Job Flight is a nationwide problem
By Jason Johnston
Job Flight is a major problem to the livelihood of the American economy. The United States job market seems to be decreasing. In a mere nine years, this phenomenon has crippled the labor movement and stagnated the economy. Cheap labor and corporate greed have made it easy for companies to not follow a long-term economic policy, but one of short-term gains. To help cure job flight laws and regulations such as an international governing body, fair trade, and Patriot Corporations could work together as a vaccine. Job flight is a serious problem requiring serious solutions.
Job flight is when manufacturing companies take jobs that were based in America to another country for lower wages. Job flight undermines the American way of life. It undermines our economic base of manufacturing goods and also our livelihood as an equal class system. In recent years, the United States job market seems to be decreasing. This practice has proved to be a serious problem to the national and local economies.
"Its the economy, stupid" was the slogan that President Clinton used to get into office and it still rings true today. Something had to be done about job flight. Someone needed to protect American jobs and preserve our way of life. The erosion of the industrial economy and decimation of factory workers job market started to take place. The year 1994 ushered in the snowball effect of American corporations taking their manufacturing jobs to Mexico for lower wages to stay competitive. Since 1994, the government has done nothing to stop job flight, but they have done things to help it. The national government has given corporations tax incentives to leave (Bevard). Not only were incentives given to leave, but officials have started to look away from corporations who set a P.O. Box in Bermuda, a country that has no income tax, to avoid American tax laws (Huffington 57). Corporations started to turn what would have been American wages and taxes into pure profits. Then in 2000, America witnessed George W. Bush take office, not knowing that he was about to squander the largest surplus in American history into a 6.8 trillion dollar deficit (Begala 87). According to Jane Birnbaum, a writer for America@work, an AFL-CIO newsletter, "The U.S. economy has 3.2 fewer jobs today than it did when President George W. Bush took office, including 2.5 million fewer jobs in manufacturing. Bush appears to be headed for the dubious distinction of being the first president since Herbert Hoover to preside over a decline in total employment during his term in office." Since President Bush has been in office, the United States has lost an average of 60,000 jobs a month (Birnbaum). America has also seen a drop in net foreign investment in the United States from 2.1 billion to 550 million dollars, which happens to be at the expense of American jobs (Koechlin 19). Over the next fifteen years there is an estimated loss of 136 billion dollars in wages and 3.3 million more service jobs (Bourge). Something must be done to strengthen our economy.
Job flight is not just a national problem it is also local. Rockford, Illinois has lost 20% of manufacturing jobs that will remain in either Mexico or Southeast Asia, which are approximately 10,000 jobs between May 2000 and May 2003 (Birnbaum). Dave Bevard, the president of the local machinists union asserts that even here in Galesburg job flight is occurring; by the end of 2004 almost 3,000 jobs will be gone from Maytag. He further states that Maytag leaving Galesburg is going to kill the local economy. Nothing is being done about this problem. The only thing that is being done hurts everyone except the corporations that are leaving. Maytag was given a 43 million dollar tax break to leave (Bevard). No longer does Galesburg have Gates, Butler, Gales, or the family farms to keep the economy going. All these are gone or are in the process of leaving, and Galesburg will be a lost cause (Bevard).
These past nine years have need a wonder. American corporations have left America for Mexico, Canada, or Southeast Asia to pay workers next to nothing. In Maytags case, the Mexican workers are being paid 58 cents per hour with no benefits (Bevard). Job flight has crippled the labor movement and stagnated the economy.
The labor movement used to be the driving force of this once strong nation. With corporations seeking lover wages, America no longer manufacturers any goods and many Americans do not have a job to support their families. This nation was built upon a representative democracy in which people could voice their opinions through their respective elected officials. No longer can the unions do this. No longer can the union push for better pay and better benefits because of the fear that if they strike the company will take their jobs to Mexico. In some cases, Americans cannot afford to live on what they are making. The American society is being undermined.
