Americans have to accept they live in a global world
This past weekend was the celebration of labor, and as I pointed out last week, bosses should not be forgotten on this holiday. That of course brought forth the inevitable question from a reader, “But what about the employers who export jobs to India or China? Do they deserve honor as well?”
Yes. Not only is it important for the world economy to provide work for people in underdeveloped countries who need jobs so that they may provide for their families, but it is good business. And what good liberal doesn’t want to raise the standard of living globally? We must provide employment globally. To decry the loss of jobs is to be a protectionist, and protectionist policies are small minded and discriminatory in an “Us vs. Them” mentality.
The fact that a CEO would consider moving a company in order to lower labor costs is one of the very bricks in the foundation of capitalism. It is their fiduciary duty to the stockholders in the company. Even if they are the only stockholder.
A business must be run efficiently. It must be run to maximize profits and minimize expenses. Any person who does not run their company that way will not have a company in short order.
Moving a company internationally is no different than when a company moves from one state to another. When Buck Knives Co. was investigating moving, it was because labor costs became too high in California. Does it make a huge difference if they moved to Nevada or India? The fact is that the jobs were leaving the state.
There was a large outcry but the fact is that to keep a company profitable, the environment for business must be hospitable. In California, and certainly in Santa Monica, business in under attack.
Why is business so under attack? Is it the insurers who are overreaching on worker’s comp claims? Is it the fact that businesses are having to compete in a global market? Is it the Wal-Mart effect?
Workers’ compensation rates are insane. The reason why is simple: To be declared an employee is the simplest thing in the world by the Worker’s Compensation Appeal Board. I had a case last month in front of a hearing officer. The “worker” was by all accounts an independent contractor. He had his own truck driver’s license, he was paid on a per trip basis, he had no taxes taken out of this wages, he was able to accept or reject any particular trip, he didn’t have to maintain regular working hours, and he did not report to any superior on the truck yard. He also was declared as an employee. The hearing officer said it is almost impossible to not be declared an employee when it comes to determining if an employer should cover injuries on the job or related to the job.
This case, where one man was driving a truck, and he wasn’t even injured, will put this employer out of business. That is 20 jobs that are going to disappear. Before condemning the bosses one should review where one shops, what is bought and why.
How many American flags were flown this past summer with “Made in China” printed on them? How many times did you shop at Wal-Mart, Target and K- Mart? Did you buy the cheapest product or the one made in America?
The “giant sucking sound,” as Ross Perot put it, of jobs leaving the country is not the fault of the CEOs. It is the shoppers at Wal-Mart, Target and K-Mart. The people that shop on price. And yes, they are most likely to be the ones who are losing their jobs next.
It is unfair to condemn the CEO, whose primary responsibility is to the stockholders to lower production costs. That type of forward thinking brought us the industrial age, which has brought us increased life expectancy, a better standard of living and amazing discoveries in science and medicine. In the late 1800s when mass production really took off, was the start of the pursuit of profits through reduced labor costs. It hasn’t changed since.
Off-shoring work is just the natural evolution of capitalism. For decades, labor came to America because of the opportunities for work. Now it’s just cheaper and easier to leave the worker in their homeland and ship the product.
If unions are losing ground to workers in India who are willing and able to live on less money, it’s not only the smart move for a CEO to move his production there, it’s his duty. So long as a Chinese factory will mass-produce American flags cheaper than they can in Riverside, that’s where the work will go.
To make business stay in Santa Monica, or California, or the United States, it needs to be an inviting environment. Wages are not the real cost that CEOs are trying to avoid. They know workers must be paid, and they would rather live in a country where their neighbors had jobs because that means they have money to spend on goods. But the fact is, it’s too expensive to pay people, and provide them health insurance, and worker’s compensation insurance, and pay outrageous city licensing fees, and permitting fees, and comply with all the city, state and federal regulations, and still try to show an increasing profit each quarter. The marketplace is cutthroat, and it gets more so each time Wal-Mart pressures an American company to lower its prices.
If the workers want to keep their jobs at home, they better start shopping for products made at home. (David Pisarra is a business development lawyer in the Santa Monica firm of Pisarra & Grist. He welcomes your questions and comments. He or (310) 664-9969).
Originally published in the Santa Monica Daily Press print edition on September 7, 2004. Read the original PDF.