(03-12-2011 07:46 AM)Mr. Peanut Wrote: Unless you're in Michigan and your plant moves to Mississippi or you're in Mississippi and your plant moves to Monterey. These moves are rarely driven by anything other than the availability of cheap labor. America deserves a middle class. Income disparity is at it's highest level since '29 while worker productivity is at an all time high.
This is the sound byte that the left wants to sell us. Unfortunately, there are a couple of problems:
1. It's not true. Sure, it applies in some cases, where you're talking low-margin consumer goods, but not nearly as often as it the left wants us to believe. If it were true, Germany would be having the same problems we are, and they aren't. They're prospering by making the same sorts of top-quality, high-end, high-profitability products that we ought to be making here--instead of fretting about losing the shoe-sewing jobs to Thailand. There are other factors that drive the decisions on plant locations, and Germany is beating us there. One reason we don't understand this well is that it's easy to see when a plant moves to Mexico, but it's less visible when a new plant locates elsewhere rather than coming here in the first place.
2. Suppose hypothetically that it is true. What do we do about it? The left has no answer there.
I'm speaking from extensive experience. After working in strategic planning for a multi-national manufacturer of a high-tech product line used in the energy and medical sectors, I consulted companies on location decisions. The eye opener for me was a project to locate a new plant, where the decision came down to Wichita or northern France. Corporate really wanted Wichita, and there was pretty intense pressure on us to slant the decision that way. In the mid-to-late 80s, at the height of Reaganomics and with a socialist government in France, the tax advantages to locating in France were more than we could overcome. So corporate decided to assume that Reagan would fix the tax gap and overruled us. Until the president and his wife went to Wichita for a weekend of wining and dining before the award was to be announced. It snowed a bunch, Wichita didn't have adequate snow removal equipment, a bunch of events got canceled because nobody could get there, president and wife sat in their hotel room and ate beanie weenies all weekend, and wife told him that they weren't going anywhere that didn't have snow plows--so the plant went to France.
Corporations make plant siting decisions based on wages and other costs, productivity (a product of education, logistics, and infrastructure), taxes (which tend to be more easily quantifiable than other factors, and hence take on greater importance), proximity to suppliers and markets, regulatory hassles, and risks. The places with lowest wages tend to be lowest productivity and highest risk, so those tend to offset. We used to win a bunch of those, and that made us competitive despite higher wages. Germany is one of many countries beating us on those other things, and that's a big reason why they're net exporters and we're net importers.
And I think you mean Monterrey, not Monterey. Monterey's in California, and nobody's moving from Mississippi to California for lower wages.
