Oppo-Economics: Outsourcing Jobs

"GhostZ" (GhostZ) 10/06/2015 at 10:27 • Filed to: None

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Obligatory light truck and “DON’T READ IF YOU DON’T WANT TO TALK ABOUT POLITICS” Warning.

You read the title? You read the warning? You’re still here? Good. Okay.

Over the last few days on the front page I’ve seen a lot of extremely long and exhaustive posts about how outsourcing jobs is going to destroy our economy in the US.

In relation to both the Trans-Pacific Partnership and Autonomous cars, there are commentors who believe that our economy will crash and fail due to both because it will cause people within the US to lose their jobs, reducing the amount of money they have to spend otherwise. Any profit that comes from the new labor sources goes to the wealthy 1% who “don’t give back” to the economy and instead hoard wealth.

An example of the type of statement I’m talking about:

“Foreign labor (And tech like autonomous cars) serve to only put money in the hands of the wealthy investors, who hoard the income and don’t give back to the economy (a CEO who makes 100x the average income doesn’t buy 100 homes) and it’s destroying our economy by increasing thew wealth gap and putting people out of jobs.”

Can someone with a cool head explain both the reason and the purpose of believing this? And possibly someone with an opposite view explain it better? It seems to me that it’s just ignorance on part of how investment works.

FazeRacer > GhostZ 10/06/2015 at 10:36

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Honestly if you are in the working class in the US you should be afraid. The wealth gap is increasing at an insane rate. Why would companies build things in the US if they could be made in Asia at 1/2 the cost? That’s more money in the pockets of the company’s shareholders, ie. rich white men.

GeorgeyBoy > GhostZ 10/06/2015 at 10:37

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Once you watch “Inequality for All” on Netflix you become an expert economist.

TractorPillow > GhostZ 10/06/2015 at 10:39

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I have a cool head, but what you wrote is very hard to read/understand. Maybe try proofreading and specifying what you want to know. (honestly not trying to be rude)

GhostZ > GeorgeyBoy 10/06/2015 at 10:40

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This reminds me of when Capitalism: A Love Story came out. I might just have to watch Inequality for All to figure out what’s crawled up some people’s asses.

spanfucker retire bitch > GhostZ 10/06/2015 at 10:43

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Read this. It is single-handedly the most informed thing I’ve ever read on the TPP.

http://economixcomix.com/home/tpp/

GhostZ > TractorPillow 10/06/2015 at 10:45

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Cleaned it up a bit, early morning tired typing. Thanks.

GeorgeyBoy > GhostZ 10/06/2015 at 10:50

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I recommend, just so you can tell when someone regurgitates some Robert Reich nonsense.

Future next gen S2000 owner > GhostZ 10/06/2015 at 10:57

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That train of thought comes from woe is me and the sky is falling. Its not completely wrong but the extent the damage from outsourcing jobs is greatly exaggerated.

bob and john > GhostZ 10/06/2015 at 10:57

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something like this is a little more suited to cigar lounge then oppo

GhostZ > bob and john 10/06/2015 at 11:00

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Not an author there and never post there. If you want to share it, by all means!

MasterMario - Keeper of the V8s > GhostZ 10/06/2015 at 11:03

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People don’t seem to understand that America is not the whole world. Jobs going oversees actually put money in the hands of people overseas, sure working conditions may not be great, but most industrializing nations generally go through a period of poor work conditions. Once workers gain more rights though quality of life increases dramatically. Jobs going overseas are actually increasing the quality of life world wide, even if it somewhat negatively affects the US. And people are always afraid of new tech and how it’s going to put everyone out of a job. It never comes to fruition. People either retire or learn a new trade. New tech means new jobs, sure you may lose old jobs, but new ones arise. People are always predicting economic doom, but you know what, the world keeps turning.

bob and john > GhostZ 10/06/2015 at 11:07

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you just have to ask one of the mod nicely...

hey what do you know...I happen to be a mod there!

i’m going to ask you to comment on something there so I can add you

Sweet Trav > GhostZ 10/06/2015 at 11:10

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Simply put, the cost of labor will always equalize to the low side globally. Meaning with exchange rates, and the levels of wages workers are willing to accept in the TPP areas being much lower than the wages of industrialized Europe and the US, there is a great economic incentive to move manufacturing jobs from the US to low cost countries.

