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Shipping Jobs Overseas Will Help The US Economy

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Is manufacturing the answer to fixing the US economy? Should we concentrate our efforts on building more and better goods and then supplying the world with those great products? Or should we drop manufacturing all together?

In past decades the USA was a great consumer and producer. The products manufactured in the USA were desired all over the world. Should we be concentrating our efforts in finding the next big product that we can produce and export? No, we should not! In fact, we should start shipping our manufacturing jobs to Mexico and Latin-America, China, India and other Asian Countries.

For many years the USA, like many first world countries, had an agricultural economy. After the industrial revolution it embraced and thrived as a manufacturing economy, while Third World countries were moving into agriculture. Third World countries were considered agriculturists or farmers, it was in the core definition of a Third World country.

Today we have a shift; these same Third World countries are manufacturing powerhouses. They have cheap labor, good engineers and great equipment. The new Third World country definition is a “Manufacturing Economy.” Does the US want to stay, compete and hang on to a manufacturing economy and compete with them on their terms? No, it does not.

We can take a look at the suffering US car industry as a perfect example. Can the USA make the best and most inexpensive cars in the world? The US can’t compete in quality and it certainly can’t compete in price. The US government has to impose tariffs and special taxes on cheaper and better built imports to even give Ford, GM and Chevrolet a fighting chance.

The USA can’t beat German, Japanese, Korean and the up and coming Chinese cars. Our labor pool gets paid $30 to $40 per hour for an industrial worker (even more with union costs and benefits) and competes with countries like Mexico that spend $2 to $3 per hour for a worker complete with tax, insurance and social security. US labor costs are 10 times higher and our cars are not better. Other fixed costs like rent, electricity, phone or water are also less expensive in other countries like Mexico and China.

Here is how the numbers look for the US car manufacturers. Let’s just say we need to allocate 100 man hours of employee work into building our car. In the USA the straight out labor cost would add up to $4,000 at $40 per hour with benefits, workers compensation, and employment taxes included in the calculation. In Mexico the same car would cost $300.

Yes, there are many variables to costs including fixed and adjustable. Some big variables could be in the acquisition of raw materials or transportation of raw materials and finished products. You also have to consider import and export tariffs for entering or leaving countries. Taking just the labor costs as an example might not be fair. Or is it? Well, imagine having 1,000 employees at $3 per hour or the same for $40 per hour. If you were the CEO, a member of the board or a stockholder in the company what would you do?

Holding on to our old manufacturing economy will not solve our present or future financial situation. In order to achieve lasting success the USA has to let go of those jobs and invest in new ones; jobs that can’t be exported or performed in Mexico, China and India; jobs that include research and development, service, technology and innovation and not production or assembly. We are no longer an agrarian society, we are no longer a manufacturing society, let’s get ready to be a service and information nation.

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About Jorge Olson

Jorge Olson is an X-Generation Functional Futuristic Idealistic Geek! He wants to change the world using business and writing as his tools. Jorge is also an entrepreneur, keynote speaker and author of “Build Your Beverage Empire” and “The Unselfish Guide to Self-Promotion”. He is working on two new books on beverage development and personal branding. In business he’s been CEO of public and private companies and owned two branding companies in the past 2 years.
  • Doug Hunter

    I think it is possible to outsmart yourself. If you can’t make actual, physical stuff in a crunch you’re at the mercy of those who can.

  • Jonathan Scanlan

    I’m with Doug, an economy needs to be diversified – relying on intangibles to run an economy is to essentially play monopoly.

    So long as certain products have limited use (i.e. food, goods, etc.), we will need someone to make them. And in terms of efficiency, local production has a lot of merits.

    Besides, hasn’t it been bankers hit hardest by the credit crunch?

  • Ma rk

    This is not either or. The US maintains rather huge agricultural and manufacturing economies at the same time as being the ‘center’ of the financial services capitalist world.

    One other small point: just as China manufactures toxic toys, the US produces shitty financial products. Why should the world buy from us now that they’ve caught on?

  • bob

    Umm,
    Where do we go if Manufacturing is gone?
    Service Level jobs? Banking, Engineering? Artistry?

    The US has no production, and our service industry is going bye bye as well to other countries.

    The ideal economy would have the people best qualified for a job doing that job. If people in the US are loosing jobs based soley on cost, then the US economy is doomed.

  • http://drdreadful.blogspot.com Dr Dreadful

    The Third World doesn’t follow our lead – it can’t be relied on to manufacture for us, as others have pointed out. It did not ‘move into’ agriculture when Europe and North America industrialized. Prior to the Industrial Revolution, every society was agrarian, except for the few that were hunter-gatherers.

    Perhaps we should get back to that. There are enough guns, after all, and hundreds of former hunter-gatherer tribes who I’m sure would be delighted to show the rest of us how it’s done.

  • Cindy

    Dr.D,

    Can we still have IMAX?

  • http://drdreadful.blogspot.com Dr Dreadful

    Only if it exclusively screens instructional films on how to hunt/gather.

  • Cannonshop

    Mr Olsen, this is the kind of idealistic bullshit that got us into this mess, and continues to destroy what tangible economy we have LEFT. The fact is, you can’t live on the product of your ancestors’ work indefinitely, and jobs that require only a classroom education to do, can be done elsewhere for even LESS than manufacturing.

