The 'Exporting Jobs' Scam

by Harry Browne

March 13, 2004        

The burning issue of the day is the "exporting of jobs" to foreign countries by corporations.

As the prevailing wisdom would have it, greedy corporations are taking advantage of lower wages in foreign countries taking jobs away from Americans and giving those jobs to foreigners who will work for much less money.

In other words, American companies make their products overseas and then bring them to America to sell to Americans who were denied jobs producing those wares.

The politicians who are upset about this practice rarely suggest any specific solution; they just promise to put a stop to it. The TV commentators who are exercised about it also are short on solutions; they just seem to enjoy viewing with alarm.

The only concrete solution that's been offered (that I've come across) is the introduction of state laws to require any companies doing business with the state government to produce their products within the U.S.

Economic Illiteracy

Politicians are notoriously economically illiterate. And even when they know what would be the right thing, we don't really expect them to do it.

But we do expect financial and economic reporters and "experts" who appear on television to have some grasp of whatever they're discussing. Thus, when these "experts" join in the chorus of outrage over greedy corporations exporting jobs, it's easy to believe there must be something to the complaint.

But just once I would like to see someone on television ask one of these politicians, reporters, or "experts" the following question:

Since American wages have always been much higher than wages in Thailand, India, Indonesia, and other Asian countries, why weren't American companies exporting jobs to those countries 30 or 40 years ago?

Or:

Since wages in African countries are even lower than those in Asian countries, why aren't American companies exporting jobs to Africa?

Or:

Since wages in America are lower than those in Japan, why don't Japanese companies export jobs to America? Yes, they have factories here that employ Americans, but those plants make products that are sold here. They don't ship the products to Japan to be sold. American companies build factories in foreign countries but don't sell the products there; they bring the products here for sale.

If you think about these questions, you can't help coming to the conclusion that jobs aren't being "exported" because of wage differentials, but rather for some other reason.

Chasing Companies Away

What is the reason?

Most likely, companies are heading overseas because U.S. regulators just won't quit heaping more and more demands on American corporations. . . .

  About the only sure way a company can avoid discrimination suits by government regulators or individuals is to hire by quotas, which certainly isn't the most efficient way to build a workforce.

  EPA officials can make a company's life miserable by demanding changes in the way a product is produced changes that conform to government rules but don't make the environment any safer.

  At any time a company might have to make major changes in its facilities to accommodate new rules for dealing with disabled employees or customers.

  In addition to the wages paid to employees, companies must collect and contribute to payroll taxes that grow bigger and bigger over the years.

These are just a few examples of the many regulatory problems companies face. Every little regulation, every demand, every new policy imposed by the government costs money. And at some point, it simply becomes too expensive to continue operating within the United States.

It's interesting that some of the politicians and reformers who have demanded the above impositions on business are the same folks who are condemning the companies that move some of their production facilities offshore.

The Solution

And what solution do they propose to stop the "exporting of jobs"? More government, of course which will chase more companies overseas.

If they really want to bring those jobs back, there's a simple way to do it: repeal all the regulatory legislation that's driven companies to export the jobs.

How soon do you think that will happen?

If your answer is "never," you're probably right. So the "exporting jobs" problem will be with us for a long time.

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Also see:
"Seeing through Economic Fallacies: Is America in Trouble for Lack of Manufacturing?"