Econ 001

If you read the brief articles below, you’ll have a better understanding of the obstacles the President elect faces in implementing his economic agenda, and you’ll understand the damage much of that agenda will do.

Reason Magazine:
A Stronger Economy Will Also Destroy Jobs, but It’s Necessary
Luddites need not apply.

The Brookings Institution:
Global economic forces conspire to stymie U.S. manufacturing
Stopping productivity increases will preserve jobs for some and destroy jobs for many others. All of them will be poorer.

The Foundation for Economic Education:
Taxing Global Trade Is Not Deregulation
The Regulatory State is where you find it.

I heard some guy named Sexton (guest hosting for Rush) making excuses for cronyism and protectionism on Tuesday. Hannity, too (while flipping stations).

The corruption of conservatism is well underway. These guys only ever paid lip service to the idea of small government. They’re just fine with Statism if the “right people” are in charge.

Cafe Hayek:
Trump’s Ignorance Is Matched Only by His Thuggishness
Remember when Obama screwed GM bondholders and fired the CEO? Donald Trump probably liked that. Conservatives didn’t.

Now, apparently, we’re supposed to cheer the big bully in the pulpit.

"Offshoring" meets automation

These jobs aren’t coming back no matter how much the President-elect threatens Apple:

After announcing its 40,000 robot workforce in October, Foxconn (OTC:FXCOF) is automating production at its factories in China in three phases, aiming to fully automate entire factories eventually.

If the average Foxconn employee making Apple products gets $3.00 an hour (it’s probably closer to $3.00 a day), and those jobs are being eliminated by automation, we don’t want them back.

Robots cost the same to operate everywhere.

Seen and Unseen

The other side of manufacturing job loss: Global Trade Is Why Your Television Did Not Cost $6,200 Like It Did in 1964

Automation has also destroyed manufacturing jobs while benefiting consumers.* As automation creeps into other industries, it becomes a much bigger threat than foreign labor. We need a leader with a plan for that challenge, not one who wants to raise consumer prices through protectionist tariffs.

Bringing offshored jobs back – when most of those jobs are going to be automated out of existence – is the opposite of visionary.

*U.S. manufacturing productivity has steadily increased since 1950.

A note on jobs

We face an employment problem. Not the one Donald Trump refers to when he talks about bringing manufacturing jobs back. Those jobs do not add much value any more. I’d argue we don’t want them back.

Take, for example, what happened to US auto manufacturers who paid far more to assembly line workers than those workers were worth: Bankruptcy. They had to lay off workers, screw over bondholders, suck-up taxpayer dollars and, in 2007, implement a two tier wage.

Entry-level auto-workers get $15.78 to $19.28 hourly. Slightly above what the economically ignorant are now demanding for flipping burgers.

Full rate auto-workers get $28 an hour. The top tier also provides better benefits, including a pension instead of the 401(k) entry-level workers get. The total difference in the two compensation scales is about $20 an hour.

How much value is added by screwing in a sensor (200 times a day) that will keep cars from crashing into each other? What value is added by designing that sensor? Which job do you want?

If Mexicans and Chinese do those rote assembly jobs for less than UAW wages and benefits, is anyone surprised? Are they still “good jobs?” Is doubling the wages of an entry level UAW worker in Detroit sustainable?

How many of you would appreciate a doubling in the cost of a new automobile, or a $9 McDonald’s fish sandwich?

Those jobs, within our lifetimes, will mostly be done by robots. Then who will Trump blame?

Donald Trump’s jobs “plan” is like insisting we bring back jobs manufacturing buggy whips.

Reconciling the Union Leadership minimum wage rhetoric

AFL-CIO leader warns labor could sit out 2016 fight over trade

AFL-CIO President Richard Trumka threatens “no endorsement” for President, if Hillary supports the Trans-Pacific Partnership trade deal:

…that’s conceivable if both candidates weren’t interested in raising wages

They decided to pass something that was going to cost jobs and lower wages, and they’re going to have to answer to their constituencies for that whenever they face them.

So, unions oppose trade deals unless those deals would both create American jobs and raise American wages. Who would disagree?

Our trading partners, perhaps?

Speaking of wages vs. jobs, after leading the fight to get a minimum wage increase passed in Los Angeles, a California labor leader appears to contradict Trumka’s wage rhetoric: L.A. labor leaders seek minimum wage exemption for firms with union workers

On May 19th, Los Angeles City Council voted to increase the hourly minimum wage to $15.

But Rusty Hicks, who heads the county Federation of Labor and helps lead the Raise the Wage coalition, said Tuesday night that companies with workers represented by unions should have leeway to negotiate a wage below that mandated by the law.

“With a collective bargaining agreement, a business owner and the employees negotiate an agreement that works for them both. The agreement allows each party to prioritize what is important to them,” Hicks said in a statement. “This provision gives the parties the option, the freedom, to negotiate that agreement.”

In sum: To be free, you must join the collective.

Acknowledging that union members might lose jobs to lower-cost competition under a consistent set of rules, Mr. Hicks demands the privilege of being the lowest cost supplier. Reality-wise, Mr. Hicks would have the better of this argument with Mr. Trumka, except that it isn’t a disagreement at all. They both want to use government regulation to drive out competing labor.

So, if it would cost their members jobs to have a particular minimum wage, unions oppose minimum wage for their members. If it would cost their members jobs for other countries to have a lower minimum wage, they want to force higher labor costs on those other countries.

Maybe Trumka and Hicks should start thinking about what this – Robots Start to Grasp Food Processing – means to their membership.

I seem to remember another time where this type of disruption affected wages and jobs. Something about power looms? Some kid named Ned Ludd was said to be involved.

It seems to me, with the robotics threat generally looming on the horizon, that Trumka and Hicks are a bit shortsighted. Lower wages from foreign competition (for Trumka Chinese factory workers, for Hicks, the illegal immigrants in Southern California) are just practice for what’s coming to their members. It’s already started at McDonalds et. al., because they’re the early targets of the social justice cohort.