Democrats & Liberals Archives

Punish Employee Dumping

Corporations who dump employees and then transfer their jobs overseas are un-American. They get away with it because they are big and powerful. Furthermore, our federal tax system encourages multinationals to open factories in low wage countries such as China and India. We encourage employee dumping when we should punish it.

Big Business spreads the word that corporations do not have a choice but to compete with foreign companies that employ low wage workers. They must dump their American employees, they say, because otherwise they would be blown away like maple leaves by the fierce winds of globalization. What a farce. Multinationals are more like huge, horrendous cyclones that produce the hurricane winds of globalization.

According to Senator Byron L. Dorgan in his book "Take This Job and Ship It":

Of the world's largest one hundred economies, fifty one are global corporations. Forty nine are countries.

Multinationals are the major globalizers blowing the most ferocious winds.

We can stop these dangerous windmills by punishing corporations that dump employees. One possible way to do it is to tax bad behavior. But this is difficult to do because many, many big corporations do not pay any income taxes. Again from Senator Dorgan's book:

In 2000, 63% of U.S. corporations that collected $2.7 trillion in gross receipts, paid NO income tax.

Many corporations are headquartered in tax havens in Bermuda, the Netherlands, Ireland and Bermuda, purely to avoid paying U.S. income taxes. Congress recently had an opportunity to stop this fraud, but did not do it.

We do have corporate taxes, but they are designed to encourage corporations to open factories overseas. They are called deferred taxes. If an American company has a subsidiary abroad, the tax on profits of the subsidiary may be deferred until the money is repatriated; otherwise it may remain untaxed. As if this isn't enough of a scam, Congress in 2005 sweetened the deal: they voted to allow repatriation with a tax at 5.25%!

Do you know anyone who pays this low an income tax? And what for? For switching profit-making opportunities from America to a foreign country. Scandalous.

(To pay even less taxes, multinationals have developed their headquarters-subsidiary relations into an art called transfer pricing, which I will write about in a future post.)

The pharmaceutical companies are tops in this game. With the aid of contributions to members of Congress, a federal law was passed that prohibits anyone from importing prescription drugs in the U.S. except for drug manufacturers. Then, as Dorgan says:

In fact, according to TIME, 17 of the 20 largest drug companies worldwide now make drugs in Ireland because of tax incentives. Pretty great deal, huh? These pharmaceutical companies get to send good-paying American jobs overseas to dodge U.S. taxes. Then they get to jack up the price and sell these drugs to the very same Americans they put out of work."

There is no outside force blowing for globalization. The pattern of dumping employees and shifting manufacturing to low wage countries comes to us courtesy of American multinational companies, with the blessing of our Congress. I hope the new Democratically-controlled Congress will have the guts to use the tax code to punish employee dumping.

Posted by Paul Siegel at November 28, 2006 6:30 PM
Comments
Comment #196764

Paul

Didn’t you just post pretty much the same thing yesterday?

That’s the difference between the left and the right. We believe in the carrot, you believe in the stick. Let’s make the tax code easier for business, so they don’t have to go to Ireland.

Posted by: Keith at November 28, 2006 7:03 PM
Comment #196767

Paul,

I am no cheerleader for globalization by any, but tax policy is not the only force behind “dumping”. The real savings to a corporation is the cost of labor, which you have ignored for some reason. Why should a company pay a person $20/hour and benefits here in the US when they can pay someone in China $2-$3 and no benefits to make the same product?
What happens when your competitor is able to gain pricing power due to this and your company doesn’t. Also consider elminating costs of regulations and all of the other costs of doing business in the United States…it is almost a no brainer to move jobs and have that cost savings. Tax policy at this point is just an added bonus.

IMO, products the American public buys today would cost much, much more if the same products were made in United States.

Walmart (responsible for 10% of our trade deficit with China btw) did not become the country’s largest retailer by selling its products higher than its competition, mind you. The labor spread will remain until either wages here contract or wages overseas rise, and until then there will be more of the same.

