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Wednesday, August 7, 2013

Job Creation and How Job Preservation Hurts Communities

Today's posting is a little different than most..

We're not going to talk on markets or the Fed or our usual fare..

Instead, we're going to focus a little bit on jobs.. Specifically job creation, maintenance and how in some cases keeping workers employed in a community is actually more detrimental than letting the corporation just leave...
First job creation.. So how is a job created?

Its created in one of two ways:  Either an employer in the public sector has a need to fill and seeks out work to pay out as cheaply as possible while getting the most intellectual, physical and/or time benefit from the new hire...

Or government hires a person to fill a specific position and perform specific tasks and goals.

With few exceptions, government employment pays more than the private sector and provides greater job security which is why corporations and fiscal conservatives Hate when government hires..
Back in the early 1930s for example, businesses were trying to take advantage of all the suffering of people during the early years of the Depression by offering the unemployed rock-bottom wages with a 'take it or go F yourself' attitude...

FDR came into office in 1933 and basically told the corporations to do the same.  He hired en masse... the more people the government hired at livable wages, the more it Forced these evil corporations to raise their wages to compete

Corporations are still as evil today.. even more so..
It's' just Obama seems to admire the economic policies of Reagan and W. Bush more than FDR...  Thus government is not seeking out new employees to hire which would have been the competing interest, and so absolutely no incentive for corps to hire anything beyond part timers and temps.

But they'll happily accept the President's generous proposal of lowering their tax rate by 7% down to 28% while the previous year raising small businesses to 39%

When millions of people on the federal, state and local level have employment in the public sector, making a good living and paying their bills while performing services that benefit those who seek their expertise, we call it a productive government..
They of course call it 'bloated government', then get all steamed that all the government employees they coldly fired just to preserve their low income tax rate is now on unemployment...

OK.. now they we talked basically about how jobs are created, let's focus a moment on how jobs are maintained or sustained in a given area...

There's two kinds of outsourcing of jobs basically..

One is on a national level-- a corporation closes all its factories in America and uses extremely cheap labor from the Caribbean, Middle East, Asia or Africa to make the clothing, toasters and TV sets.
The corporation is still allowed to sell its products in America and make enormous profits without any tariffs, duties or other punishment...  Any employees retained domestically are solely for the purpose of marketing and selling, not the product's creation.

In the US like in most western nations, we're good enough to buy the Shit.. Just not good enough to make it

Now the second kind of outsourcing which is actually more hideous in our opinion is on a state or local level...  
Company X is thinking of leaving a particular community to relocate in another state 1000 miles away.  This would mean the loss of 3,000 jobs...  What's the slimy local politicians to do?   There's an election just around the corner and no one gets re-elected as a job-destroyer...

Well the only thing to do is give that company tax breaks..  The larger the company.. the more they hire, the bigger and better the breaks.

"Don't worry Company X, those simple minded employees grateful for work will end up paying the taxes you were meant to pay out of their precious earnings and be happy to do it!... Now you can keep even greater profit for yourselves and um.. maybe donate to our re-election campaigns??"
Here's a real life example of what goes on everywhere across the country and how people get hurt by these decisions...

Boeing is one of the largest corporations in America-- they make airplanes for domestic and foreign airline carriers as well as planes for the military..

Last month, in a place called North Charleston, South Carolina, the local government passed legislation to ensure its biggest companies would not leave to relocate elsewhere... the goal of course to preserve jobs for those who live in that area..

Isn't that wonderful?  
Now the specifics...  According to the Post and Courier of Charleston:

"The city council on Thursday (July 11th) cut the rate used to calculate annual fees for companies earning $250 million or more. There are only four such companies in the city.

The city also created a new top rate tailored for Boeing that is 99 percent less than the current levy...  Essentially, the deal was created so Boeing pays no more than about $1 million in yearly fees to North Charleston as aircraft production increases"

You need to really let that sink in... digest it...
Boeing last week received contracts from the US Army and Navy worth over $10.5 Billion in the Philadelphia area to build dozens and dozens of war planes...

This is an extremely profitable company here.  Their overall revenue has Increased 9% this year compared to last and have made $21.8 Billion to this point..

So what did North Charleston do to keep them?

Lowered their tax rate by 99%!!!
So instead of collecting $100 million annually, now they'll be collecting $1 million...  Simple math, that's a $99 million shortfall..

Who makes it up?

The Boeing employees?  Other workers of smaller companies i.e increased local income tax?

The residents who live there-- we imagine their property taxes will need to skyrocket or there will be cuts to be made.. teachers, police, fire, waste disposal..
Maybe raise the local sales tax another percent or two or three...

Meanwhile a corporation generating $21.8 billion in only the first seven months of the fiscal 2013 year received a gift Specific to them;  an income tax rate decrease of 99%

This is what your government does... locally, state-wide and even on the Federal level..

They bend over backward to accommodate corporations with dramatic tax breaks so the politicians can say they're job-creators and savers then receive kickbacks i.e. donations to run for office again or build Presidential libraries...
Then cuts are made to basic social services and the quality of life decreases for all, and those same piece of garbage leaders say 'Hey, its the economy'

And the corporations then downsize or restructure anyways double-crossing the politicians they got their deals from and say 'Hey, its the economy'

And as long as corps like Boeing have states to play off one another, the power play works like a charm...  And the people have no clue as to the how or why they're so lucky to have this new corp relocate to their lovely town... they're just happy to be making $10-15/hr
It's funny... we've never seen network, cable or financial news address this problem with any depth or honesty and yet we do for you the reader...

Guess its a good thing we're not part of the corporate media.