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Bert22306
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CEO
Globalization is the great equalizer
Bert22306   5/7/2014 6:11:32 PM
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What you describe is a self-regulating machine. Jobs move offshore when they are more cheaply done offshore, and then the natural order of things will bring those lower offshore costs up in due course. Which encourages some amount of re-shoring.

The emphasis on government, IMO, is unnecessary. We fortunately live in a country in which we don't expect government to lead us, its lowly subordinate subjects. The other way around, more likely.

I think the most surprising aspect of this is how quickly the regulating mechanism is working these days. It's not generations anymore.

Seems to me, the other natural result is income inequality. There will always be jobs that require lower skill levels. But if you have a tremendous global pool of labor available to industry, then it seems inevitable that pay for the easier-to-fill jobs will continue to be pushed downward. (Re-shoring only happens when these jobs can be done for low-enough pay also at home.) Or beyond that, the job gets replaced by industrial automation, at home. All of which creates more income inequality.

henry..12
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Blogger
Re: Globalization is the great equalizer
henry..12   5/7/2014 8:10:00 PM
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@Bert22306 I unfortunately do see a role for Government in rebuilding skills that have all but disappeared in the US over the last 30 years.

Government's current involvement in reshoring amounts to tax breaks (again) for manufacturing jobs. Sadly, many of the more highly skilled jobs are not the focus of the US government's efforts to reshore jobs.

It's easy and fast to move semi-skilled job: the US white goods workers who lost their jobs to foreign workers know this well. A tax break here, a trade zoine here, and pretty soon the scales tip back to domestic production. Interestingly enough, this is a fact around the world.

Where might we need some spurring by GOvernment?  You don't need to look hard to understand the dynamics. Eucation credits, training programs, and the inevitable demand for tax credits. I'm not sure how much any of this ios "needed" but it sure seems like some parts of the US have a lock on the formula. Unfortunately, a big chunck of the formula includes big tax breaks.

I'm reminded of an aero-space company developing composite airframes for small passenger jets. They received many millions of dollars in state-backed loan guarantees. But when I looked at the company the establichment in a New England location (even though it was located near a massive runway) made no sense. That company ultimately relocated out-of-state where there was a larger, highly trained, workforce - and many more millions of gyarantees and tax breaks.

 

LarryM99
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CEO
Re: Globalization is the great equalizer
LarryM99   5/8/2014 1:20:40 PM
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Both tax breaks and education programs can be effective, but the former can happen relatively quickly while the latter typically need longer than an election cycle to see results. All else being equal, government policies will therefore tend towards the quick fix.

During the recent recession there was a real lack of demand for labor at pretty much all levels. In this situation the only real possibility for a jobs program would be to hire one group to dig holes and another to fill them in. Now that we are coming out of that situation companies are starting to really need people. They are trying to get the best people as cheaply as possible, hence all of the tax games and fussiness about picking only people with exactly the right skills and history. As the labor supply shrinks and demand increases both tax incentives and hyper-specific training requirements will figure less and less into the equation.

There have been opportunities for all parties involved to think ahead. Companies could have taken the opportunity to do significant long-term research over this period. The government could have instituted real training programs as the layoffs were growing. Laid-off workers could have gone back to school or otherwise upgraded their skills. Any combination of these would be accelerating the economy and job growth right now.

Sheetal.Pandey
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Manager
Re: Globalization is the great equalizer
Sheetal.Pandey   5/8/2014 2:50:37 PM
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Actually US companies must keep all design and development jobs in their home country. The companies must bring the engineers they like to US and allow them to work there. Its good both for the company and the engineer. And only routine and maintenance jobs must be ousourced from cost perspective.

henry..12
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Blogger
Re: Globalization is the great equalizer
henry..12   5/8/2014 3:47:53 PM
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@Sheetal.Pandey  Actually, ALL jobs are always at risk, save for a very few select people (mostly government contractors with security clearance requirements). The notion that any company *must* keep any job in their home country is simply a fallacy.  The very same financial rationalization that led to offshoring manufacturing jobs is also at work for skilled engineering jobs.   

henry..12
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Blogger
Re: Globalization is the great equalizer
henry..12   5/8/2014 3:58:00 PM
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@LarryM99 You make excellent points. But for me, the take-away message here is summed up nicely in your last paragraph: EVERY party had an action that they could have taken during tyhe downturn. 

Unfortunately, money for retraining or more education was "available" but far too many individuals couldn 't actually use the opportunity.

perl_geek
User Rank
CEO
Action at a distance
perl_geek   5/8/2014 4:21:21 PM
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Robert Townsend pointed out the hidden difficulties involved with far-flung operations in "Up the Organisation" nearly 50 years ago. Time zone mismatches, shipping delays, cultural difficulties, &c. can all negate simple wage differentials, even big ones.

A case study is Gildan, a Canadian company that makes t-shirts, hoodies, and similar garments; the classic low-skill trades that scurry round the Third World in search of cheap workers. Y

You might expect them to employ Vietnamese, Bangladeshis, or inhabitants of the sweatshop nation du jour. Not so. Canadians would be impossibly expensive, but factories in the Dominican Republic enable them to beat Chinese firms on price, quality, and delivery dates.The DR is relatively close, and in a reasonable time zone relative to Canada.

 

henry..12
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Blogger
Re: Action at a distance
henry..12   5/8/2014 6:03:55 PM
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@perl_geek with the average wage in teh Dominican Republic being less thasn 6000 pesos (about $139)  per YEAR, I personallty don't see that choosing to use the DR worker really says much more than "exploit wage differences" to me. The Dominican Republic beats asia hands down for logistics.

 

perl_geek
User Rank
CEO
Re: Action at a distance
perl_geek   5/9/2014 10:12:47 AM
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@henry..12 In a labour-intensive but low-skilled trade like basic clothing, "exploit wage differences" pretty much defines management's job. Why struggle to keep people in a low-value-added job if the economy develops opportunities for them to do better?

henry..12
User Rank
Blogger
Re: Action at a distance
henry..12   5/9/2014 8:15:11 PM
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@perl_geek  The point for businesses should be to innovate even for, and probably especially for, the low skill jobs so that they can stay in the country of origin. I know that nobody in Canada or the US can compete with a Dominican average salary. I don't begrudge them their need to make an income. But all we have to do is look at decisions of the past to move the "low skilled, low pay" jobs to the country de jeure and we see an inexorable migration of the better paying jobs to those same coutrues as their workforce gains experience. Ceeding control to another workforce just bvecause it's cheaper is often not the answer.

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