Posted by: Dizzle at November 28, 2006 7:08 PM
Comment #196768

should read “cheerleader for globalization by any means”

Posted by: Dizzle at November 28, 2006 7:09 PM
Comment #196769

Everybody hates Walmart except the people who work there and the people who shop there. What does that tell you about Walmart and its enemies?

Posted by: Jack at November 28, 2006 7:11 PM
Comment #196772

—Paul— Exxon-Mobile made fourteen billion dollars
in their 3rd. quarter, an ten billion on their fourth quarter. They also retired their CEO with
a 300 million dollar bonus, not including his
retirement package. I guess we all need to put our
money in off shore Banks an let all the Co. move
there. Most of the largest Pharmaceutical Headquarters have already moved to Porto Rico. Know
We have some——People who want more Corporate
Tax breaks, an some of these same folks can’t even
find a job, say we tax Companies too much. Go Figure that Logic.

Posted by: DAVID at November 28, 2006 7:44 PM
Comment #196779

Dizzle,

“Why should a company pay a person $20/hour and benefits here in the US when they can pay someone in China $2-$3 and no benefits to make the same product?”

Let me think…
Could it be that it isn’t the same product?
Could it be that these same companies are paying their CEOs $10’s of millions a year to sell this baloney?

Why would I want to buy a piece of crap, from a company that seeks to save 90% of it’s labor costs, and still charges me the same premium price as a quality product?
That just doesn’t make any sense.

Why would I want to buy 3 of something for the same price of one product that lasts five times as long?
Not only that, but if my “quality” product breaks, I can have it repaired, and use it again.

This “use and throw away” society, is abhorrent.

Posted by: Rocky at November 28, 2006 8:27 PM
Comment #196780

Rocky,

I don’t disagree at all. Unfortunately, we’ve had a drastic shift from paying more for a quality product to paying as little as possible for a piece of junk. In the modern consumer’s mind, this does not matter. The focus is on how cheap a product is, and quality is not considered as a priority.

Also consider the typical “WalMart” shopper, who can’t possibly afford at any point in time to buy the quality product, and has to buy the cheap POS made overseas.

Nowadays, the argument is either quality vs. price or Made in USA vs. price. I will concede that quality may possibly improve that side of the equation, but unfortunately Made in USA vs. Price will not. The people want their cheap products, and making these things in the US is not the way to get them…it is simply too expensive to do.

Posted by: Dizzle at November 28, 2006 8:39 PM
Comment #196781

Rocky,

No one is telling you not to buy the more expensive, higher quality item that lasts longer.


keith

Posted by: keith at November 28, 2006 8:40 PM
Comment #196784

-Rocky- You are exactly right. Some of their products are even dangerous. The State of Michigan,
bought thousands of long bolts to attach those
very large road signs over the Expressways an within
two years, two separate people were killed because
the bolts from China,(supposedly) high grade material, were junk. many other signs fell, an the
State had to replace all these bolts, at a huge
loss of State funds. I would not be surprised if
those tunnels on the East coast that have been falling in large pieces, bought their steel from
China. Just a wild guess!!

Posted by: DAVID at November 28, 2006 9:00 PM
Comment #196787

Dizzle,

“Also consider the typical “WalMart” shopper, who can’t possibly afford at any point in time to buy the quality product, and has to buy the cheap POS made overseas.”

The problem isn’t that the “typical” WalMart shopper can’t afford the quality product, the problem is that the typical shopper wants it this nanno-second, even if it a POS, and will buy three because they think they’re getting a better deal.

Keith,

“No one is telling you not to buy the more expensive, higher quality item that lasts longer.”

Good, because I refuse to buy crap.
You don’t seem to realize that the service industry is going into the crapper as well. When you buy something that is cheaper to replace than to fix, the broken one goes into the landfill, and the service guy loses the work.

DAVID,

It’s called Asian “butter steel”, and I had direct experience with it on a project I worked on in Korea.

Posted by: Rocky at November 28, 2006 9:27 PM
Comment #196790

Just another thought.

It would also appear that in those economics classes that the bean counters take, they leave out one important fact;

When you buy junk, you get junk.

