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.'"
Is Grove running for office? (Score:3, Interesting)
I am completely sick of being screwed over by the corporatist plutocrats.
Re:How do you decide what's offshored labor? (Score:3, Interesting)
Ask the companies who are being audited by the IRS for their existing Cayman tax dodging practices how much fun that is.
This is one thing Obama should be lauded for (and I'm not a huge fan).
Comment removed (Score:5, Interesting)
Ugh (Score:5, Interesting)
Of course this ever happening in the US this is a pipe dream, but I like to visit these dreams every once in a while and yes it makes me feel better.
Hmm... (Score:4, Interesting)
Re:Damn Skippy! (Score:5, Interesting)
By taxing them you put people on a more even footing to make informed decisions, it's not telling companies that you can't do it, it's telling them that if they want to do it they'll have to compete on a more even playing field.
Re:Dont tax, remove tax breaks. (Score:4, Interesting)
No CFO in the world will say, "Thank goodness we've been saving so much over the years with those tax breaks! All that money is right here in a piggy bank, so we're ready to start paying those taxes again." Those same CFOs already received huge bonuses based on those breaks, and that money's long spent.
Re:How do you decide what's offshored labor? (Score:1, Interesting)
But doesn't that mean the "product" is now subject to import duties (ie, taxes)?
I'm not being a smart-ass, I'm curious how that pans out...
Re:Treat it like other wars... (Score:3, Interesting)
While we're going all Iraq Invasion Style here...
How about the rest of the world add tariffs for stuff like exceeding a certain baseline aggregated carbon emissions for the production of goods, or paying salaries to textile workers that are lower than some predefined (and local price level adjusted) level?
This would IMO lead to a decrease in the use of manufacturing processes (and energy generation for these) that are focused on saving pennies on the dollar in exchange for large increases in pollution. In the case of sweatshops, companies can pay livable salaries without losing their competitiveness.
Re: (Score:4, Interesting)
How is it that China, and Japan before them, are able to peg their currencies? This is a question rarely discussed. The easiest and most effective way to accomplish this is by purchasing U.S. bonds, which we sell in abundance to cover our enormous debts. In effect, the politicians railing about how unfair the Chinese currency policy is actually contribute more to the problem than anyone else.
'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.
Re:Is Grove running for office? (Score:1, Interesting)
Re:Government is the problem, not the solution (Score:3, Interesting)
I agree with your last point. I think that we should drop personal income/payroll taxes for anyone making less than $200,000/year and have corporations pay strictly based on gross revenue minus non-executive salaries of US workers. That would cut costs and get more money moving throughout the economy.
New Form (Score:2, Interesting)
[X] It requires investors to care about something other than short term profits
[ ] It requires corporations to care about something other than short term profits
[X] It requires politicians to care about citizens rather than corporations
[X] It requires laws without loopholes
Re:Is Grove running for office? (Score:3, Interesting)
Absolutely not. This is the absolute worst thing that you can do.
I'd rather the government just be straight up protectionist and say solutions must be made in the USA or at least in NAFTA.
Companies will always find ways around taxes. they will form subsidiaries... who knows. Not that, but who ends up with the money of a tax? It will be the government. It won't be the struggling American tech worker. I see no benefit in taxes in the government's hands so it can give the money to more bureaucrats.
The other question is how much will the tax be. Lets say a laborer in the developing world is 1/4 your salary. How much tax do you think it is going to take until it is economically rational to hire an American over a Chinese person?
No, I'd rather we take his message which is sound. I'm tired of hearing about the innovation economy and blah blah. We need regular commodity industry as well as a retention of knowledge and the ability to innovate on existing knowledge.
Especially with digital technology today, do we want to end up in a world where if you want to work on CPUs, you have to move to India or something? Now let's not pretend we're the victim all the time.
American companies make a lot of money by exporting. Intel, Cisco... all want to see to the billion indians / chinese. If we take protectionist measures, they will too.
