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View Diary: Less than 5% Unemployment? (24 comments)

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    •  Unfortunately, there are some basic economics (0+ / 0-)

      missing here.

      In the long run, people will work if the benefits from working exceed the costs.

      Want to see 99% employment?  Eliminate all social programs and minimum wages.  Now, a lot of low end workers will be working for a bowl of soup and a place to sleep in a corner somewhere but they will be working.

      In the long run employers will hire people if the value of what they produce exceeds the cost of hiring them.  For example, if the marginal Gross Profit of an additional burger flipper exceeds the cost of hiring him (including cost of capital, wages, taxes, insurance, legal compliance, etc.) then McDonald's will hire him.

      All the green job programs in the world can't change the fact that low cost manufacturing in China brings down the price of manufactured goods to a point where  new manufacturing in the US for anything except highly automated or very high end products is rarely cost effective.

      You think you're going to solve the problem with local work like building?  I know a bunch of guys in Shanghai (including several Americans) working on a well funded project to build pre-fab home kits for mid-market homes and ship them to the US for snap together assembly.

      Think healthcare reform will solve the problem?  Guess again.  People are outsourcing jobs like reading X-rays to India using process models similar to Amazon's Mechanical Turk including requiring that two independent readers agree on the result and salting with known result X-rays so they can quickly weed out any bad or inattentive readers.

      The only way to bring back work to America is to lower the cost of building things here.  That's a combination of:

      o Lower wages
      o Lower compliance costs
      o Lower taxes
      o Lower cost of funds (so cutting government competition for funds with the private sector - less government borrowing)

    •  The biggist problem to restart (0+ / 0-)

      Is not cheap labor but the cost of capital, the difficulty of obtaining financing and the unwillingness of OEM to shoulder the burden.

      As manufacturing became more capital intensive, OEMs found it was a more profitable busines model to sub-contract, placing the burden for capitalization (and labor/benifits) on contractors who could operatate at higher effciency and lower profits, and to concentrate of product development and arketing which tales relatively little investment.

      If you compare the operating profits of Apple verses it's contract manufactureres I'm confident their net profit is at least double. Why should they give up that model?

      And i must ask, with credit so tight and interest rates so high, where would the investment capital to build so many factories and finance their operations come from?

      I'mnot argueing againsr rebuild the US indutrial base, to the cotrary I think it's essentisl, I'm simply stating the problem no one else has mentioned.

      Ask me about my daughter's future - Ko

      by koNko on Tue Mar 16, 2010 at 10:34:26 AM PDT

      [ Parent ]

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