Three things will suffer, the overall quality of goods (Trust me I build the exact same part in China, and the US due to localization, the US part has far fewer defects per million), the wages of manufacturing in the US (If I can pay a person in Vietnam $0.06 an hour to build a widget, why do you deserve $25 an hour to build it in the US) now one would expect that the savings of $24.94 would show up in the cost of consumer goods, but its pretty clear after NAFTA it does not. Finally the TPP will have a tremendous impact the environmental quality of the member countries, there are no real enforcable environmental policies contained with the treaty. Essentially, they are asking all of the producing countries to act like China when it comes to environmental quality.

It’s a dupe for anyone who doesnt already have a couple million in the bank. For general consumers, your price of goods will not decrease. For those in manufacturing, you are too expensive to keep on the payroll. For anyone in college, you’re fucked. (just kidding)

Oh and it makes child labor and trafficing only a misdemeanor.

http://www.huffingtonpost.com/stan-sorscher/…

nermal > GhostZ 10/06/2015 at 11:17

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Of my last three vehicles, one was built in Mexico, one in Germany, and one in Ohio. The Ohio-an one was a total unreliable shitbox, the other two have been flawless. So there’s that.

As far as moving production to out of the US, there are a few factors to consider. First, cost to do so. Shipping a vehicle halfway around the world is expensive, so you need to ensure that manufacturing costs can be reduced enough to offset that. I have no problems with using cheap foreign labor for that. They’re willing to work for less, great! No different than Mexicans picking vegetables or milking cows in the US.

The other major issue is environmental impact. As long as the pollution output is similar in the overseas factories to domestic ones, then it’s no issue.

Finally you have build quality - Again, it needs to be on par or better with domestic production.

Otherwise, let them do it. I’d consider a New Ranger for my next truck, even if it was built in Indonesia using child labor that was lured from the shoe factory across the street for an extra $0.25 / day. Assuming the cost / pollution / quality mentioned above is up to par, of course.

yamahog > FazeRacer 10/06/2015 at 11:22

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Don’t forget, there are no “working class” Americans, just “temporarily down on their luck” future millionaires who will vote against their own best interests because they believe they’re better than and not in the same tax bracket as those alleged damn lazy greedy poor people looking for free stuff.

Hahayoustupidludditeshutupandgohandcrankyourmodeltalready > Sweet Trav 10/06/2015 at 12:24

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bump

Manwich - now Keto-Friendly > GhostZ 10/06/2015 at 12:39

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I’ve taken some economics courses at the high school and university level, so I’ll try to give you both sides. But note that I’m not an expert in economics.

“Foreign labor (And tech like autonomous cars) serve to only put money in the hands of the wealthy investors, “

What I see here is a faulty premise... in that there is an assumption that all investors are wealthy. I personally I’m an investor. I don’t consider myself wealthy unless I’m going to compare myself to the average person in Africa. What is the baseline for “wealthy”? Also, what constitutes “foreign labour” depends on where you are. Workers in Canada are “foreign labour” to everyone outside of Canada. Some uneducated people think that every “foreign worker” = one less job for a “domestic worker”.

But that’s not how things work in practice. The pool of workers needed is not a fixed number and it’s not a zero sum game.

“who hoard the income and don’t give back to the economy (a CEO who makes 100x the average income doesn’t buy 100 homes)“

You can call it “hoarding the income”, or you can call it “saving for your retirement”... but it’s basically the same thing. As for CEOs who get overpaid... well the solution to that is to buy shares and vote against electing those CEOs. But pulling that off means ditching your mutual funds, buying stocks directly and being involved.

“and it’s destroying our economy by increasing thew wealth gap and putting people out of jobs.”

