"Gould 0738" wrote in message
...
You will not pay $1000 for a 60 gig disk drive! If you would, then the
manufacturers could build them here. Fully bundled labor cost in
Malaysia
is probably in the $3-5 range, was $1.50 in the early 1990's. So, since
the
consumer wants the $60 drive retail, the companies are forced to build
overseas. You think that a PR guy for a union pension fund, should make
$100k+? Then you can hire him, but if you could get the same thing for
$20k, would it not be provident to do so for the benefit of the
pensioners,
and stockholders?
No, most folks wouldn't pay $1000 for a disk drive. That would amount to
several days' income for a typical American.
Ironically, when we build them overseas and sell them for $60, that price
represents several days' income for the people that built it.
The missing portion of this equation is executive compensation. UP Uranus
Widgets and Gidgets, (for example), traditonally grossed $500mm per year
in
sales with a respectable 8% operating net of $40mm. The CEO earned $6mm
per
year.
UP Uranus moved manufacturing from Oklahoma to Malaysia, and accounting
and
customer service to New Delhi. The decrease in personnel cost improved the
company operating net from $40mm to $110mm, activating an "incentive"
clause in
the CEO's contract that increased his pay from $6mm per year to $35mm.
The board of directors voted themselves fat bonuses, dividends went
through the
roof, and the stock price advanced sharply. The CEO, the board, and the
stockholders were all delighted.
Somewhat less delighted were the ex-rank and file employees of UP Uranus.
Many
had to rely on unemployment insurance, some were forced into an early and
underfunded retirement, and others settled for "underemployed" jobs at a
fraction of their former wages and lost homes, cars,
savings accounts, as a result.
Almost as undelighted were the taxpayers in Oklahoma. UP Uranus discovered
that
by forming sub corporations in Malaysia
and India and registering these entities in certain Caribbean nations,
there
would no longer be any US federal or local sate taxes paid on the
proceeds.
Just when UP Uranus dumped thousands of involuntarily jobless people onto
the
doorstep of society, UP Uranus engineered a way to avoid participating in
the
social costs associated with the layoff.
That's what is defined as "smart business" by many people whose god is a
greenback
and holy writ is last quarter's financial statement. What the hell, let
the
common people eat cake. If they get too desperate, they can sell one of
their
Lexus......(surely every family has at least a couple of those, right?)
BUT.....we haven't finsihed casting all the villains in this little
scenario.
Throw in another 200 million adults of consuming age and blind them all to
any
portion of a purchase decision except price. Have them shop in a business
that
is so powerful it collects almost 10-cents out of every retail dollar
spent in
the US, and have that business inform its competing suppliers that it
*expects*
them to offshore
as many jobs and reduce costs as much as possible so that the company's
200-million customers can buy a new toaster for $10, or a microwave oven
for
$39.
Winners: The very rich and the very poor. (Most of the very poor being
overseas). Middle class consumers but only to a point. (Higher
unemployment and
greater underemployment depresses wages for all,
meaing that it takes as long or longer to earn that $39 microwave as it
did
when the
appliance cost a bit more).
Losers: The middle class overall. Skilled labor, white collar
professionals,
and tax revenues. (Sales tax doesn't diminish much when the companies
reorganize offshore, so the portion of the tax burden paid by the
consumer,
rather than the corporations, remains relatively high. Transfers the tax
burden
to the little people).
Is this a "good" thing or a "bad" thing?
That's up to everybody to decide based on individual values and
perspectives.
No doubt about it, however, it is a common scenario in contemporary times.
Part of the problem has been the astronomical inflation of wages in the USA
in the last 25 years. Middle class wages. 1980 a good engineering job paid
about $23k a year. A car cost $2-4K and the burger flipper was making $2 an
hour. Now the burger flipper is making $9 an hour and the employed engineer
is making $100k a year for the same position and the same car is $25-40k.
What is that inflation wise? About 10% a year. A lot brought on by the
overspending of the government giving away lots of money to the downtrodden.
War on Poverty. Did we win the war? Still people complaining about the
downtrodden. Look at the Carter Presidential years. 17%+ inflation. We
have priced ourselves out of the market in a lot of areas. The rust belt,
had huge unemployment because of a couple of reasons. Iron ore ran short,
and the foundries did not upgrade to produce steel with scrap and some ore
more efficently. And the labor unions forced huge wage increases via
strikes. Sure, it is nice to be a high school dropout, or even a graduate
and earn $80k a year. average public traded companies CEO's in 1962 made
about $130k. 10x the average workers salary. Now same CEO's are making
$1mm. maybe 15x the average workers salary. Sure, there are the Martha
Stewarts, et al. But a small percentage of the CEO's. And we probably had
a similar % ripping off the stockholders in 1964. We are in for hard times,
but maybe we come back into line with the rest of the world in terms of pay.