2.4 million jobs lost in just 7 years because of China's "currency manipulation." That's the disturbing conclusion of Tuesday's report from the Economic Policy Institute in Washington which chronicles the impact of the growing trade deficit between the US and China.
The numbers are staggering and nowhere has been spared: California (370,000 jobs lost), Texas (193,700) , New York (140,500), Illinois (105,5000) and on, says the EPI study. Every industry has suffered, from manufacturing (down 1,616,300 jobs) to electronics (627,700) to professional services (139,000.)
Most troublesome is that those raw numbers can't begin to paint an accurate picture of the pain suffered by workers who have been laid off, by their families and their communities.
This is not the stuff of the American Dream.
Consider, however, what the years from 2001 to 2008 were like for Cleveland-based Lincoln Electric, an American multinational which since 1930, has remained the world's biggest manufacturer of arc welding technology. In 2001, Lincoln Electric's global sales totaled $979 million. By 2008, sales for this Fortune 1000 and Forbes 400 firm had grown to $2.5 billion from production facilities in 19 countries, including China.
Yet no permanent American employees of Lincoln Electric were laid off: the workforce in Cleveland expanded by 2.8 % to just over 3,000. In fact, no permanent American employee at Lincoln Electric has been laid off for economic reasons since at least 1948.
Lincoln Electric isn't immune to the ups-and-downs of the global economy, including "currency manipulation." Welding is essential to making everything from bridges to automobiles to pipelines to electricity-generating windmills. When those industries stumble, Lincoln Electric does too.
What's different is that for nearly a century, Lincoln Electric has embraced a unique incentive system which brings out the best in its employees by promising that as long as they work hard and smart, they will never be out of work. It's powerful encouragement, given what has happened to most American manufacturing workers over the past five decades.
The incentive system delivers even more with a profit-sharing bonus that has been paid every year since 1934 -- because the company has turned a profit every year since the Great Depression.
The bonus is always potentially big because employees receive 32 % of gross profits. In December 2009, a year when worldwide sales dropped 30%, the average employee received almost $17,000 -- that's on top of base earnings which have to be locally competitive to attract good workers. In 2008, it was $29,000.
It isn't a worker's paradise. Under the terms of the company's "guaranteed employment program," overtime is mandatory (subject to local labor laws) and in tough times like these, hours on the factory floor drop to a minimum of 32 per week. White-collar employees see salary cuts and they're also expected to put in longer hours to develop new products and new markets so that the others can get back to a full work-week. In other words, everyone shares in both the gain and the pain.
The end result is that the innovation by workers which employment security nurtures -- and the flexibility of workers which employment security earns -- helps Lincoln Electric respond to global challenges without the endless and costly cycle of laying employees off and then rehiring.
Mindlessly copying Lincoln Electric won't work. An incentive system such as this can't be plucked off the management bookshelves. It probably wouldn't work for most others, especially given that the grease which makes it run so smoothly is a hard-won level of trust which is sadly absent in many American workplaces.
But the current system isn't working, and corporate leaders can't blame it all on China. Most business schools teach MBA students that a no-layoff policy is a dangerous and unprofitable anachronism. Too many CEOs keep the layoff lever on their desk, ready to be pulled at the first sign of trouble. Wall Street then applauds them for making a "tough decision."
That needs to change. Individual companies can do little about threats like China's "currency manipulation." But individual CEOs can lead by seriously -- rather than just rhetorically -- making a commitment to regard layoffs as the last strategy before bankruptcy, not the first whenever trouble looms. Business schools must do more to educate their aspiring CEOs that the needs of employees can and should be on an equal plane with the needs of investors, not on a second tier. And governments at all levels - through existing training programs, help for start-ups, granting contracts for public services to private firms with the lowest layoff rates- can act to support those values.
Lincoln Electric's success with its incentive system proves that there are alternative forms of capitalism that can protect people as well as profits. We desperately need more of them in action.
Avoiding a layoff at all costs can be quite a good way to load up your payroll with "deadwood by attrition."
I have no doubt that their CEO doesn't make 200 times more than their average worker either, as is the case in so many industries these days. I believe when St. Ronny took office the average CEO only made 20 times the wage of their average worker.
I keep telling my senator that we need to impose a 20% security tax on every item that is imported into the United States. Regardless of country of origin, this fee would do two things: it would pay for the security costs (manpower, infrastructure) of examining each truckload of goods coming into this country; and since it would be directed at all countries no one country could claim that they are being unfairly singled out.
It has been our "Captains of industry", who drove the ships onto the rocks, not the employees. They fail at their job of management. Chasing short term profits, they fumbled the ball.
Lincoln Electric, still in business, American made and profitable. I thought that wasn't possible?
These plants should periodically and/or constantly be for sale based upon periodic open public competitive bidding, but at a minimum sale price at least equal to as much as the government investment, and with terms of cash only without any creative financing. There should not be any leveraged or other creative financing for purchase allowed by the government. Only cash sales should be allowed.
This might be better than the US government borrowing more and more money from the industrial nations in order to pay unemployed people not to work
The fixed exchange rate allows the chinese currency to avoid overvaluation. They can export as they like and trade benefits from stable prices that don't swing according to demand.
Rather jobs have been lost to workers pouring into chinese cities from the impoverished chinese countryside. Those workers have been working for less than american workers. even if the yuan was not available at a fixed rate, those workers would still be there.
Face it, this blog needs to tell the truth. Ask a chinese billionaire, there's nothing unfair about a fixed exchange.
I really don't want to live like a third world worker but it seems that many free-market types are more than willing to force this life-style on the American worker.
Would bringing back slavery make you free-market advocates happy?
If a business does not outsource their labor costs overseas, then their competitors will and this will cause the company utilizing US labor to become bankrupt due to high production costs.
It is called "Life Cycle Cost Analysis", and takes into account every cost over the life cycle of the factory, including the items that we both mentioned. I have prepared more than 100 of these formal studies/reports.
You must also consider the cost of taxes, utilities, materials, factory construction, government permitting, administration, suprevision, and etc. You must also consider and escalations in the future costs of these items.
You must also consider the market changes that might affect the demand and price for your product.
Who has moved their factory back to rthe USA? This would be a good thing!
I work for a large multi-national corporation and while they are not quick to pull the layoff lever, they are OK with moving most of the manufacturing out of the US, now most of it moved to Mexico but we do have an ever growing presence in China.
We have no incentives other than retaining our jobs. In my particular department there is nowhere to go. So if I am lucky enough to keep my job, I will be doing the same general thing I am now and I will continue to get sub cost of living wage increases.
I sometimes feel that I owe my soul to the company store. And that sucks.