Investment Contrarians

Why America’s Destined to See Jobs Move Overseas

By for Investment Contrarians |

America’s Destined to See Jobs Move OverseasI was reading that Apple Inc. (NASDAQ/AAPL) would produce at least one of its computer products in the United States. This is great news for jobseekers, but Apple will continue to manufacture the remainder of its products outside of the U.S. in low-cost global manufacturing regions, such as China, Asia, Mexico, Eastern Europe, and Latin America. The reality is that companies have to control costs, especially given the slower revenue growth amid corporate America.

The jobs numbers are not good. There are 22 million or so Americans looking for work who are unemployed or underemployed, with about 12 million being fully unemployed. These are not good jobs numbers, as many of these people are taking minimum-wage jobs just to fight off the creditors and put food on the table. The poor jobs numbers climate is also hindering the eurozone.

Jobs growth is showing signs of wanting to edge higher with the unemployment rate holding at 7.8% in December, with 155,000 workers managing to find full-time work, which was slightly ahead of Briefing.com’s estimate of 150,000.

The official unemployment rate is 7.8%, but I wonder about the validity of the jobs numbers as far as an accurate reflection of the nation’s jobs situation. My thoughts are that the unofficial unemployment rate is much higher than the reported rate. The official jobs numbers don’t include the millions of Americans that have dropped out of the labor force, tired of pounding the pavement to get shut out of jobs or working at minimum-wage jobs.

As I have said in this newsletter before, the millions of jobs that have vanished from the U.S. landscape to faraway places, such as China, India, Mexico, and Latin America, are likely gone for good. The average hourly wage of factory workers in China was around $1.36 per hour in 2012, which is much lower than the $23.32 in the United States. (Source: Kavoussi, B., “Average Cost Of A Factory Worker In The U.S., China And Germany,” The Huffington Post, March 8, 2012, last accessed January 28, 2013.)

Similar jobs numbers comparisons are found in other poor, developing countries. The reality is that wages are relatively high in this country for jobs to come back home. Global companies selling mass-market goods require low wages in order to remain competitive on price, while also delivering results to shareholders who demand profits, however it’s done.

President Obama suggested he would add taxes to U.S. multinational companies that employ cheap labor overseas, but I really don’t think it will have a major effect on the jobs numbers. Companies would rather pay a bit more in taxes and save with cheaper operating costs overseas than pay more for labor and overall manufacturing costs in America. This is the sad reality. Moreover, adding to the overall cost of American manufacturers by raising taxes could backfire, as it would increase the prices of goods sold to Americans.

The bottom line is: the jobs numbers environment is vastly different now, given the low-cost production centers situated around the world. The real challenge for President Obama will be to get the economy going, which will then drive the jobs numbers.

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  • Arthur Lemay

    It seems obvious that Obama's actions are not calculated to help American job growth. His policies are similar to the Cloward Piven model in which the collapse of the economy brings about the suspension of the Constitution, installation of martial law, and government by dictatorship. Or did you think it could not happen in America? Think again, it's happening right now.