Intel Co-Founder Calls For Tax On Offshored Labor 565
theodp writes "Intel co-founder and ex-CEO Andy Grove calls BS on the truism that moving production offshore to locations with much lower wages is a sound idea. 'Not only did we lose an untold number of jobs,' says Grove, 'we broke the chain of experience that is so important in technological evolution. As happened with batteries, abandoning today's "commodity" manufacturing can lock you out of tomorrow's emerging industry.' To rebuild its industrial commons, Grove says the US should develop a system of financial incentives, including an extra tax on the product of offshored labor. 'If the result is a trade war,' Grove advises, 'treat it like other wars — fight to win.'"
How do you decide what's offshored labor? (Score:5, Insightful)
The first thing companies will do is spin off "Offshore Labor, Inc" to a separate corporation headquartered in the Cayman Islands or wherever, then import the products for sale here. No offshored labor here!
Damn Skippy! (Score:3, Insightful)
Dont tax, remove tax breaks. (Score:5, Insightful)
Re:Treat it like other wars... (Score:4, Insightful)
And weak to no media coverage and using the same soldiers over and over until they're ground to a pulp physically and/or mentally and ensure that the general population suffers no ill effects of the war to the point that it doesn't affect more than the occasional purchase of a "Support our troops!" magnetic ribbon.
Balance of tradeoffs (Score:3, Insightful)
1) Low tax, say taxing the corporations for 20% of the difference between US cost of labor and offshored cost of labor. Consumers will pay more in the US, but get no new jobs, and are worse off. The government earns taxes and is better off. The corporations sell slightly fewer products due to slightly higher cost, and are slightly worse off.
2) Medium tax rate, say taxing the corporations for 80% of the difference between US cost of labor and offshored cost of labor. Consumers will pay more in the US, but get no new jobs, and are worse off. The government earns lots of taxes and is better off. The corporations sell fewer products due to higher cost, and are noticeably worse off.
3) High tax rate, say taxing the corporations for 120% of the difference between US cost of labor and offshored cost of labor. Consumers will pay more in the US, but get some new jobs, and are worse off unless they would be unemployed otherwise. The government earns very little in taxes and is barely better off. The corporations sell fewer products due to higher cost, and are much worse off.
Of course, the corporations lose less money if the goods in question are price inelastic (demand doesn't drop that much if price increases) and there's a social benefit from more employment and technical expertise, but the government gets the most money in case 2, where everyone except for the government is made worse off by the taxes. In real life, there's a huge time in cost and effort needed to move manufacturing back to the US, what with hiring new managers, building or reopening factories, establishing entirely new supply lines, canceling contracts, etc. Because of this, companies are unlikely to move manufacturing back to the US even if the tax makes hiring offshore workers the same as hiring American workers; the slight gain in quality and public respect is canceled out by the upfront cost of moving.
I for one sincerely doubt that the US government will tax corporations with a high enough rate to make most of them move back to the US, as the tax income is the lowest in that situation. Sadly, even if this knee jerk reaction goes through, social benefit to consumers and citizens will likely take a back seat to corporate interests and government revenue collection.
Re:how is it (Score:3, Insightful)
You have obviously never tried to convince an American "businessman" to consider customers first and profits second.
Re:Government is the problem, not the solution (Score:3, Insightful)
Or just remove worker benefits entirely. And freedom of asembly. And speech. And make it easier to bribe government officials. Also workhouses. Rows and rows of beds. That's the way to increase employment! Make workers so cheap and desperate that their only alternative is slow death. We did eliminate healthcare, yes? Good.
the economic justification is actually simple (Score:5, Insightful)
Now, I would consider myself fairly conservative. Usually the argument goes "they're taking our jobs!! We need to enact protectionist policies to protect American workers!"
Doing this blindly, I have a problem with it-- it doesn't make economic sense. If we are more efficient at producing one good, and they are more efficient at producing something else, then it doesn't make sense for us to waste money trying to produce it ourselves in the States.
However, I cannot economically justify free trade when
1). the trade occurring is uni-directional (IE, we're buying from them and they're not buying anything of ours-- I don't count China's investment in Treasuries as real goods-based Trade [even though financial trade is _technically_ trade])
2). one of the countries (China) involved in the trade refuses to let their currency's value be determined by the market.