The single largest group harmed by job flight is the manufacturing workers and their families. These are the people who no longer have jobs. Also, these people can no longer afford to have a family. For example, Kathy and Scott Ward, Maytag employees, are facing a tough decision in that they will have to leave Galesburg to have a fair paying job or stay here for a lot less money (Fanning 9). Scott came to Maytag after serving four years in the United States Air Force and he states "Americans are good enough to die for American businesses, but they are not good enough to work in them (9)." It is not as if the union workers at Maytag in Galesburg have not given good faith efforts to helping Maytag insure its profitability. Maytag workers gave concessions in 1994, including lower wages and fewer workers at the Galesburg plant, for the company to keep the plant in Galesburg, recounted International Association of Machinists union local lodge 2063 President Dave Bevard. According to John Fanning, an editor with Chicagoland Chief Engineer, the corporation was also given over 9 million dollars by state and local governments in various incentives to stay in Galesburg, Illinois. The city of Galesburg imposed a tax on its citizens to provide almost 3 million dollars for Maytag. Tax abatements were also given to Maytag to the tune of 1 million dollars that conveniently will expire in 2004, the same year that they are leaving Galesburg for good (14). These incentives to stay were based on the premise that Maytag would become competitively viable, and thus remain in Galesburg. Maytag concluded that after being ranked 395th on Fortune 500s list of largest corporations, making sales of 4.25 billion dollars, and an increase of nearly 50% in their third quarter earnings compared to the same quarter last year that they were no longer competitively viable (14). Maytag announced their third quarter earnings just three days after announcing that they were closing the Galesburg plant. Evidently, these earning did not constitute competitive viability for Maytag.
With the loss of three million jobs, the American economy is not as strong as it once was. Paul Begala, the author of "Its Still the Economy, Stupid" and co-host of CNNs Crossfire, outlines President Bushs proposed budget cuts for 2003. According to the proposed budget the Department of Labors budget was cut by 4.8% which is 2.9 billion dollars even in the face of dramatic job loss. We are now facing an economic downturn and a shrinking social safety net to catch fallen workers. These cuts are coming from the Transitional Adjustment Assistance, or TAA, which uses tax dollars to retrain unemployed workers. President Bush has cut eight different job-retraining programs within the Labor Department and twelve other programs within other departments (55). If neither corporate America nor our government respond to the crisis of job flight, our economy will continue to shrink and stagnate.
Labor unions in America are another group adversely affected by job flight. The union used to be a strong gathering of workers in that workers could have leverage about the wages they were paid for a particular job. IAM local lodge 2063 used to have 8,000 members in the 1970s, but by the time Maytag leaves Galesburg for good in 2004 the union will have only 15 members (Fanning 19). These members will then have to be merged into another local IAM union (19). In 1994, the union gave up 13 different rule changes that were demanded from Maytag including a drop in employment from 2,400 to 1,600 (19). The union met all of their demands and even helped them to produce a number 1 product rating by Consumer Reports (7). For ten years companies have held the threat of plant closures and transfer of operations to foreign country as a means to force unions to accept minimal improvement in wages and benefits, thus negating the viability of union activities. We have forgotten in these times the many great things that have come out of the unions. The government during the early 20th century passed legislation for workers rights, a forty hour work week, and minimum wage. All of which came form support from the American Federation of Labor and the Congress of Industrial Organization which were two different labor unions until they joined forces to become the AFL-CIO. It was the powerful unions of the mid 1900s that improved the safety of union workers. Thanks to their efforts we now have Occupational Safety and Health Administration, or OSHA, to investigate accidents and the safety of the workplace (Occupational). OSHA is a very worthwhile outcome of union pressure to insure safety in the workplace. However, job safety is not a top priority with President Bush as he has cut the program by 8.9 million dollars (Begala 57). Without the unions, our economy is neither strong nor successful. This is what we are witnessing at the present time in American history, the destruction of progressive ideas which got America to where it is today. Workers are now at the mercy of a handful of people because the union no longer has leverage against the powerful rich as they face the constant threat of job deportation.
The American society at large is also hurt from job flight. Job flight has kicked societys legs out from under it. Manufacturing was the legs of our nation, and with job flight occurring, manufacturing no longer holds the economy steady as we now have to rely on an economy of service jobs. People buy goods and goods produce profits. Profits are what pay people, and people in turn buy more goods. This is the basis of a capitalistic economy and why it has made America so strong. Now with that same equation, corporations are trying to take people out of it. People no longer are being paid; therefore they cannot buy goods, which means corporations are not making profits. Corporations that do not make profits go bankrupt; and the American taxpayers have to bail them out. Taxpayers are not making much money, which means less money goes to the government to spend. If the government has no money to bail out these bankrupt corporations what will they do? The government will create the money by spending money they do not have which turns into a national debt. The current national debt is approximately 6.8 trillion dollars (Begala 56). A depression is the result of unemployment and large national debt. We have both in America today. Therefore, it is plausible to assume that we may experience a depression in the near future. People with spending money are the backbone to a capitalistic society. Without a population in which people have disposable income to buy products there is not a market in which to sell. Now with greedy CEOs in absolute power and a growing disparity between rich and poor as a result of job displacement, there is no reason to assume that a revolution of the nature of the French Revolution could not occur here in America.