    Any economy that becomes a single-industry entity ends up obselete, or in collapse eventually. “Intangibles” aren’t worth much without “Tangibles”.

  • Jonathan Scanlan

    “Any economy that becomes a single-industry entity ends up obselete, or in collapse eventually.”

    … or with a civil uprising (i.e. Cuba)

  • Cindy Briggs

    We can’t just shop and due to technology we are already shipping medical billing, dental work, accounting and a number of other jobs no one ever thought would go. Of course they work for less, they are slave labor. They don’t make enough money to buy anything we make. Fair trade is fine, free trade is a losing proposition. The only reason it worked the last 8 years was because of easy credit and falsely inflated house prices. Now look where we are and so is the rest of the world. Free trade should promote decoupling. OH OH, so much for that theory.

  • Cindy D

    Your URL doesn’t work Cindy. You would need to put it like a link, including the http bit.

  • http://takeitorleaveit.typepad.com/ roger nowosielski

    A very well reasoned argument, Jorge – mirroring Robert Reich’s argument in The Work of Nations, 1992. The problem still remains though (and you should really look up that reference), it will not solve all our problems as you seem to suggest.

    According to Reich, only ten percent of the population, fifteen percent at most, will be engaged in “service and information technologies.” Reich called them “symbolic analysts.” So what are we’re going to do with the rest? Reich’s prediction: the vast majority of Americans will be forced to be either “burger floppers” or “security guards” – menial jobs by any stretch.

    So while your argument does ring true – in so far that we can’t perhaps compete on a global scale when it comes to manufacturing – there’s still something to be said for rejuvenating the manufacturing sector at least on the local, community level (if only not to foreclose the ever-dwindling employment opportunity at home).

  • gazza boy

    I feel sorry for all the people who are losing their jobs it is not right and is not fair at all, they all have worked hard to make America what it is and this is the thanks they get it is a disgrace to humanity. It sounds like a bit of a gamble to assume that everything will be alright to give other countries our jobs like it was no big deal. This kind of stupidity is what destroys countries and should not be allowed to happen.

  • gazza boy

    It would be more acceptable if there were jobs in place for Americans who are losing out to foriegn labour.

  • Al

    Technical jobs are being shipped overseas, India and Ireland are two that Fidelity shipped jobs to. I’m on the fence with manufacturing jobs being shipped overseas since I think it’s dangerous for us to rely on everyone else for 100% of our daily or household products. But I’m 100% against our technical and office jobs being shipped overseas, I wish our gov would heavily tax or fine these companies so it wouldn’t be worth it for them to not offer these jobs to Americans.

  • Brian

    You would be a fool to listen to this guy. He is probably sitting pretty somewhere with a government job that has no risk of being shipped overseas. Ask what an middle class citizen thinks when they have just received a their last pay because there job was shipped out and if i were a CEO i wouldnt be selfish enough to toss out honest jobs in america then give myself another few million dollars to my pay. And ask yourself why are wages over seas for man power so cheap ? are the treated fairly ? do then have an opportunity to work decent hours or have safe working environments. Are children being employed in those manufacturing jobs ? This isnt the advancement of america it is the destruction of the middle class

  • SD Dude

    The company where I worked has been braking profit records. We make software for cars and trucks. Yet, our parent company, snap-on wanted more efficiency. What did this company do? fire all editors and slash programmers in half and shipped all those jobs to India.

  • red-moon

    “The USA can’t beat German, Japanese, Korean and the up and coming Chinese cars”

    The average monthly wage for manufacturing in Germany is $3511 USD and in the US its $2928. The average manufacturing work week in the US is 40.8 hours and in Germany its 37.6. hours. Germany outpaced the US in manufacturing growth in 2010 *and* competed successfully with China, Japan, and Korea in spite of a shorter work week, higher wages and better benefits the the US.

    Is short, the author’s assertion that shipping jobs overseas is good for the US because the US can’t compete is full of rubbish.

  • bill

    this article is horrible, and the author provides no solution for a future outside manufacturing. obviously he has never worked in a factory or been to the middle of america where the majority of workers are blue collr.

  • Luders

    Indeed, USA has to let go about its jobs that are being shipped overseas. Those lost jobs will never be returned into the US soil, anymore. They lose forever.

    The sole solution for the jobs-shippings- overseas, US government has to create new jobs on a technical challenging scale in various aspects, i.e., from manufacturing to professional jobs.

    More importantly, if the US government accepts to create new jobs, two things that need to be followed its job creation projects: (1) US must produce products and services with great qualities. (2) American people should embrace patriotism more. They should boycott all American products that are made overseas. This way the imported market of American goods that are made offshores would be destabilized.

    Nevertheless, at the conclusion of the article, I become to disagree with Mr. Olson. Even though USA is no longer an agrian society, but the reality there’s still a large number of Americans that are yet to adopt with the high-tech time.

    When turning a society into a technologically advanced one without having prepared most of its citizens within, this society becomes a very dysfunctional society. And currently, the United States has fallen into the category of ones of the dysfunctional societies.

    In any society on this sphere, without exception, people who earn highly academic degrees are always in a very small percentage. More likely now in the US, people who can barely survive or suvive are the ones with degrees or advanced degrees. The rests are indirectly eliminated (left in the lurk). A society can not create ways in order to survive for a small group only. Once it is happening in such a manner, this society is dysfunctional. And currently that’s right happening within USA.

  • julie

    Occupy Jorges brain.