In other words, what we have now is not true "free trade". If it were free trade, China would be buying our products [unfortunately much of our product is now Intellectual Property and it's difficult to enforce consumption of these goods], and China would not be fixing the value of their currency. If they weren't fixing the value of their currency relative to ours, then any trade imbalances would be slowly corrected as it becomes more and more expensive (in dollars) to outsource labor/manufacturing to China.
The Intel guy is mostly right; we just differ on how the imbalance should be corrected. I'd much rather a natural, market-driven return to mean, than a politically dangerous (taxing imports) one.
Re:Damn Skippy! (Score:5, Insightful)
I would rather pay a get more for the product to ensure I get good customer support.
You say that now, but how many products tell you where their tech support is based on the packaging? If you see two identical products on the shelf and one is ten bucks less than the other, you're going to buy the cheaper product without even thinking about where their call center is. Consumers cannot be trusted to vote with their dollars on things like this, especially since in the vast majority of cases they are called upon to make purchasing decisions with incomplete information.
Global free trade is one of those things that sounds really good in theory, but in practice ends up driving down wages everywhere, decreasing quality of products and services, and gutting the middle class of more prosperous nations. We've seen this over the past decades. Unfortunately, both consumers and suppliers make decisions on short-term scales, meaning they tend to make decisions based on what the balance sheets say today without even considering the impact those decisions will have years or decades down the line. In theory, government regulation is supposed to help provide a hedge against that sort of thing, since governments are supposed to be concerned with more long-term economic matters.
This is not to say globalization in and of itself is bad. However, it needs to be undertaken much more carefully and gradually than it has been. Simply dropping all tariffs and letting businesses run wild all at once has produced a situation where everyone except for the very richest among us suffers, and even they will start to suffer if we allow the middle class to completely disappear and they have to drive through squalor on the way to their gated compounds like they do in many developing countries.
It's in everyone's best interest to preserve a robust middle class in developed countries and encourage the middle class to grow in developing countries. Globalization policies should be undertaken with that goal in mind, not with the sole purpose of driving down cost as has been done so far.
Re:Is Grove running for office? (Score:4, Insightful)
Too bad he's not the CEO anymore.
And too bad all of Intel's products seem to be made in China these days.
Re:Is Grove running for office? (Score:5, Insightful)
If the laws and taxes make it economically infeasible to compete without offshoring, Intel like every other corporation will offshore. Grove is suggesting we make it more feasible to compete with local labor because of the long term benefits it will have for innovation. I expect if it were economically feasible to keep work here they would.
Nothing hypocritical here.
Re:Dont tax, remove tax breaks. (Score:5, Insightful)
When you frame something as "demonizing," you're implying that the characterization of demonic behavior is not accurate.
Given the actual track record of corporations since the beginning of the East India Company, your implication is false on its face.
Walling yourself in and burning bridges bad (Score:3, Insightful)
That FSCKER! (Score:5, Insightful)
He basically told them they were all fscked. "Somewhere in India," he said, "there's someone willing to do what you do and more for 1/10 your salary. Sitting next to you are people who will do anything to beat you at your own job," and so on. He talked on and on about how much you have to compete to survive, effectively saying, "your work needs to be your life and you need to expect nothing from it."
And that'd all be well and good, but that same year, he was compensated over $100M, partially because of the cost savings of outsourcing, of forcing his employees to compete ruthlessly for each other, and so on. It seemed disingenuous at best to say, "This is the reality," when it's the decision of him and people like him to enforce that reality.
What this change in tone says to me is that he feels that other companies are beating Intel at the outsourcing racket. Maybe he's upset that Samsung is making Apple's A4 for the iPad and iPhone, and he wishes it had been Intel ARM chips going into those millions of devices over the last quarter or so. Maybe it's something else, but this rings of the spoiled kid down the block leaving the game with his football because his team is losing.
There is another way to run your company. Treat your employees like valued contributors. If they don't contribute, find out if they want to be in another role, or another company and let them do that. But if you're always looking to get the cheapest workers, you're in danger of losing your best people, and being beaten at the bottom dollar game as well.
OK, end of rant.
Re:Dont tax, remove tax breaks. (Score:4, Insightful)
But would that, alone, be enough to make offshoring financially ?