Job flight has been and is a major problem to the livelihood of America. It has hindered many great programs and people. Job flight has completely ruined the idea of the once prosperous American Dream.
Fred Maytag, founder of Maytag Corporation, once said, "In all business, there is a factor which cannot be compensated for in dollars and cents or computed by any measure. It has no relation or connection with the mercenary and is represented only by the spirit of love which the true craftsman holds for his job and the things he is trying to accomplish." Cheap labor and corporate greed have made it easy for companies to not follow a long-term economic policy, but one of short-term gains. NAFTA, globalization, and tax incentives seem to have all combined to cause the phenomenon of job flight. All of these policies have increased the strain on the workers, unions, and society.
NAFTA was first reported as a policy to help out the farmers (Fanning 9). In all actuality it was a way for corporations to take American wages and turn them into pure profits while still selling to American consumers. NAFTA allows free trade between Canada, Mexico, and the United States, which is exploited by Maytag. Maytag is taking nearly 3,000 jobs to Mexico to pay teenagers and mothers 58 cents an hour without any benefits (Fanning 17). Dave Bevard, president of the local union states that "NAFTA was designed like the Marshall Plan after World War II. A policy designed to build up neighboring countries in a manner that they can buy the goods that America makes." When someone is being paid 58 cents an hour, they cannot not afford the two thousand dollar refrigerator that they are making (Bevard). NAFTA is a major contributor to the diminishing job market. With over three million workers without a job, they no longer have expenditures to keep the American economy strong. Workers need jobs so that they can spend money which keeps the economy moving forward. This economic policy is best explained by Henry Ford, who revolutionized American business by raising the wages of the workers on the auto assembly line so that they could afford the cars that they were making. He claimed that by the company paying workers enough money that they could afford what they were making then it was going to have a positive effect on the worker and the business (Fanning 11). Nothing has changed in capitalism that would prompt a change in this form of business. In fact, this policy helped to make America the strongest and best economy in the world. Not only does NAFTA harm the workers and create unemployment, but it also creates a burden on the federal governments of all the participating countries. Arianna Huffington, author of Pigs at the Trough, writes "in the real world, the lawyers who helped draft NAFTA inserted language that makes it possible for companies to seek compensation from any one of the other two signatory nations if regulations cause a dip in their future bottom line. So, for example, a U.S. company can sue the Canadian or Mexican government for compensation if its losing money in Canada or Mexico because of government regulations in that country." Almost two dozen companies have cashed in on this other form of Chapter 11 bankruptcy. Methanex, a Canadian corporation, sued the U.S. government for $970 million because California had the temerity to phase out a cancer-causing gasoline additive the company produced (135). NAFTA is so wrong on so many levels that it needs to be renegotiated.
Globalization is NAFTA on a larger scale. Globalization allows companies to take their jobs anywhere in the world in which America has an agreement. These companies no longer have to pay taxes to keep their factories overseas. In todays economy, this cannot continue. Currently there are 2.5 people seeking a job for every one job (New Report). Taxes are what pay for workers to support their families and or find a new job. There are more than two million workers that have run out of state and federal-provided unemployment benefits (New Report). Other countries are allowed to sell to American consumers who just so happen to be the best consumers in the world, but Americans are out of work and these countries have Americas manufacturing jobs. Greg Palast, author of The Best Democracy Money Can Buy determines that "globalization allows corporate America to make quick profits. They make their product in an under developed countries until these countries have some semblance of a union or gathering of workers who want more money. The company, under globalization, is allowed to just pick up and leave to another under developed country where they can pay workers less than a dollar an hour (145)." Globalization is a fraud and should be stopped.