It’s really hard to make ice cream out of horseshit, and hopefully sooner, rather than later, the American public will wake up and smell the difference.

Posted by: Rocky at November 28, 2006 9:49 PM
Comment #196800

Paul another good article. Obviously these “Hate America First” multinationals should be made to pay.

Dizzle:
“Why should a company pay a person $20/hour and benefits here in the US when they can pay someone in China $2-$3 and no benefits to make the same product?”

Rocky gave some good answers to this, but let me also add these thoughts:
Because they’re owned by Americans who should want what is best for their country, not just for themselves.
Because Americans are more educated than those who live in third world countries, they are far better producers, and make far better products when they are given the incentive of a good wage.
Because Americans who make 20 bucks an hour can not only live decently, and not become a burden to our society, but can also buy more American made products.

“What happens when your competitor is able to gain pricing power due to this and your company doesn’t.”

You redraw the plan for your company entirely. You make products that are better designed and better made than your competitor, until he is no longer your competitor at all. The phrase “American Know-how” has always carried a lot of meaning, and should not be rendered quaint.

“Also consider elminating costs of regulations and all of the other costs of doing business in the United States…it is almost a no brainer to move jobs and have that cost savings.”

There is no brain being used by people who want to put Americans out of work, and who want to eliminate or move away from environmental and safety regulations. Saving money by underpaying workers in foreign nations, and leaving in order to be able to pollute their countries and disregard the health and safety of those workers should become an international criminal offense.

“Tax policy at this point is just an added bonus.”

The free ride for American owned corporations should be brought to an end. We must steeply tax, and tarriff these companies for their immoral and treasonous stance toward America, and American workers. Moreover, their disregard for workers in the third world who they’ve been taking a horribly unfair advantage of for such a long time must be made into a liability rather than just another dirty little asset.

“IMO, products the American public buys today would cost much, much more if the same products were made in United States.”

Cost more, but people making decent wages could then afford these American made products. And since they’d be so much better designed and made, they would therefore become, as they always were in the past, very highly desirable on the world market. Like I said, you redraw the plan and thereby, eliminate your competition by placing yourself onto another level and position. This will cause your former competitor to struggle because his product is junk — and everybody knows this.

“Walmart (responsible for 10% of our trade deficit with China btw) did not become the country’s largest retailer by selling its products higher than its competition, mind you.”

Actually, Walmart started out by advertising that their products were proudly made in America, so naturally Americans wanted to shop there. Then, Walmart kicked into their pre-planned predatory mode, killing off most of their small business competition, began using third world labor and/or importing almost everything they sold. When decent wages for Americans gradually became a thing of the past (thanks in part to Walmart), a vast majority of Americans who had at first believed that Walmart was some sort of a great, patriotic retailer found that as they switched to working two jobs in order to feed their family and barely get by, they could no longer afford to shop anywhere else.
Walmart sucks. Walmart hates America. Don’t shop Walmart.

Hey Rocky — I totally agree with you about quality, and about how disgusting the throw-away mindset is. For this reason, I’m an admirer, collector and daily user of well made products from America’s manufacturing pinacle which I consider to be around 1945-1965. As someone who loves to cook, I’m truly passionate about my big 1946 O’Keefe & Merritt 4 burner gas stove with built-in griddle, slide down top cover, and double ovens. O’K&M’s and Wedgewoods really were the best stoves ever made, IMO. I also love my 1962 (year I was born) Kenmore sewing machine that I bought at the Salvation Army for 20 bucks, 20 years ago. It only to took one thirty dollar visit to a repair shop to fix it into perfect working condition. Like my stove, the thing is beautiful, and was built like a tank for the long haul — all metal parts, except for a few little setting knobs made of hard plastic. They’re getting harder to find these days, but in my opinion, you simply can’t beat American-made products from our famous and justly proud past. I get much greater satisfaction from buying things like these than I do pieces of junk made by wage slaves in foreign countries in order to benefit filthy rich American corporations who lack all social conscience.