If the answer is "no", I would say do it anyway. Tax breaks are really taxes put onto someone else...American citizens. If fewer American citizens are earning money from these companies ( to be taxed ) I see no reason why Americans should subsidize these companies with gifts.
"We broke the chain of experience..." (Score:5, Insightful)
"We broke the chain of experience that is so important in technological evolution..." Darn straight. I sure wish more company management understood that.
You can document a little, you can document a lot, but you can't ever document everything. Every company relies on stuff in peoples' heads. Reading other peoples' code and then being able to ask them about it. Solving problems at the time they occur by talking to the right person for five minutes in the hallway, instead of writing thirty-page memos and scheduling a series of weekly hour-long meetings, which eight people attend so that two of them can talk.
The guy who says "Well, it worked well when we did it thus-and-such way on the Dash-Twenty-Twos."
Even more important, the guy who says, "Well, the reason we're doing it that way now is because of concerns X, Y, and Z that we had on the Dash Twenty-Twos, but those reasons don't apply any more.
Re:Treat it like other wars... (Score:3, Insightful)
FINALLY, someone gets it (Score:1, Insightful)
'Not only did we lose an untold number of jobs,' says Grove, 'we broke the chain of experience that is so important in technological evolution
ding ding ding ding ding ding
Give that man a cigar.
The problem with offshoring all the entry level jobs is that in 5 years, all the folks with 5 years experience will be somewhere else, in 10 years, all the folks with 10 years experience will be somewhere else, and in 15 years there will be few folks around qualified to do more than ask if you want fries with that. (yes, I know that we've been offshoring entry level work for many years, the only reason that we aren't all phone sanitizers by now is that we haven't thrown _everything_ overseas.)
Senior folks, capable of sustaining interesting, cutting edge work don't fall out of the sky. They need to get a first job somewhere. A country that doesn't invest in new hires is sacrificing tomorrow for today.
Re:Balance of tradeoffs (Score:3, Insightful)
3) High tax rate, say taxing the corporations for 120% of the difference between US cost of labor and offshored cost of labor. Consumers will pay more in the US, but get some new jobs, and are worse off unless they would be unemployed otherwise. The government earns very little in taxes and is barely better off. The corporations sell fewer products due to higher cost, and are much worse off.
You're analysis is impressive, but is missing one point in scenario 3. While cost of goods are higher, domestic demand is raised due to more jobs and a higher median income. Neglecting domestic jobs has reduced demand (less money to shop with), which has been offset by cheaper goods.
Re:Government is the problem, not the solution (Score:3, Insightful)
That is already what is happening....more and more good jobs go overseas, Americans become more willing to accept lower standards of living.
Re:Treating symptoms instead of disease (Score:2, Insightful)
Re:Ugh (Score:4, Insightful)
I think the problem is there just aren't enough jobs. For local / offshore / everywhere.
Too many people in the world, not enough resources, not enough of anything to be honest. So we want to make a system that further skews things because too far in one direction is worse then a crappy balancing act. Offshore pushes towards labor inequality. I just wish the offshore people would demand more from their employers and it seems to be slowly moving that way. But the fact is that there are too many people that can do the same job, but with varying demands of compensation. So taxing them because they are willing to work for less does not seem very ethical to me but that is why I will always be broke. I'm not willing to screw people over just for a little extra money.
Re:Balance of tradeoffs (Score:3, Insightful)
ECONOMIES DO NOT WORK THAT WAY!
If you have a cost and pass it on, your prices go up! If they could raise the price they already would have. Their competitors would drink up their milkshakes if they did what you are suggesting.
Re:Grove is a two faced .... (Score:4, Insightful)
Of course they couldn't find qualified Americans.....for $10/hour. That's his whole point. If the offshore labor was taxed for the same things local labor is taxed for, the scales wouldn't be quite so imbalanced.
Re:Balance of tradeoffs (Score:3, Insightful)
Re:Dont tax, remove tax breaks. (Score:5, Insightful)
I'd live to see the tax loopholes closed altogether, but failing that lets stop reducing money coming in (by sending jobs offshore) while at the same time paying out in tax breaks.