Globalization and NAFTA are very major problems that are only worse when the federal government supports such policies. Maytag, who by the end of 2004 will be practicing job flight, were given a 43 million dollar tax incentive to leave (Bevard). Not only does Maytag get money to leave, they were also given money to stay, from the state and city of Galesburg that conveniently run out in 2004. Arianna Huffington describes that some of Americas premier corporations were given major tax rebates in Bushs economic stimulus package that was passed just one month after September 11. "All you really needed to know about the true nature of the economic stimulus package could be found in a largely unnoticed provision that made permanent a gaping tax loophole that was about to expire. It allowed multinational corporations such as GE and Ford to preserve forever a key weapon in the corporate tax dodgers armory: the freedom to shift profits overseas. Tell me, how exactly is providing incentives to keep money out of our economy supposed to stimulate our economy?" Further stated is how the government shoveled out money to big business without conditions, which means that this money that was aimed at creating jobs is now going to the CEOs compensation package (124). Without conditions on these taxes, corporations can funnel profits offshore with tax deductions (125). All of these tax incentives to leave make it easier for corporations to pick up and move their profits to a new country while they are staying in America for all the benefits and securities one gets from this country. Such actions have shown high risks of ruining the nations economy.
The numerous causes of job flight all mean certain doom for the economy. Short term investments over long-term goals have ruined the companies. NAFTA, globalization, and tax incentives have all proven to be dangerous to workers, labor unions, and society. Cheap labor makes foreign countries look attractive and corporate greed takes the jobs there. All of which are forms of corporate rape (Bevard).
If only the nations leaders would look closer, they would see a problem that could be fixed. Laws and regulations such as an international governing body, fair trade, and Patriot Corporations could all help to cure job flight. Many workers have lost their jobs and livelihood. With such measures from Congress, the nation could prosper again.
The promotion of workers rights is essential. Free trade has hindered the undeveloped countries to the extent that big business pays children, teenagers, and mothers all less than a dollar an hour to manufacture a good (Palast 184). The AFL-CIO calls for the creation of an international governing body to help increase enforceable regulations (New Report). The governing body would be made up of representatives from all countries actively pursuing free trade. This body would be there to support the growth of all nations, including undeveloped countries. Workers would be paid the same in Indonesia as they would in England. These new regulations would then allow for all people of the world to afford the same products that we Americans can afford. In effect, the global economy would be very strong. Since this governing body is international, it would take national governments to fund, and maintain such a body. In the AFL-CIO article "New Report: Bush Economic Performance Failing" it would take a very powerful leader to step forward and push such an agenda, years of diplomacy, and agreements with all nations to successfully create a working body. The long term positives that would come out of this body would far outweigh the short term negatives.
The promotion of fair trade not free trade would also combat the fraud that is globalization. Fair trade agreements would promote social welfare between nations that hold trade agreements. Fair trade would do on a smaller scale what an international governing body could do. As Dave Bevard, president of the local IAM 2063 infers, fair trade would develop a set of countries at a time thus increasing the money flow between countries. The environment, workers, and the economy would all be positively affected. Congressman Lane Evans, of the 17th district, echoes "we need to raise all boats along with the big boats. I dont think we can undo what we have done. That would be too much of a hardship for low-income people" (Allemeier). Once a set of countries were developed in a strong trade union, other countries would try to emulate their agreement (Bevard). Fair trade would also not be a race to the bottom for American workers. American workers are among the best in the world and with same age rates, companies will want to be based in America (Fanning 14). The problem lies in that many people in power believe in pure capitalism, which is to leave the markets and capital flow alone because it will fix itself. Herbert Hoover was a firm believer in pure capitalism, he was the president when the Stock Market crashed in 1929 and led to the Great Depression. Every time the government takes a step forward, an unnoticed clause in a piece of legislation causing the government to take two steps back.
