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Where Did All the Jobs Go?

September 13, 2012

In all the discussion leading up to our Presidential election this November, creating jobs has been a hot topic.  Everyone is worried about continued outsourcing, about our jobs going overseas, and about the fragile state of the economy.

This is going to be the first in a series of posts addressing what is wrong with our economy and my ideas as to how we can fix it.  There is no simple or quick fix, but I believe there is a solution.

Also, since I have not heard a real plan for a solution from any of the major candidates, I thought there could be no harm in me posting my ideas.  However, before we can fix the problem, we have to know what caused the problem.

So Where Did All the Jobs Go?

We’ve all seen the labels that say “Made in China” or “Made in Mexico” or “Made in Taiwan.”  In my opinion, there are two major causes of our jobs leaving to go to other countries.  They are –

  • NAFTA and similar trade agreements, and
  • Sky-high corporate taxes

How Does NAFTA Cause Jobs to Leave?

Let me explain.  NAFTA (North American Free Trade Agreement) is an agreement in which we agreed with Canada and Mexico to eliminate tariffs on almost all imports.

Originally, this seemed like a good idea as it gave access to cheaper goods from other countries and opened up other markets in which we could sell our own goods.  However, as time progressed, it became evident that this policy put US businesses at a disadvantage.  Countries with cheap labor such as Mexico could manufacture goods at much lower cost, allowing them to capture market share in countries where the labor costs are higher, like the United States.

Businessmen as a group are not normally dumb.  Realizing that goods could be manufactured much cheaper in other countries without the added cost of import taxes, businesses began to build their factories in other countries.

Factories are not built overnight, but as new factories were built, jobs were lost in the US and moved to other countries.

In addition to this, it could be argued that by participating in NAFTA and similar trade agreements, we are supporting the “sweat shops” where children are made to work long hours at pitiful wages.

How Do High Corporate Taxes Send Jobs Overseas?

This seems to be rather obvious, but again, business owners are not normally stupid.  If taxes are prohibitively high, they will look for other places to make their goods.  According to the Heritage Foundation and other news sources, the United States has held the dubious distinction of having the highest corporate taxes of any industrialized nation.

According to Curtis Dubay of the Heritage Foundation,

“The high rate in the U.S. is driving businesses and jobs to other countries. Those jobs will continue to flow to other countries if the U.S. insists on levying its self-defeating corporate income tax rate. It is long past time for Congress to lower the rate so it is equal or below the 25 percent average of our competitors. If it does not, businesses and jobs will continue their exodus to more friendly locales.”

This was written over eighteen months ago, and has proven true over time.

So, if you want to know where the jobs have gone, look for a place that protects its own businesses with appropriate tariffs or a place with cheap labor.  Look for a place that doesn’t try to tax their businesses and wealthy out of existence.  In these places, you will find that jobs are plentiful and the economy is strong.

We have been giving our jobs to those countries for nearly twenty years now.

Thanks for taking the time to read my thoughts,

Dave

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