So let's not pretend too much here, Mr. Intel CEO. I'd rather each region have reasonable job prospects in each field. So a Chinese CPU firm makes CPUs for Asia. Intel and AMD fight for the NA market. The EU does its own thing. It will limit growth opportunities for these global players, but it will ensure a more robust economy in each region
We need to preserve freedom and industry. Putting money in the hands of government doesn't help.
It's better to have a free market limited to NAFTA than a fake free global market with government directing the whole thing.
Re:how is it (Score:3, Interesting)
I'm pretty sure if they had any interests other than making profit, they could find employment doing something more useful than management.
Well, okay, that's not fair. What I mean is, the people who went into business from the get-go were never interested in being of service to others. You don't earn a business degree as opposed to an engineering degree, science degree, law degree, etc, because you wanted to do interesting things. You earn it because you want to be in control of a business. Businesses "do whatever" and make money from it. End of story.
I know this is biased and spiteful and a little bit flamebait-ish; however, it's a touchy subject, and I think rightfully so.
Re:how is it (Score:3, Interesting)
Personally, I'm going after a business degree primarily because I already have technical skills. I will be much more capable having an understanding of both sides, rather than only one.
It will narrow my job opportunities, but the opportunities it allows will be worth it.
Re:How do you decide what's offshored labor? (Score:5, Interesting)
From the stand point of double taxation of foreign profits in the US, you are much better creating your corporate HQ somewhere like the Isle of Man or the Caymens, et. al. and then creating a separate US entity. Then your profits made in other countries are taxed in those countries, but if you send the profits to the Caymens you aren't taxed again on those profits.
As it works now, if you are HQed in the US and have different operating units in other countries, you pay the taxes in those countries. Then any remaining profits sent back to the US are taxed again by the IRS. So the US company is being taxed for the profits made in the UK, Germany, Russia, or wherever.
In most countries, if their company makes profits in the US, they aren't taxed again back home when they bring the profit back.
Re:Government is the problem, not the solution (Score:3, Interesting)
If executive level managers didn't take home half the payroll of their companies, said companies could afford to hire people. As someone else said, Grove took home $100,000,000 in pay one year and he is ONE PERSON. What exactly did he do to earn that much money?
How much money could be made available for paying for on-shore manufacturing if the upper management were paid a reasonable amount? If Grove had been paid $1 million, there would have been $99 million dollars to hire 990 people at $100,000 per year. That is almost 2,000 full time positions (5% of Intel's workforce) at $50,000 per year. You could give 19,800 people a $5,000.00 per year raise.
And, that is just for one person. Throw in the rest of the similarly over-paid executives and managers and think of how easy it would be for Intel to pay to have every one of its employees in the United States.
The problem isn't the government. The problem is literally executive greed.
If past experience with corporations are any indication, doing any and/or all of what you suggest will result in higher executive pay and no more jobs in the United States.
Re:You can (Score:1, Interesting)
The Other Side (Score:2, Interesting)
Just to make things clear from start: I am one of the so-called "offshore" employees. I got hired by a large USA-based corporation as a call center analyst; basically I took calls for 9 months in a row.
I am not located in India, but in Eastern Europe (Romania, to be more precise). My English is very good, and although I do have an accent, I sound just fine on the phone. I got a shitload of praises from callers during my time spent taking calls. Some got to as high as my LOB VP.
Then I got promoted to a Team Lead position in the same Help desk organization. I didn't take calls anymore but had to practically manage the whole Romania team. I have been acting as a manager, with manager's responsibilities, except for setting wages and approving leaves. Then I got promoted again as a Service Delivery Manager within the same organization, and now I am expecting yet another promotion. Until now, that's the background. Now on with some things you should consider...
