New Jobs at Mickey D’s

The first order of business- – deal with the smoke and mirrors media presentation of being able to create jobs for the international market. If McDonald’s hires more people in Singapore and Honk Kong does that mean– we as a nation are growing? If Apple orders more tablets from China– have we made progress in the high tech industry? Creating jobs and profit inside multi-national companies does not necessarily feed us. Stop looking at multinationals on the stock market as clues to our fiscal health.

If you find the previous paragraph confusing as it relates to jobs in the USA, you should. We are dealing with apples, oranges, kumquats with a few rutabagas thrown in. Beginning with the spread of labor unions into commodity product markets we saw the decline in U.S. job supply. The stronger collective bargaining became, the less jobs remained in the U.S. Is that a byproduct of greedy corporations or greedy workers? You will need to sort that out on a personal level.

Do not allow politicians and the “politically correct” media to cloud your vision. Jobs left the US for Asia when “organized” labor drove the wages and benefits up. The disease of collective bargaining would be the diagnosis as cause of death of the U.S. labor market. Corporations exist to make a profit, nothing more. If labor is cheaper in Korea, then the Korean labor market grows.

Populism and Work

The war between labor and “big” business keeps the media happy. There’s an ongoing theme to put up as a lead story. “Big” labor needs “big” business to survive. If we had mostly mom & pop shops with 5-10 employs collective bargaining would have little power. Unions drive up wage and benefit costs until “big” corporations find alternatives. Mom & pops go out of business and with them, 5-10 jobs.

Big business found controlling thousands of workers and large manufacturing plants difficult, so “big” labor helped them keep employees in line. Sure, the headlines carried the ongoing screaming match, but, underneath the surface both “bigs” needed each other. Looking in the rear view mirror, who lost the war between the “bigs?” And, how?

Media is the modern culprit, but, before the era of cable news people were more communal. They gathered to socialize. Out of those informal gathering opinions and movement arose. Populism isn’t new. What did Lenin build his revolution on? It certainly wasn’t a job at McDonald’s. No, it was against the oppressive Tsarist regime in Russia. Every movement needs a scapegoat. Populism works to unite the masses in a “common cause.” (Phrase sound familiar?)

Our U.S. revolution used populism. It became the citizens of America against the Crown of England. Corruption was a key talking point. Freedom from unjust persecution was a talking point, but, the driving force was the smaller against the mighty. Populism works because people lack options. Or, do they? In a monarchy one can easily see there are privileged classes. In the current U.S. central government model few want to look beyond the facade and gaze upon the current “ruling elite.”

Math vs Fantasy

We have roughly 300 million people in the U.S. China has over 300 million people working. We will never be the leader in jobs. Mathematically the job is impossible. Just over half the people in the U.S work. Many of the 54,000 U.S. jobs created in May were at McDonald’s. At minimum wage our labor force cannot feed a family of four, nor can they provide health care. Are the major corporations such as General Electric the problem? GE won’t pay taxes they can avoid, so who gave them the pass on taxes? But, that’s another issue. Let’s stick to math.

If the average worker in China makes under $50 a week and the McDonald’s worker makes $200, we have roughly a 4-1 ratio. Spread that across a manufacturing base and look at the great divide at retail. If the labor for a product equals 25%; $1 for labor in China equates to $4 labor cost in the U.S. But, we are not done yet. If one multiplies distributor costs and retailer profit, the spread becomes even larger. Even a Walmart profit margin cannot make the U.S. labor priced product competitive.

So, whose the bad guy here?

“You, Me, Labor, Business?”

No amount of recalculating nor media spin will reduce the spread between U.S. and Chinese labor cost. AND, as long as Chinese labor cost are 1/4 or even 1/3 of U.S. labor cost- we as a nation lose. Forget doing it with high tech. China has made the transition from handsewn kewpie dolls to high tech. Why do you think Walmart sold you that “flat screen” for $600? Not because Billy Bob made it in a sweat shop in Muscle Shoals. The Chinese are elevating skill levels in their work force, but not the labor cost at the same rate. Final point,

“it’s not China’s fault. It’s just good business.”

Free Lunch is Over

The gap between U.S. labor cost and Chinese labor cost lies as much between our ears as our hands. We, as a nation, bought into the concept of “Free Lunch.” The populist speaking, union leader showed up at the shop door promising high wages and benefits for the same or less production, and we bought in.

“Isn’t that free lunch?”

Getting something for nothing doesn’t exist in most of the world. 100′s of millions of people live with little more than electricity, if that. Our lifestyle as a nation surpasses most others on the planet. And, we show no sign of slowing down. More gadgets, more convenience, but, we want it for less money and less effort.

We could be classified as “greedy or lazy.” But, I think it’s more a matter of social evolution. We were told, life should be good. We bought into the concept of the USA, as the land of milk and honey. We as the phrase goes, starting believing our own press. What my grandparents and parents did to elevate me to the level I reached, was not 40 hours of high wages with benefits. They worked hard and saved.

One can look toward Asia for the values which made the U.S. strong. Hard work, savings, family were all a part of our heritage. Those same aspects drive Asian culture today. Their savings rates far surpass any Western nation. Do not believe I am not just as guilty. This is not about finger pointing, this is about accepting our condition. Before we can change, we must fully understand and accept the error of our ways.

“We all at some level bought into free lunch.”