Creating Jobs in the US: The Challenges and Obstacles

I listened to the Washington Journal on CSPAN today. The guest was Scott Paul. He is the Executive Director of the Alliance For American Manufacturing. This article is a discussion of how we could bring jobs back to the US.

The first issue with regard to increasing jobs is the suggestion that the US should repeal the minimum wage law. The only possible goal of this repeal is to lower wages. The theory is that this would make us more competitive with foreign nations. But the motivation behind repealing the minimum wage law is misguided. It implicitly affirms that the US trade agreements do not account for the differential in wages between the US and other nations. Unfortunately it also implicitly affirms that the US Government is unlikely to do anything to correct the flaws in the trade agreements. In other words, the repeal of the minimum wage law is treating the symptom instead of the problem.

The problems the US needs to address are much more deeply rooted and will not be resolved by forcing lower wages on the US worker. The biggest problem is the different ways in which other nations support their industries.

Scott Paul gave a specific example: Manufacturers in Germany pay their manufacturing workers about about 25% more than US manufacturers pay their manufacturing workers. One would think the US manufacturers would have a competitive edge over the German manufacturers in the global market.

The German manufacturers have the competitive edge. Why? Because Germany offers far more government support for it's manufacturing industry than the US does.

What kind of support? First and foremost, the US is one of the few nations in the world that burdens it's businesses with health care costs. Second, the US often does not provide adequate funding for vital activities like research and development. Other nations do. Third, the US does not apply fees to imports from other nations wherein wages are lower than in the US. The US should apply fees to imports from other nations and those fees should be large enough to compensate for the government support given to firms in foreign nations and large enough to compensate for the difference in wage scales.

Instead, the US has done the opposite. A clear example of the willingness of our government to keep our firms at a disadvantage in the global market happened during the administration of President George W Bush. The contract for a presidential helicopter was not awarded to a US manufacturer. It was awarded to a manufacturer based in a foreign nation.

As long as there is an aversion to active government support of industry in the US accompanied by an aversion to the concept of leveling the playing field with import fees; any administration, regardless of political party affiliation, will fail to increase jobs (in the US) to the level needed.

The second problem is that political parties make decisions in accordance with their ideologies instead of making decisions in accordance with reality.