Re:the economic justification is actually simple (Score:3, Insightful)
The Intel guy is mostly right; we just differ on how the imbalance should be corrected. I'd much rather a natural, market-driven return to mean, than a politically dangerous (taxing imports) one.
What would be a realistic example of that?
Re:Is Grove running for office? (Score:1, Insightful)
Only if you define "economically feasible" as "the absolute greatest profit".
Re:Damn Skippy! (Score:2, Insightful)
Global free trade is one of those things that sounds really good in theory, but in practice ends up driving down wages everywhere, decreasing quality of products and services, and gutting the middle class of more prosperous nations.
Wait, what?
Re:the economic justification is actually simple (Score:3, Insightful)
You aren't addressing Grove's point, which is that there is intellectual capital to be gained and retained by continuing to manufacture such commodities ourselves. Textiles vs semiconductors differ in this respect. There is also physical capital we might like to have ready to go, i.e. the fabs, for when China gets tired of taking our Monopoly money.
Re:Is Grove running for office? (Score:2, Insightful)
Re:Grove is a two faced .... (Score:5, Insightful)
When Grove was CEO of Intel, HE was the one who moved much of their R&D overseas because they were "unable to get qualified Americans."
Of course he did. When he was CEO of Intel, his job was to do what was best for Intel. Now that he is not the CEO of Intel, he is looking at a different picture: what is best for the USA. There is nothing two-faced about it.
Re:Is Grove running for office? (Score:3, Insightful)
Intel is already more expensive than the competition. It's not an issue of making money, it's an issue of making the MOST money.
Re:the economic justification is actually simple (Score:2, Insightful)
It's nice to blather on thinking you know something but in fact you do not.
Let me clue you in, the markets will not correct any trade imbalance. The markets do not work for the United States. Witness the epic economic collapse of the banking industry in 2008. Free market forces at work that ripped $2 TRILLION dollars from our treasury and countless BILLIONS of dollars of people's savings, property values, jobs...the economic tsunami was unprecedented.
Free markets without regulation is anarchy.
FYI what's keeping the US economy afloat is all the debt China is willing to buy. China holds nearly $1 Trillion dollars in US debt.
The US has no leverage over China. No one can force China to float their currency. If China decided to sell off it's holdings, the US would be plunged into a depression.
If China decided to float its currency, the US would be hit with HUGE price jumps that would cause great economic hardship to an already poor population. All the cheap stuff from Walmart would become very expensive. Those goods could not be replaced with US versions since all the manufacturing is in China. The manufacturing that is in China WOULD NOT move back to the US because, if you read the article, companies made a heavy investment in China. Setting up a new plant back in the US would be very expensive, take lots of time, then you would have to hire workers, train and scale up production. Unless you have already made the investment today, it would take years to do. That's not going to happen especially since, thanks to the manufacturing in China and Asia, a middle class has developed that can afford to by these cheap goods that China was selling to the US. China could also afford to help develop other industries with all the cash they have. China is cash rich. So they could further mute the effect of a floating currency. And the flip side is, if their currency is going up in value, more investment in China and/or holding its currency may be worthwhile further driving away investment in the US.
Read before you post.
Re:How do you decide what's offshored labor? (Score:5, Insightful)
The logical course would be to tax money based upon where it is EARNED, not where the company resides.
Re:how is it (Score:2, Insightful)
every american businessman inevitably refers to business process in terms of war.
IIRC some business schools used to have, or may still have, The Art of War as required reading.
Re:Grove is a two faced .... (Score:5, Insightful)
He was still an American when he was CEO of Intel. Shouldn't his duty to his country take priority over his duty to his employer?
Re:How do you decide what's offshored labor? (Score:3, Insightful)
The first thing companies will do is spin off "Offshore Labor, Inc" to a separate corporation headquartered in the Cayman Islands or wherever, then import the products for sale here. No offshored labor here!
I agree but it's not hard to figure out who's doing it and just tax their goods.
Re:How do you decide what's offshored labor? (Score:1, Insightful)
Institute a 100% tax on any company that moves its headquarters overseas.
Corporation exist only because they are chartered by the state to allow them too. If they're no longer in the country, their charter is invalid, seize all the assets.
Re:the economic justification is actually simple (Score:1, Insightful)
companies made a heavy investment in China
Which would become a sunk cost.