My salary is 6 to 8 times less than an US-based employee gets for a similar position. My compensations practically don't exist (except for health insurance). I've had 0% raise ever since I got hired and I can't do anything about it (there's a huge competition here as well). And by all means, I do more than an US-based employee is willing to do, because I'm not inclined to yell "murder!" whenever my manager tasks me with something extra. I do large amounts of coding (although I shouldn't), I design processes (although I shouldn't), I create trainings and documentations (although I shouldn't) and the list can go on. Prices here are similar to prices in the US (for clothes, houses, electronics, computers, cell phones) and higher for certain commodities(e.g. a gallon of gas costs 8 dollars). I work from 5 PM to 2 AM local time to be in sync with US business hours.
But Andy complains that off-shoring takes jobs away from the US. Guess what, it doesn't. Off-shoring generally finds the most economically-competitive people to do things that are usually frowned upon by people from other countries.
Simply put: you would love to talk to an American dude when calling for support, but you would hate working in phone support yourself.
Now I can also compare my approach towards work to an US-based citizen's. I often find myself having an idea but get slowed down to a halt by people from the US (such as my direct manager and his peers), because they need enormous amounts of time to have meetings, come to an agreement, provide approvals, analyze, digest the idea, think about it, think some more, forget about it, remember it, talk some more, discuss a bit more... until times change and they figure that, if everything used to work OK (translated: no major disaster occured because that idea wasn't implemented), the idea doesn't really need to be implemented anymore.
There are many examples to be given, but I'll just stick to one. An application was in the process of being decommissioned. We used that application but didn't own it, so we (2 off-shored guys) were asked to identify a replacement. We needed 5 days to identify 4 solutions, out of which 2 were external, one was an application built by the corporation itself and the least desirable one was using spreadsheets as a workaround (bah! spreadsheets! we stuck this in to show how worse it can get if we don't act soon). We presented this list to higher management together with comparison charts, some Powerpoint presentations they use to love, live demos (we installed all the demo apps, etc). They said thank you and were never heard from again. Our attempts to get this going to one direction or another were answered with "wait, the decision is to be made soon". Six months later, the application went offline (the fact that it stayed up for this long shows that even app decommissioning is as slow as tectonic plates movement). All of a sudden, everybody panicked. They swiftly
Re:How do you decide what's offshored labor? (Score:2, Interesting)
Sounds pretty simple to me. Look at it like this: Where is the product sold, and where is it manufactured/developed/supported? If it's sold WITHIN the 50 United States, and any manufacturing, development, or support is located OUTSIDE the 50 United States, then it should be considered "offshore".
Re:Treating symptoms instead of disease (Score:3, Interesting)
It's bizarre that Americans complain about that pegged currency.
You do realize that if China wasn't buying treasuries like crazy in order to stop their currency from climbing in value against the USD then all that government spending would have to be paid by taxing you more, right?
The US government could break that dollar peg overnight by refusing to issue anymore debt.
But don't worry it ends in the relatively near term anyway, sadly though America isn't going to enjoy the end of this "the rest of the world does all the work, while we consume all the stuff and send them IOUs".
Re:Damn Skippy! (Score:4, Interesting)
Wait, what?
Which part whooshed past you?
He basically says that being able to move products and goods without taxation caused this scenario where labour can be sent over-seas to a country with lower wages. This generally means that either that country has all the jobs or other countries have to lower their wages to stay competitive. This also reflects the quality of products and services, since you are paying substandard wages and basically taking people who need money to survive and not people who work because they enjoy it. On the flip side, the middle class in the more prosperous nations are left without the jobs they'd need to get by, or they'd take sub-standard (for their country) wages and scrape along the bottom.
I don't know if this is accurate to what happens but it basically works like this:
China and the US make deals to let companies operate in each others borders. Computer Technician jobs from the States get offshored to China because China offers the lowest wages for that kind of work, so Company A can save money on support thus increasing profits. Because of this, the existing Americans that work in Tech support must either move to and work in China (Almost making them more Chinese citizens than American), or find another job. Tech Support in India was also at a low cost but since China and the US made this deal, and China is offering lower wages, India must lower their wages to stay competitive.