Posted by: Adrienne at November 28, 2006 11:08 PM
Comment #196806

Adrienne,

I actually became aware of off shore manufacturing in 1984.
I worked for the Federated Group (they’ve long since gone under), one of the first of the electronics mega stores.
It seems that when Hi-Fi innovators Sol “Marantz” and Avery “Fisher” died, their products became “made in Korea”, by Superscope, and Sanyo, respectively.
And thus America started it’s long, though cheap, slide into the crap we now listen to in our homes.

Interestingly enough, because of their craftmanship, the original Marantz, and Fisher gear sometimes sells for thousands more now than it did new.

Posted by: Rocky at November 28, 2006 11:43 PM
Comment #196825

Society has become a place where Big Business has taken advantage of the “average dude”.

The right suggests that we empower Big Business, and let them choose how it should trickle down to the “average dude”.

The left suggests that we empower the “average dude”, saying this will all him to choose what lifestyle he wants to live in.

One problem I see is:
When you remove the choice from the “average dude”, you force him to be a victim of the choices made by “big business”. Big Business is NOT required to trickle anything down to anyone if they don’t want to! Said another way; if Big Business wants to be greedy SOB’s, they are more than welcome to.

I understand the USA as being a place where the “average dude” is given the power to make choices for himself. I believe Globalization helps to remove the “average dude’s” choice, which contradicts what our nation was founded on.

-Dutch expat

Posted by: Dutch_expat at November 29, 2006 5:26 AM
Comment #196829

Adrienne

Re quality - We are often mislead about the quality of goods made in the past. When I really think back to the 1960s, the quality of most goods was poor. Tires wore out after a few thousand miles. Radios and TVs just didn’t work. Cars broke down a lot. etc. I am very impressed with the quality of ordinary clothing. You used to have to pay a fortune for the kind of quality you can get in a pair of wrinkle free Dockers. What only the rich could have in 1960, almost anybody can have today w/o the work of ironing or professional dry cleaning.

The reason we THINK things were better is an example of what I think they call the survior fallacy. After 20-30 years, the things that are still around and working are the best of the group. We are also often comparing high end products of the past to ordinary products of the present. Everything else is long since broken, junked or composted.

We went through a “quality revolution” in the late 1970s and 1980s. Quality, as measured by suitabilty to tasks and reliablity increased exponentially.

The one thing that probably is a “quality” issue is simplicity. Many products have become very complicated. This is in response to consumer demand, but not always a good thing. Your gas stove may be an example of that. But I would guess that it burns more gas per unit of delivered heat than a comparable stove today.

Posted by: Jack at November 29, 2006 8:47 AM
Comment #196842

When then did planned obsolescent become the norm?

Posted by: j2t2 at November 29, 2006 10:19 AM
Comment #196869

One last time for all you uppercase challenged people. There are 2 of us out here Keith (me) and keith (the other one. Since neither one of us wants to give up our name, we are pretty consistent in the uppercaseosity of our names.

Thank You

Keith

p.s. I know that uppercaseosity is not a word.

Posted by: Keith at November 29, 2006 2:04 PM
Comment #196871

jt2t

It did not have to become the norm. Thing broke pretty much on their own. Archeologists count on it. Most ancient cities are on top of giant garbage piles.

The problem with many of today’s products is that they last too long. They go out of style way before they wear out.

Posted by: Jack at November 29, 2006 2:20 PM
Comment #196872

American multi-national companies are having a hard time competing in the global marketplace with non-American multi-national companies, in part because they are forced to pay taxes on all earnings, not just what is earned in the United States.

I know, because I work for an American multi-national company that repatriated to Bermuda several years ago. It was an agonizing decision for our leadership, but in the long run it has allowed us to maintain a strong manufacturing presence here in the US (we have dozens of factories all over America, many of which are the backbone of rural communities.)

We still pay a large amount of taxes on all earnings generated in the US; we just don’t have to pay US taxes on our foreign-earned income any more. We now are on an even playing field with our foreign competetion, and continue to add jobs here in the US (manufacturing and professional) as we grow stronger.