Setting up a new plant back in the US would be very expensive, take lots of time, then you would have to hire workers, train and scale up production.
And whoever did it first would eat the lunch of people still trying to convert dollars to Remninbi.
Unless you have already made the investment today, it would take years to do.
Should have thought of that before bulldozing your plants.
All of that said... what'd happen isn't any of the above, the corporations currently outsourcing to China would simply move to some other shithole third world country. Maybe convince the US Govt that Somalia or some other slum is of absolute strategic importance and get them to blow away one side or the other -- whichever pays worse -- so they can partner with the survivors to help them employ their starving masses for a bowl of rice or two a day.
Re:Damn Skippy! (Score:4, Insightful)
Really? You have some statistics to back up your claim that the wages in China and India have fallen since they got on the global free trade bandwagon right?
Re:Damn Skippy! (Score:3, Insightful)
I agree with you for the most part, but you left out something important. While, yes, globalization has been driving down salaries of the middle class, it's also reduced the cost of living of the middle class, as well as created a middle class in developing countries like China and India.
It's not that globalization is universally bad -- it's just bad for salaries of middle class workers in developed nations.
Re:Is Grove running for office? (Score:3, Insightful)
>And too bad all of Intel's products seem to be made in China these days.
Err, do you really want to work in a chip fab? They're in China because of China's lax environmental regulations. They're essentially poison factories.
Grove's statements are populist bullcrap. Protectionism isn't going to help. Raising the price of Intel's chips isn't going to help (that's what these taxes will do). Sure, fabs are overseas but all the cushy office jobs that aren't manufacturing are here. If sales drop because of rise of prices, which they will, we'll be laying off our local engineers, marketers, etc because of the drop in business.
The US will never be a manufacturing powerhouse again. We're too rich. We dont want dirty factories polluting our lands and more minimum wage jobs in factory conditions. All countries that can afford to get out of manufacturing do so for a reason.
This is not only good common sense (Score:4, Insightful)
It is not only not good common sense but it is actually bad economically. The protectionist law Smoot-Hawley Tariff Act [wikipedia.org], which became law in 1930, led to the Great Depression. When one country enacts protectionist laws other countries pass their own protectionist laws in retaliation which shuts down trade. Economies then collapse causing recessions and depressions.
If you want to help create US jobs, reduce if not get rid of Payroll taxes [about.com]. Besides all the taxes employers have to deduct from employee pay checks, employers have to also pay taxes [allbusiness.com]. The FICA or Medicare and Social Security tax, employers have to pay half of it. They have to pay federal and state unemployment taxes as well. Not only that but they have to pay accountants to calculate how much has to be paid in taxes. These taxes are paid for every employee, reduce the number of employees and the taxes are reduced as well. Reducing, I'd prefer them to be abolished, federal income and payroll taxes would allow employers to hire more employees and or pay them more. And more people making more money will boost the economy. They will have more money to buy more, driving demand, and or they will invest more thus creating more jobs.
I am completely sick of being screwed over by the corporatist plutocrats.
So hold them accountable, just don't shut down trade.
Falcon
Re:The Other Side (Score:5, Insightful)
And, there is where you show your bias and ignorance of most Americans.
Re:the economic justification is actually simple (Score:2, Insightful)
more efficient at producing something else, then it doesn't make sense for us to waste money
That's where you went sideways.
Getting stuff cheaper works great in the office with the spreadsheet tallying up the beans. The problem comes when the day ends and you leave the office and discover you have to live among all those "inefficient" folk you've outsourced. The ones that no longer contribute to government revenue, leaving the budgets deep in the red at all levels. The ones that end up in tent cities [prisonplanet.com] and lose any interest in being productive citizens. The ones that can't cover their own expenses due to wage competition and instead vote in people that make you cover it for them.
Opps.
Still want to characterize money spent domestically as "waste"? Ever been outsourced yourself?
This indifference doesn't belong exclusively to the 'greedy capitalists' either. The left has not hesitated to create vast imbalances in cost through regulation and then look the other way when business evacuates the US as a result. Pollution, slave wages, unsafe conditions, etc. are all fine as long as they take place in Asia. Lemme stick an 'OBAMA' sticker on my Escalade while cap-and-trade moves the refinery to Mexico. Brilliant.