A bill floating through Congress called Patriot Corporations is the closest America has come to fixing the phenomenon of job flight. Patriot Corporations would take the business tax from thirty five percent to fifteen percent for those companies who keep their manufacturing jobs in America (Bevard). This bill is an attempt for Congress to reverse their tax incentives to leave. The federal government until this bill has stuck by big business. Reversing the tax incentives to leave should in turn keep jobs in America. This bill, if passed, would keep a number of Americans employed. This bill is not law yet; therefore, it cannot affect the economy. The majority of Congress is conservatives who do not like modifying free trade. The representatives like trade the way it is and see no reason to take action. Representatives are also swayed by big business and all of their special interests. For example, ten corporations spent $306.6 million dollars in lobbying from 1997-1999 (Huffington 97). Big business is armed with a big budget to sway votes and to hire lobbyists. Enron turned the art of lobbying into a science (104). In all of their glory, Enron created "The Matrix" in which they input the relevant data in the impact of a new federal regulation. The computer program would then come out with how much this new regulation would cost the corporation. If Enron does not like the results, they send lobbyists to defeat the bill. Yes, lobbying works. Enron passed the Commodity Futures Modernization Act of 2000, which allows companies like Enron to trade derivatives that happens to be a $95 trillion dollar industry, by themselves (104). The government is being swayed by special interest groups to help the haves and hurt the have-nots.
An international governing body, fair trade, and a bill known as Patriot Corporations would all work together to keep money flowing through the U.S. economy and keep jobs here. Without such actions, the U.S. could become a second rate economy.
America is in a race to the bottom for manufacturing jobs. The exodus of corporations leaving is enormous and there is no apparent benefit to free trade. On the contrary there has been a lowering of wages, the breakup of entire communities, the displacement of families and record breaking imports into this country which threaten to increase the failure and prevent the development of small and medium size manufacturing concerns (Fanning 26). The government needs to take measures to persuade the corporations to stay in America with tax incentives. The easiest way to do this would be to modify a new bill known as Patriot Corporations. This bills intent is to decrease the business tax on companies who keep their jobs here in America. It would decrease the tax by twenty percent (Bevard). Unfortunately, this would not be enough to stop the exodus of jobs. This bill is going to be hard to pass because the corporations who it would harm would use their lobbyists and political donations to defeat the bill. The case in point would be Enron (Huffington 104). Many conservative lawmakers would not support this bill because it is stepping into private business which they do not like. President Bush has tried many things to help out big business. He put a provision in the economic stimulus package that allows corporations to funnel their profits offshore (Huffington 125). However, he is not going to help pass or even sign a bill that has a chance to reduce profits to multinational corporations. Even though the social well-being of America would in the end be better because of this modified bill, it will not pass due to corporate lobbyists and their generous donations. Modification to this bill is needed. This bill has to decrease the benefit to use cheap labor which is the whole economic profit for a corporation to leave. Clauses that would do such a thing would be to force American corporations to follow United States laws and also close the tax loophole for multinational corporations. This would make cheap labor in other countries not as cheap because of minimum wage, overtime, child labor laws, and taxes. This would decrease the benefit of cheap labor because business would still have to pay for the shipping of the goods back to America, which is where they sell their goods, and would also pay a heavy tax to the United States government. Now, undeveloped countries would not look like a "for sale" sign to corporations. It would make American corporations more profitable to stay here in America. American workers are among the best and brightest in the world. They produce the best goods, and demand a reward for their hard work. This reward is what keeps the economy growing because it is being spent on more goods. The federal government needs to bring this reward back. The federal government does close loopholes and does take measures to bring such rewards back. Clean Money Clean Elections is a new campaign finance reform bill that would limit the power of special interest and lobbying groups during elections. Special interest groups were talked about in the federalist papers which were written by James Madison, John Adams and John Jay. These groups were assumed to be positive until they gained power. Now, they are extremely too powerful and the government is doing something about it. They need to also do something for workers and pass Patriot Corporations. This bill has an opportunity pass because of the upcoming elections. President Bush needs to come back down to reality, instead of partying with his buddies Al Dunlap, Jack Welsh and Ken Lay. These are only three votes when he needs a total of over sixty million in the right states to win. President Bushs poll numbers have been on the decline since after September 11 (Klein 27). He is going to have to pass this bill to become the compassionate conservative and bipartisan that Bush campaigned on (27). By modifying and passing Patriot Corporations, the government would take a firm stance against job flight and stand behind America.
Unless something is done, job flight will continue to affect the livelihood of all Americans. In less than nine years, the United States job Market has been decreasing. The major exodus of American corporations to foreign countries has crippled the labor movement and stagnated the economy. Companies follow short-term gain policies instead of more profitable long-term investment policies. Laws and regulations such as an international governing body, fair trade, and Patriot Corporations could work together as a vaccine to help cure job flight. Something needs to be done about this phenomenon before it is too late.
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