Saving money doesn’t destroy the economy per se. But it can look that way in the sense that money is being taken out today for use at some time in the future. So in the short term, it can look and feel like it hurts the economy. You also have a *redistribution* of jobs. Of course people only look at the jobs lost... and ignore the jobs gained elsewhere. And that’s why some uneducated people believe that it “destroys the economy”.

“It seems to me that it’s just ignorance on part of how investment works.”

I agree... it is ignorance. But not just with how investment works, but also when it comes to macroeconomics.

In my opinion, macro/microeconomics should be a required course taught in every high school. Economics-related courses were some of best courses I took in high school and university.

Manwich - now Keto-Friendly > spanfucker retire bitch 10/06/2015 at 12:40

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Essentially what you’re saying is that people shouldn’t “save for their retirement”.

E92M3 > GhostZ 10/06/2015 at 12:47

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Completely false. The middle class is the enemy. The rich executive is a busy person. He does nothing but work, with no time or desire to do anything else. Everything from washing his cars, to cleaning his house, remodeling the house, to gardening is done by other people that he employs. The 1% also don’t leave money idle in a savings acount. It’s all invested somewhere. The middle class cut their own grass, wash their own cars, clean their own toilets. They try to be a jack of all trades so to speak. They will stash money in .01% savings accounts. The executive flys first class which makes the coach fare cheaper for all of us. He’ll take a taxi, Uber, or a Limo to the airport instead of asking for a friend to drop him off. The Porsche he buys helps the dealership exist that employs 40+ people. Etc,etc, etc.

Our biggest threat is the shift to “knowledge jobs”. Blue collar jobs are looked down upon, and we are taught from an early age to go into a large amount of debt in ordet to get a respectable white collar job (which essentially makes you a professional emailer). People don’t really know much about how anything actually works. They couldn’t even change their windsheild wipers if you asked them. These knowledge jobs can be done anywhere aka: outsourced. A plumber, HVAC repairman, etc can’t be. There will come a time where the tables will turn, and the blue collar workers will be in short supply, and they will make more than anyone sitting in a cubicle. They will also stay employed their whole life with no unemployment gaps.

Sweet Trav > MasterMario - Keeper of the V8s 10/06/2015 at 13:03

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You’re right in the fact that these types of deals do help poor-er countries become less poor. Which is certainly a good thing. However, these types of trade agreements have No minium wage agreement, No environmental restrictions, no worker safety laws, no worker’s compensation, no medical, no right to collective bargaining. if these types of things were in these free trade agreements, they would be that much better for the world.

Might this agreement take some dirt poor people and upgrade them to just plain poor? yes probably. but let’s not try to say this is some sort of bootstrap pulling humanitarian aid. The powers that be are exploiting a whole region of the globe for cheap, expendible labor.

I mean China has been (for the most part) in deplorable working conditions for the past 60 years, not to mention the irreversable environmental damage that has been caused by their rapid and inexpesive growth. You also tend to assume that workers will gain more rights over time, if the (land of the free and home of the brave) US is the trend setter, workers will get some rights over the course of 50 years, then have them whitled away over the next 30.

If done right a trade agreement can be a wonderful thing to happen to an undeveloped country. the problem is we have yet to "do it right" and the TPP is not even a step in the right direction.

spanfucker retire bitch > Manwich - now Keto-Friendly 10/06/2015 at 13:18

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Do you save for your retirement by socking away fist full of bills in your mattress, or do you use a 401k or IRA, or any other investments so you can get your savings to grow?

Besides, that’s not what I’m saying at all, and that isn’t what the comic is saying either. I don’t appreciate strawman arguments.

Sweet Trav > nermal 10/06/2015 at 13:27

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1. Anecdotal evidence, but seeing as ohio is the worst state in the union, i can see why anything from that god awful state is a shitbox.