Re: (Score:4, Insightful)
'Outsourcing' allows smaller firms to take on projects that they otherwise could not afford to do. I own a small business and at least two of my products I could never hope to bring to market if my only option was to use domestic resources. Those products make money and allow me to expand. This is not a burden on the U.S. economy; it is a positive contribution.
The fundamental reason you can't produce your products using domestic resources is not that it would cost too much. It's because you couldn't sell them for enough to cover the costs and make a profit. The reason for that is because Americans today are by and large earning less, because the jobs that paid better are gone. Thus those Americans consume less and so cannot be a source of much profit for business. This is a big reason why the financial services sector has ballooned to 1/3 of our economy, because the other sectors of our economy are dying out and one of the only way to earn large amounts of money is to aggregate other peoples' money (e.g. their savings) and use it for investments. This, however, only makes a small number of people all that much richer, while everyone else continues to participate in a race to the bottom.
The very real problem that perhaps not you, but your children, will need to worry about is this - will Americans be able to afford ANY products our businesses produce? Of course, we all need food, clothing and shelter, but you can't grow an economy if people are only buying the bare necessities. When lots of companies outsource, they're not just reducing their operating costs - by laying off the Americans they used to use to do the job, they're also reducing the number of people who have discretionary income to spend on their products! In small numbers, this is not a horrible thing, but in the past twenty years, something in the range of tens of millions of jobs have been lost, and lots of people have moved from working in factories to working at McDonalds and often working two jobs. In 1960, how many families had two parents working two jobs to make ends meet? It's not uncommon today. Why is that? Obviously, as you yourself have realized, most things Americans can do can be done by people in other countries cheaper, and that mostly just leaves what jobs people MUST be in the US to do, and those jobs tend not to pay very well because they're mostly butt-in-seat jobs.
Unfortunately, each individual company sees in the short term an increase in profits and can't see the long term damage they're doing to themselves, and so they all rush to outsource in search of bigger profits. The big problem facing us is that people like yourselves do not think about the big picture, or, you perceive it as not your problem - you add up the dollars and cents, and if it equals profit, you think it's good. You might want to brush up on your Chinese though, soon they'll be the ones with the money to afford your product. Except that, if the Chinese decide to produce your product without your help (they don't really care about IP), they can probably charge quite a bit less and make an even bigger profit since they don't have to deal with paying an American wage.
Re:How do you decide what's offshored labor? (Score:4, Insightful)
Okay, so I live in Canada, your business is in the states. I order something online.
Where was the money earned?
Re:How do you decide what's offshored labor? (Score:2, Insightful)
So ironic that we're considering implementing the financial equivalent of the Iron Curtain. This has come up for individuals, also. It's just unconscionable. Just exactly what sort of country do you want to live in? Next you'll be proposing we snipe the richies as they attempt to flee the border. That people are considering such extremes just tells me that the current system is broken. Income taxes just aren't the right vehicle for gathering revenue.
Re:Damn Skippy! (Score:4, Insightful)
in practice ends up driving down wages everywhere
That is utterly and absolutely false. Sure the wages paid to Chinese factory workers are low by our standard. However, the wages a Chinese peasant earns in an electronics factory are far higher than the wages he or she would have earned in any of the other occupations open to him or her. If it were not the case, there would not be such a large labor force for these factories. China, despite all its other authoritarian policies, does not frog march workers into these plants. They come of their own free will.
That's what makes me despair about a lot of the anti-globalization/fair trade protesters. They don't understand that workers are not being driven into the factories. Rather the factories are a more attractive form of employment than subsistence farming or herding. Are these factories places where you or I would want to work? Absolutely not. That, however, does not give us the right to take that factory job away from someone whose other opportunities are even worse.
Re:This is not only good common sense (Score:1, Insightful)
We've already seen that these kinds of tax break "incentives" don't work. The companies pay less taxes, don't hire more people, and then give the money they save on taxes as raises to the executives. My company gets the R&D tax credit and they still sent a few thousand jobs to China this year. Tax break incentives don't work.
The time for incentives is long past. It's time for punishments.
Re:How do you decide what's offshored labor? (Score:1, Insightful)
Just require that all imports to the United States be required to pay at LEAST American minimum wage.Let's let all workers make a decent wage instead of trying to cut American wages to 3rd world standards.
