The U.S. economy will not return to prosperity without substantially increasing its manufacturing sector.
At a minimum, to bring industry back to the U.S., we would have to take the following steps concurrently:
1. Eliminate all federal minimum wage laws.
2. Eliminate all federal employee liability laws.
3. Eliminate all federal funding of social programs, including Social Security and Medicare.
4. Dramatically increase the number of legal immigrants allowed to come to this nation and be naturalized.
At the very least, manufacturing requires abundant low-cost, low-risk labor. This was once widely available in the U.S. but has now been erased through restricting of legal immigration, federal minimum wage requirements, high federal income taxes, including Social Security and Medicare taxes, and federal employee liability laws.
A very simplistic argument would be to state that without having competitive labor we will lose manufacturing to other countries. While there is ample evidence to support this, the argument has clearly not been strong enough to effect any policy changes. What may help is a more micro analysis of manufacturing.
In the U.S., we commonly think of a production worker as someone making a lower middle class income, but in the rest of the world the production worker is someone who makes a very low wage of one to five dollars per hour. These employees are often illiterate, coming from rural poverty-stricken backgrounds of subsistence farming or abject poverty. The opportunity for them to work in a factory and make any wage is an opportunity that many of them dream about.
A widget factory in China has 1300 employees and $60 million in annual revenue. Around 1000 of the employees are production workers that are paid low wages, but are given free room and board, with clean yet humble ‘apartments’ located on the factory premises. These living conditions are substantially improved over what they had in their previous lives. Additionally, their children will have the opportunity to attend schools that otherwise were not an option. In fact, many of these workers will use a substantial portion of their income to pay for their children’s schooling and secure a better life for their children than they could ever have.
Of the 300 employees who are not production workers, a considerable portion of them make wages that are comparable to U.S. workers when adjusted for spending power (and some even without such adjustments). The sales, engineering, finance, and administration of the organization will have wages that are very much in parity with U.S. employees. A salesperson who can generate $10 million a year in sales is valuable anywhere in the world, as is an accountant who is responsible for $60 million, or an engineer who can create products superior to the competition, and the list goes on. When the dollars get big enough, the owners will do what is necessary to protect their wealth, including excellent compensation.
Let’s say we moved this entire factory to Central California. From an employment perspective, what current residents are hurt by this move? Nobody is losing their jobs and employment is being increased, so the answer is none.
What would be the impact on the local economy? Everyone at the factory, including the workers, will buy clothes, cell phones, food, and use various forms of transportation. The vendors of these products will benefit and will need to hire employees in order to increase, so from an employment perspective adding this $60 million, 1300 employee factory to the region is very beneficial.
But what about the local employment? Won’t employers abuse employees by decreasing wages? (Please understand I am not arguing the proper role of government in wage controls as the states still retain their power to set minimum wages.) Wages would go down in low-skill job sector, but so will the prices of the goods and services offered. While the prices may not fall in perfect parity with the reduction in wage costs, prices of things purchased by those operating in the low-skill job sector would necessarily fall in order for vendors to continue servicing the market. Regions already set their own minimum wages when employers find that they cannot find qualified help for their business, they increase wages, which forces other employers competing for the same employees to increase their wages as well. So employers will be forced to set wages at the minimum price required to attract qualified labor.
If we eliminate federal minimum wage laws, how can we be sure that employers pay their employees a fair wage? The states retain the power to set minimum wage laws to maintain the industry of the state. Since the employees are also voters, the wages will be kept at a standard that is desirable to the constituents, who are also free to vote with their feet and move to another state.
If we eliminate all federal employee liability laws, then won’t employees be put needlessly into harm’s way by the abusive employers? The states still retain their power to create and enforce employee liability laws, and civil courts can enforce liability through the civil court system.
If we eliminate the funding of social programs, won’t all of society break down? We won’t have hospitals, or education, old people will be put out to the street and the poor won’t be able to get health care. There is no perfect system to take care of all of society’s ills. Every system has flaws, so we must determine which system of flaws is the least undesirable. In the system we have today we are on an unsustainable path. We cannot afford to bring in large numbers of immigrants to feed on our social services, and we cannot expand production without bringing large numbers of immigrants, and we cannot move forward without expanding our manufacturing sector.
So we can have it one way or the other. Leaving the social programs in place while increasing the number of immigrants would bring our economy to a screeching halt and draw people to our nation for purposes other than to contribute to our economy. To deny others the opportunity to enjoy the liberties that we have, to escape from their economic and political oppressors, to contribute to the improvement of people’s lives and feel a sense of self-worth and life satisfaction, I believe is more inhuman than any of the arguments I’ve heard.
Who would determine how many people we allow to immigrate to the U.S.? My recommendation is to leave it to the states. The Federal Government should grant 12-month working visas to anyone who applies for them, except those deemed a danger to society, such as murderers and rapists, and those who are found to have dangerous communicable diseases can only enter with a sponsor who demonstrates reasonable care will be given. If these immigrants want to be naturalized, then they must get that from some state. Each state can determine how many immigrants are naturalized, but cannot place any restrictions on naturalized citizens (the Constitution prohibits this).