2. Working for an international supplier, its not the vehicles that will get moved around, its the components. my company has about 9000 employees world wide, some union, some non-union. Most paid a very fair wage, even in China. The problem is that many companies wont pay a fair wage, When you tour these plants and talk to a single mom who works this job 40+ hours a week, who depends on this job to raise her kids, with full benefits and retirement and you’re able to shove 5 million dollars worth of new business into a plant, to ensure that these people still have jobs, its a great feeling.

3. The domestic manufacturing plants are under EPA jurisdiction, overseas plants are not. there is very little enforcable environmental protections in the TPP. Much like china, without oversight the industrialization will cause irreversable pollution to their lands.

4. Really? You'd buy a vehicle utilizing Child Labor? Would you sign your children up to work in a factory?

MasterMario - Keeper of the V8s > Sweet Trav 10/06/2015 at 13:40

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Completely agree. I was talking more in general about jobs moving overseas, not necessarily about the trade agreement specifically. I just hate when I hear people talk about a job moving oversea as if that in and of itself is a reason to get upset. And that’s usually the context people talk about it in.

DrJohannVegas > spanfucker retire bitch 10/06/2015 at 14:40

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First: One would sock away retirement funds in the mattress if they believed that it was a better investment (a better risk-adjusted rate of return) than a 401K or an IRA. Cash is rarely a good way to hold capital, but in times of risk, it can be a safer investment. As Kahneman (one of the economists that webcomic referred to without understanding the depth of his/her argument) suggested with prospect theory, people will often take a less profitable certain outcome over a potentially-more-profitable uncertain one.

Second: The page you posted alongside the link has a curious and subtle inaccuracy in the second panel: what was once an exchange (dollar sign for “Stocks, Bonds, and Real Estate”) has now become theft (dollar sign for nothing). You find strawmen frustrating, I find this kind of imprecision frustrating. Your author engages in the same sloppy, assumption-ignoring behavior which he claims to be refuting. When people put their profits/wages/etc. into savings, it lowers interest rates, as the supply of deposits increases relative to demand. You know why you can borrow money for a house or a car at historically-low rates? Savings. (Admittedly, monetary policy also has an effect, but we wouldn’t want to accuse the Fed of pumping cash into the economy. That’s something only the nasty Chinese do, right?) That’s how financial markets work. The author glosses over all of that to make a political point.

Finally, and most importantly: If you (the webcomic) have to remind me again and again that you aren’t creating a strawman, you probably are. Consider it a paraphrase of Thatcher’s infamous “Being powerful” line.

None of this is easy, none of it is simple. The fact that one can engage with that comic in a reasonable fashion means it’s a damn sight better than many pieces written, drawn, spoken, or videotaped about the TPP. But, by ignoring the very nuance it claims to embrace, painting the outcomes in broad, monolithic class-and-country sweeps, I just can’t take it seriously. The author has clearly read some economics, but just as clearly has a neo-Keynesian ideology.

Also, China isn’t in the TPP. Using it again and again as an example is a red herring, and a despicable one at that. The current Chinese government would never sign on to the kinds of capital openness required by TPP. It’s what allows them to control monetary policy within their borders while maintaining a relatively-fixed exchange rate, not “printing Yuan” (page 9). See the Mundell-Fleming Model.

spanfucker retire bitch > DrJohannVegas 10/06/2015 at 14:49

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1: I have nothing to do with the webcomic, so I don’t know why you seem to be associating me with said comic in reference to “not engaging in strawman.” Also, again and again? I don’t now what you’re talking about, you went completely off the rails there. My comment was in relation to the fact that someone read that one slide and took it out of context.

2: His references to China are about the trade deficit that America has and is only used in the context of explaining other trade deficits - such as the one we have with Japan which is part of the TPP. Any references he makes to China isn’t about specifically how the TPP will affect trade between our nations, but to contextualize the effects.

3. As to why the interest rates are low, of course it’s the Fed. I don’t know why you even bothered making such a veiled remark about it. For the last 6 months the IMF has been telling the Fed to not raise the interest rates too early and undue the progress that has been made.