Would that stop it? (Score:5, Insightful)
Over the past decade or so, we've had great expansion in worker productivity in America, and we also boasted a high GDP. We also had anemic wage growth vs. inflation (especially against the prices of goods such as college education and health care) and nearly non-existant job growth. And this was after two separate substantial tax cut packages near the beginning of the decade. The lessons of the last decade appear to be that there is not always a direct link between job growth and increased business profits / lowered taxes - often, the business's shareholders just pocket those increases. So forgive some of us for being skeptical that additional cuts on payroll taxes will have any major effect.
Re:Balance of tradeoffs (Score:3, Insightful)
The trouble with these type of taxes is that the corporations simply pass it onto the customers.
The trouble with your logic is that your competetion can choose NOT to outsource, and thus don't have that expense to pass along to their customers. They can either out-compete you, or charge the same as you and take higher profits.
Re:How do you decide what's offshored labor? (Score:3, Insightful)
Yes, this is how you would have to implement these kinds of taxes. It gets rid of the quandry of trying to figure out where it is earned. Put a high enough import duty on it, and if the market is big enough to warrant it, companies will move manufacturing centres there. And if you think this isn't happening now, think again. China is doing precisely this, but in a sly manner. They keep wages low, benefits low, have lower environmental standards than the west, lower safety standards than the west, less employee rights than the rest, and they keep their currency artificially low. This means that goods manufactured in the west are too expensive for the average Chinese and so nobody will import them there. It creates the same effect as a duty.
If the west were to raise duties to counterbalance the advantages the Chines have built into their economy, given shipping costs etc it would be more economical for the companies to move manufacturing back to the west. Granted we are seeing a slow increase in the standard of living in China, but if you notice, the numbers of unemployed in the U.S. keeps growing. Today it was announced that 83000 new jobs were added in the U.S. However this is still below the number of jobs required to be produced to account for those leaving the work force due to retirements and increases in population. By the time the average Chinese worker reaches a comparable standard of living as the west, the west's workers will have their standard of living lowered significantly and be virtual serfs like the average Chinese. You cannot make the weak strong by making the strong weak. All this serves is to create a greater division between haves and have-nots, and eliminates the middle class.
Similarly, taxing offshore services like a duty can be done for software related work for example.
Re:Damn Skippy! (Score:4, Insightful)
Your post is balanced on a tower of incorrect unstated assumptions.
There is no mythical place with the cheapest labor prices and an infinite supply of labor. When an employer enters a new country and wants to hire people, they have to increase the wage they offer those workers in the market in order to compete. Those workers actually benefit by doing this.
Sub-what-standard wages? Where does the "standard" wage come from?
Everyone needs money to survive.
Rare breed, they.
Oh, are they? They couldn't possibly think up new, better, more enjoyable jobs could they?
I am missing the assumption that you are apparently stuck on that there is some kind feeding trough of jobs that people, like cattle, line up for...?
Apparently you are also missing the very obvious fact that consumers who buy goods actually benefit because the goods are cheaper.
It's like a broken record with you protectionists. Chinese jobs are bad! US jobs are good! If local jobs are better than foreign jobs, it seems somewhat arbitrary that you choose nations as your granularity. Why not states? Are Arkansas jobs worse than Texas jobs? What about California jobs versus Idaho jobs? Those labor markets have radically different wage profiles--is "exploiting" cheap labor in Detroit bad for the expensive labor market in California? Why stop there? Why not get upset that *any* jobs exist outside your town? Or your family?
Hey, don't buy that hammer, my brother makes hammers!?
Re:Is Grove running for office? (Score:3, Insightful)
Ah... But define "economically unfeasible". I contend we're already there with things and just don't see it yet.
It's a race to the bottom and it's unsustainable- and it cannibalizes much of the country that you do it in, enriching the people that were in charge and as often as not the countries they shift the work to. And it also ends up being substandard work and all- which also is economically unfeasible.
Re:How do you decide what's offshored labor? (Score:3, Insightful)
This rhetorical question amuses, as different law enforcement agencies in the US cannot even decide where they want it to be earned. You know, pretending they had a say in the matter and by fiat of law could make it so, the various agencies can't agree where it ought to be!