In spite of what you may think, it is not an easy decision to close an American factory, but is normally made as a last resort. I’m afraid, reading your posts, that if Democrats do indeed try to make us incorporate back in the US or heavily penalize us with taxes, that American factories will have to close and professional jobs will be lost as we will be forced to try to cut costs in other ways in order to compete internationally.

You see large corporate salaries and view international businesses as evil; I see thousands of American factory workers who are earning a good living and proud to work for my company, who may not have jobs if it wasn’t for my company.

Posted by: nchoosier at November 29, 2006 2:22 PM
Comment #196884

—Kieth— If there is a dish with two wall-nuts on
it named Kieth, how does one distinguish
which one is the real nut named Kieth ? ? Would the real Kieth please add a (1) after your name, or you
will always have a falling out with others. Being
Fist is better anyway!

Posted by: DAVID at November 29, 2006 3:19 PM
Comment #196901

DAVID

OK, I will acquiesce. From now on I, the lower case keith, will use the initials wkw. This will not cause great harm to me or any of my family. This will help those who cannot distinguish between myself and uppercase Keith, by either writing styles or by being able to tell the difference between K and k.
Thank you all for your patience in allowing us to work on figuring this out without the use of the U.S. Govt. or any of its agencies.

wkw (formerly known as keith)

Posted by: keith at November 29, 2006 4:32 PM
Comment #196916

keith

Thank you

Keith

Posted by: Keith at November 29, 2006 6:05 PM
Comment #196941

Paul Siegel,
Good article.
The problem is there isn’t a lot we can do to stop it.
However, we should start monitoring all corporations that are merely mirgrating from one place to another, insuring there is always cheap labor somewhere.
Corporation can move around.
As a result, they can move to where labor is cheaper.
However, if a corporation is merely jumping between locations previously occupied, it is engaged in a process of ensuring that cheap labor always exists somewhere else (i.e. cultivating cheap labor for later).

Posted by: d.a.n at November 29, 2006 7:28 PM
Comment #196957

What I would like to see is an outsourcing of CEO jobs. I think we could find overseas CEO’s that give far better value in terms of work vs pay than the overpaid clowns that run many US corporations. I’m tired of hearing the argument that we had to pay him a zillion dollars if we wanted the “best man” for the job. I’m guessing that was part of the defense for compensation paid to guys like Lay and Ebbers. How many CEO’s do you think have looked into outsourcing the executive offices to some country where all the exec comnpensation could be cut by 75%?

As for EE dumping tell me, are you going to punish the US company who moves jobs to China and not punish its foreign owned competitor who already has the jobs in China? I suspect we are in a no win situation unless we want to turn protectionist and we saw what happened when Bush tried that with steel.

Posted by: Carnak at November 29, 2006 9:20 PM
Comment #197292

By no means do I like the fact that American labor is continually exported to other countries, but you called companies that do so un-American. Since when has the American thing been to help the litte guy or consumer out? International businesses outsource because they are American. They are looking for profit. That is what makes them American. Thats like saying that McDonald’s is un-American because it sells fatty foods to Americans. McDonald’s is making America fat. No McDonald’s is trying to make a profit just like all the other international companies that outsource their employees are trying to make a profit. The reason they are succesfull companies is because they take care of themselves first and formost. Thats capitalism at its finest and always has been the way business has worked.

I agree with Carnak. It would be great to see companies outsource the executive positions.

Posted by: Jay at December 1, 2006 5:12 PM
Comment #199743

No one likes to see jobs exported, however, more laws to punish anything has never worked. Laws are in place now, but, given the same hammer, side by side, one being $39.oo and one being $9.00, if you need 100 of them which are you going to buy? It is hard to solve a problem after decades of neglect. I have worked in a large corporate company - it is true, most upper management is of dubious use. The worker bees knew how to do their jobs quite efficiently without supervision. And so much smart, young talent is ready and waiting to interface with a global community. If we need a law to keep a job in America, we will only end up importing cheap labor to live here. Of course, then we will need more laws for those who come… But, I am more or less a Libertarian looking for a free land, society - probably an unrealistic dreamer.

Posted by: jennie at December 18, 2006 10:19 PM
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