Manwich - now Keto-Friendly > spanfucker retire bitch 10/06/2015 at 14:57

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The comic is asinine and itself uses strawman logic. And I highlighted that with my own ‘strawman’ point.

Who is the guy in the middle exactly? Is it Bill Gates? Is it Warren Buffett? Is it Rob Ford? The average baby boomer?

I know one thing for sure... the last time I bought real estate, the money didn’t go to an old man who just hung onto it. The money went to the family who were selling the place because they were getting divorced. And they in turn likely used it to pay for their own separate places as well as use it on their two kids.

And when I bought stocks, there was no guy just selling it and hanging onto the cash most likely. I either bought them directly through my brokerage account or bought shares in a mutual fund (which in turn, invests the money in stocks and bonds). The money went to an individual who owned it or some investment fund like a mutual fund. And typically, investment funds DON’T sit on piles of cash for no reason.

In the case of stocks, if it’s an IPO, the cash was either be used for investment in a business or to pay down debts racked up from past investment. NO company just sits on cash for no reason. Neither do very many individuals.

You could argue that banks sit on capital. But then you should also know that banks are required to have a certain amount of capital on their books. And many companies sit on a certain amount of capital so they can weather industry downturns. Failure to do so can lead to bankruptcy... as should be clear to anyone who was watching the auto industry over the past 10-15 years.

So tell me... who is the guy in the middle and what is it exactly that you’re trying to say about him?

Manwich - now Keto-Friendly > E92M3 10/06/2015 at 15:08

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“There will come a time where the tables will turn, and the blue collar workers will be in short supply,”

Some say that time has already arrived. Though some of them are liars... such as trucking companies when they say there’s a shortage of drivers. In reality, there’s only a shortage of drivers who will work for next to nothing.

Manwich - now Keto-Friendly > Sweet Trav 10/06/2015 at 15:13

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“now one would expect that the savings of $24.94 would show up in the cost of consumer goods, but its pretty clear after NAFTA it does not”

As someone who lives in Canada, I can tell you from first hand observation that there were HUGE drops in the cost of some consumer goods after NAFTA... with software and clothing in particular. Software packages that cost $60 got $20 cheaper overnight. Clothing that in the past cost $40-60 could be had for $20-$30.

It did spell the end for Canada’s outmoded and inefficient textile factories. But there is still a clothing industry up here... only that it was forced to modernize and get efficient.

DrJohannVegas > spanfucker retire bitch 10/06/2015 at 15:29

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1) That was a narrative attempt which, in hindsight, was bad in both concept and execution. I am well aware that you are not the author of the webcomic. I’ve encountered his work before. Sorry for the confusion.

2) The US has trade deficits with many countries. See: https://www.census.gov/foreign-trade/… Using China as the example is a classic red herring. China is the bogeyman of the day (as Japan was in the 1970s and 1980s, and Latin America - Mexico in particular - was in the 1990s). There’s plenty in US-Japan trade to discuss, and it would be more topical.

3) I can assure you that, were I trying to veil the importance of the Fed, I would have tried harder. Rather, I was hoping to highlight the hypocrisy in complaining about opportunistic monetary policy. Also, while the Fed funds rate does determine the prime lending rate, the actual market rate (which I shared in those links) is a combination of that rate, a risk premium (as any commercial loan is far riskier than Treasury debt), and market conditions in the demand and supply of loanable capital. The fed funds rate itself is responsive to the demand and supply of capital. So, saying “of course it’s the Fed” ignores the fact that the Fed sets interest rates in response to market conditions, commercial loans are not issued at the Fed rate, and my original argument was about the supply of capital for future loans.

Sweet Trav > Manwich - now Keto-Friendly 10/06/2015 at 16:16

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Prices may have dropped, but at what cost to an industry? How many factories ended up shuttered because of it? Regulated trade, would have forced a slow gradual change, NAFTA opened up the flood gates. I mean the CAW is in trouble. From what i can tell Brampton and Oshawa are on the chopping blocks, because (among other things) NAFTA.