Had "Free" trade not been enacted, meaning, labour, products, services, etc, getting taxed appropriately, none of this would have happened.
Re:Is Grove running for office? (Score:4, Interesting)
"They might be made in China, but the decent ones aren't designed there. They're designed in Israel."
You know what? I don't care WHERE they are designed, if they are CONSTRUCTED (and then not even tested...how often do you find them little "Tested by 108" stickers on Chinese products?) in China, more then likely it is a piece of junk.
I bought a 110v appliance timer a few weeks ago from Lowe's, a nice programmable one. Not the cheapest one on the shelf by any means.
I plug it in, hook up the appliance, program it...then just for the hell of it (I'm funny that way), I decide to test it. I set the clock so it would complete the circuit while I watched...the thing literally squirted dense smoke and got exceedingly hot the moment the circuit was completed. Yanking the timer out of the the wall was the only thing that kept it from bursting in flames.
In short (no pun intended), if I had not tested it and had simply plugged it in, as I am sure many people do, it would have burnt my house to the ground when the timer went off.
I took it back. I was pissed. I went and looked at ALL of the timers Lowe's had in stock...and without exception, every single model was imported from China by one of three distributors, that were in reality all the same company. The addresses on the boxes were all the same for all the brands.
I then started walking around Lowe's, randomly pulling stuff off the shelf and looking to see where it was made. Every single item I picked up, ALL OF THEM, were from China. I must have picked up 60+ items in the half hour I was in there, and they were all Chinese products.
Home Depot is pretty much the same.
I don't know where I am going with this, but I can say one thing. Sad, just...sad.
Re:Grove is a two faced .... (Score:1, Interesting)
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.
Sounds a lot like "Do as I say, not as I do." To that I would posit the question, can you really have ethics if you can't live by them ?
Re:Is Grove running for office? (Score:3, Interesting)
While I'd like to live in a libertarian world, we do not live in it.
The government has made it illegal for the American worker to compete. What is 'free' about that.
We have a minimum wage that is higher than the countries we sign free trade deals with.
We have government going into debt to prop up salaries in the public sector. What is 'free' about that.
We have government bailing out large industries. What is 'free' about that.
We have various protectionist professions (medical, legal...) that essentially make their living manipulating laws.
I don't see those changing. The solutions governments are taking around the world are not for increasing liberty in case you haven't noticed.
They're pumping money into government monopolies like healthcare and education to provide jobs. They're funding public works projects...
China and India themselves are not free market societies. Especially China... it has heavy government invovlement in every industry. Tech companies must form partnerships with Chinese firms.
Pardon the American tech workers who has to compete with a a population of 1 billion that is not only working for much lower wages, but also has a government that protects them.
Free trade is premised on us all playing by the same rules. Then competition works.
We currently do not play by the same rules. So you don't commit industrial suicide as a country by basing your entire policy on lower prices.
Given this global trade but with ridiculous heavy government involvement, I'll gladly side with freedom within a region. You keep playing the side that empowers big government.
Maybe you missed the last election. Obama won; not Ron Paul. The big centrally planned guy won because people are see the inherent unfair trade problems. You want to keep them exposed to unfair rules.
Obama says he will protect them.
Give me call when we get rid of all professions, get rid of the minimum wage, prevent government from going into debt, get rid of the property tax, get rid of public sector workers except for law enforcement and regulators... get all countries we compete with to obey these same rules of liberty... and I'll gladly sign up.
Until that day... don't pretend we have a free market.
Re:Treating symptoms instead of disease (Score:3, Interesting)
Actually, there's lots and lots of people who want to buy US debt. Someone else will pick up China's purchases, at a slightly higher interest rate.
Really, the reason China is allowing the RMB to float is they already are not comfortable owning that much US debt. They were already cutting down on purchasing new debt.