Frankly, I'm with Von Mises. Institute a tax on the unimproved value of land, and call it a wrap. No more income tax at all. Income taxes aren't just a logistics problem (and invasive! get rid of the state's interest in knowing what people do for a living, and how much money they make for gawdsake), the system is just too gameable. Land, now that's viewable from space.
C//
I don't need land to become a multi-billionaire. I can use virtual land to do that just fine. Sorry, but the land analogy is archaic. Corporations are screwing America and putting the burden of taxes on the lowest tax brackets while off-shoring their accounting to hide assets. I'm with raising the corporate tax rate up to 50% with the option to cap it at 30% if 20% of those taxes are turned back into job creation and R&D.
Re:How do you decide what's offshored labor? (Score:4, Insightful)
The difference here is that it's not the 1950's. Our only possible competitor, Europe, was recovering from the devastation of 2 world wars, Made in Japan was a synonym for cheap junk, and don't even think about China, India or Korea. You could get away with an 87% corporate tax in the 1950's, because corporations really had no where else to go.
Try that today, and the only result you're going to get is corporations fleeing overseas as fast as they could go.
Re:Damn Skippy! (Score:4, Insightful)
Your post is balanced on a tower of incorrect unstated assumptions.
Oh probably, but this is the internet!
There is no mythical place with the cheapest labor prices and an infinite supply of labor.
Umm, well, China has pretty cheap labour, and 3+ billion people to do it, and because its so much its practically infinite.
Sub-what-standard wages? Where does the "standard" wage come from?
A standard wage is the earnings associated with the cost of living required to maintain a good quality of life. Grade 10 Social Studies, did you skip class or something?
Oh, are they? They couldn't possibly think up new, better, more enjoyable jobs could they?
You can't just "Think up" a job and make money. I'd like to think up "Pie eating" as a job, and get paid to eat pies. No, sadly, Jobs are based upon what positions are available at companies willing to pay employees. The big issue is that companies would rather NOT pay employees, or if they have to, would like to pay them very little. Since the government regulates a minimum pay, these jobs go to countries where the government regulated minimum pay is the lowest.
Apparently you are also missing the very obvious fact that consumers who buy goods actually benefit because the goods are cheaper.
Well, yes, it IS nice that my new Computer fully decked out with all the latest features ONLY costs maybe 1 or 2 thousand dollars, when really the matierals that make up the computer itself probably cost way more. However, if I make minumum wage and housing costs so much, I'll never afford it. It's a shame the way that works, choosing food over a new TV.
it seems somewhat arbitrary that you choose nations as your granularity. Why not states?
Silly Goose, because Nations operate under different dollars and dollar amounts! An American Dollar is worth an American Dollar all across America. However, An American Dollar could be worth more or less than the Canadian Dollar depending on how lucky those Canucks are getting. Now a lot of regulation goes into Canada and US trade (see Lumber [gov.bc.ca]) because they are so close. However, since China is really far away their trade can be a little more free.
Take Gasoline for example. In Canada, we have to regulate our Gas prices to match the United States (and they to ours, its a mutual agreement kind of thing) even if one of us technically has more gasoline than the other. Why? Well, if Gasoline was signifigantly cheaper in say... Alberta (with the oilsands and all) then there would be nothing from stopping some Montana based company from driving hundreds of tankers up, buying up all the oil, and driving it south to make a profit.
It's unlikely though, that anyone would go and buy a product over in China where it is cheaper, than bring it back to the states. So free trade is a little more lenient with further countries. (Don't get me wrong, thats not the only thing that plays a part).
So thats where corporations come in and fill that gap. They'll make the product where its cheaper and ship it back to you, thus, THEY make the savings.
Re:How do you decide what's offshored labor? (Score:4, Insightful)
n those days, fiscal conservation actually happened. The wealthy who reaped the benefits off of labors backs paid back and the nation built highways, dams [Eisenhower screwed up by not making rails first and highways second, but that's a separate issue], power grid expansions, etc.
Which isn't very strange. When high incomes and big corporate profits are taxed heavily, money tends to get reinvested instead of taken out as profit for the rich.
Well, as long as you tighten the tax holes that allow money to escape abroad instead.