board room and start dictating policy. But all of us, as a whole, telling our financial advisers that we want more profit so we can afford that giant motorcycle to tour on when we retire is heard loud and clear in those board rooms. And that wish is heeded. So, if you don't like what a company is doing simply quit buying their products and dump their stock. Or, shut up and quit whining, and start working on making American jobs competitive on the world market. Like it or not we live in a global economy and we have to compete globally. Because like it or not we are responsible for their actions. Not some evil board members. They, like our politicians, work for us, and we are responsible for their actions.
The other fix is to innovate so that our jobs allow us maintain our way of life and our workers to make what they need to. Of the choices I prefer that last one. And more importantly I believe in the ability of the American people to do just that, make their economy and therefore their jobs more innovative so that we can manufacture our widgets elsewhere without harming our selves.
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