Especially after our economy collapsed from doing so.
Re:Is Grove running for office? (Score:3, Interesting)
I recall reading an article some years ago in a trade magazine for the Plastic Injection Molding industry by an engineer who was explaining why most mold production has moved to China. It didn't have to do with cost, it had to do with speed. The Chinese would diagnose mold problems quicker than their American counterparts AND fixed them much more quickly. This engineer was describing once when there was some sort of a problem with a mold (perhaps unreliable release of the part) and he diagnosed it with the mold maker and they agreed on some fairly major changes to the mold. The American engineer went back to his hotel and assumed he would just fly back to the US in a day or so because it seemed (based on his extensive experience with American mold makers) the mold change would take, I think, at least two weeks and there wasn't much to do until the mold was changed. He was shocked when he showed up at the mold maker's the next morning and they were ready to test with the updated mold.
Americans, overall, just aren't hungry and competitive enough and have developed a sense of undeserved entitlement. The problem of off-shoring is not going to change as long as we raise our generations of kids such that too many of them expect the world served to them on a golden platter (and don't think it's the "teacher's fault" they got a B- on a test which they didn't prepare for).
Probably multi-generation Americans won't save us. Perhaps if we let educated, professional workers enter and work freely and give them an easy path to citizenship, we can leverage off of brain drain for awhile.
Re:How do you decide what's offshored labor? (Score:4, Interesting)
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.
Hate to break it to you champ, but when Eisenhower was President, Corporations and the top tax bracket were 87%. In 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.
Corporations weren't drowning and being incapable of innovating. They invested heavily to grow innovations. This only happened after strict regulations were put into place post Depression. Political scumbags are complaining the tax burden on corporations is devastating today and they can't create jobs.
B.S. on all the falsehoods. These same corporations love the billions pouring into the Military complex. Cut the defense budget in half and redirect half of those cuts back into US infrastructure and you'll see them quickly fighting for that cash, but still bitching about drowning in tax burden.
The US needs a clean slate on high, strict regulations that are fair across board, drive tax incentives to innovate and not to maintain the status quo. This will force the big conglomerates to either innovate and spin off some of their assets or die for refusing to change. Too bad. It's We The People, not We The United Corporations Against The People.
Re:How do you decide what's offshored labor? (Score:3, Interesting)
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!
Well, that wouldn't be that hard to get around. Instead of a tax on the parent company, institute a tariff on the imported goods or services. That way you put the penalty on the consumers of imported goods and services rather than the producers, who can always find a way around a tax. With a tariff, you don't care who manufactures it where, because it's the importer and the consumer who's going to be forced to cough up, as soon as soon as it crosses the border. It would make consumption of foreign produced goods a lot less attractive, and make it a lot harder for companies to play shell games with subsidiaries.
Reagan employed that approach to induce Japan to restrain auto exports to the US, and encourage the Japanese manufacturers to build manufacturing facilities in the US in the 1980's (google Voluntary Export Restraints).
I'm not really a big fan of protectionist policies, but if you really decided it was necessary (and there's certainly an argument for it), it's not really an insurmountable problem.
The Right Entity for The Right Stuff (Score:1, Interesting)
Since it's international, half of the tax should go to the U.N. - to be used to supervise and act to improve worker's rights and working conditions all over the world. Not just in the U.S.
Ditto for education. Then, offshoring will become less attractive. Or equally attractive. The best - most educated, prepared, efficient, experient, and up-to-date labor will be hired, irrespective of where they live. Or were born. Or how long their pony-tails are.
And the U.N. could receive other international taxes, as well. It's annual budget is twice what the G20's one week in Candada cost - monetarily. The social and civil costs are astronomical and exponential. The political fallout is going to be sour the fasci.... er, "conservative" ballot box and stain the public consciousness for decades.
And I'm not sure we even have Casblanca, anymore.