Class Warfare Blog

December 18, 2016

Our Jobs are Going South Because …

For example, 300 United Steelworkers jobs are moving from Indianapolis to Mexico because…? The standard “cause” proffered over and over (and over …) for job loss in the manufacturing area is that these jobs are lost because of “automation” and “technology.” But does that interpretation hold up?

The first thing we might ask is if there is new technology that is available in Mexico that is not available here or is available cheaper there. Is this the case? No, actually, the equipment those 300 workers worked on is being shipped to Mexico, too. Do the workers have skills superior to those here in the U.S. No one claims this and it doesn’t seem reasonable. We might also ask whether the numbers of jobs added in Mexico is fewer than lost in the U.S. (If automation is a cause of job loss, you would need fewer workers.) I suspect, but cannot prove, that the number of jobs added in Mexico is actually greater than lost here.

Clearly the reasons are two fold: in Mexico wages are lower, much lower than here. And, secondly, that old equipment won’t be needed to be upgraded for environmental concerns any time soon. So, the purpose of moving those jobs, and I argue, many, many others, is to access cheap labor and weak environmental laws that allow further value to be extracted from older operating equipment.

Compare this “attitude” of American businesses with that of Germany. (It is an attitude and a strategy; it is not being forced upon U.S. executives because of circumstances. Gosh what else can they do?) Germany uses the most advanced (aka expensive) technologies in the world and manufacturing workers in Germany earn much more than their U.S. counterparts. But manufacturing jobs make up 22% of the German workforce and account for 21% of Germany’s GDP. U.S. manufacturing jobs make up only 11% of our workforce and only 13% of our GDP.

Germans spend more making their products and keep their jobs in country with a strategy that if the quality of the products is high enough, people will pay enough extra to cover those costs and, well, they don’t seem to allow greedy executives to make changes in companies that benefit only the greedy executives.

How do you think that is working for Germany and its manufactured goods (Mercedes-Benz, Audi, BMW, Siemens, BASF, SIG Sauer, surgical instruments, musical instruments, kitchen appliances, etc.)? Would you say that “Made in America” compares favorably with “Made in Germany” at this point?

Why do we let U.S. business executives export quality jobs to other countries to extract short-term profits that benefit the executives but leave the companies they are “leading” in less competitive shape? Why do the companies? (Hint: the CEOs pack their Boards of Trustees of these corporations with cronies who will rubber-stamp their plans.)

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18 Comments »

  1. Why? Because in America we worship the GODS of greed and excess. All the other little god systems of belief are subservient to the truth espoused by Gordon Gekko: “Greed, for lack of a better word, is good. Greed is right. Greed works. Greed clarifies and cuts through to the essence of the evolutionary spirit.” There simply is no limit to the hunger of the American psyche fore MORE.

    Comment by Zachary — December 18, 2016 @ 8:17 am | Reply

    • Zach, meet the Deep End, Deep End meet Zach. ;o)

      Most people are scrambling to keep up and pay little attention to economic goings on and then when a local catastrophe happens, such as losing jobs in a hometown industry, they are isolated and unsupported by eith a union or the government and so, go down to defeat. We do not worship greed, although we accept it way more than recently. We worship money. This is a bit like Christians who worship the Bible more than they do their god; it really distorts their reality. It is interesting that the conservative scum have been able to convince working people that unions are bad, so they have no protections when companies do what companies do. Unions put more money in worker’s pockets and you think they would have earned a bit more reverence from the flock, but it is not so.

      On Sun, Dec 18, 2016 at 8:17 AM, Class Warfare Blog wrote:

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      Comment by Steve Ruis — December 18, 2016 @ 8:34 am | Reply

      • All true. But would argue worship of money and greed as inseparable … or at least part and parcel of one another. Perhaps the root love is the ‘more’ … the ‘never enough.’ One sees it in Sports. More of everything: Owner profits, excessive salaries etc. And the jealous want of sports fans … who want more championships, more of what the athletes have. So I comeback to greed with a peculiar American flavor (stench.) While at the same time 99 percent of us get less and less. I find perspective helpful: 60% of the world lives on less than $600 a year. Happy Sunday!

        Comment by Zachary — December 18, 2016 @ 8:46 am | Reply

        • I think greed is currently a manifestation of rich people seeking dominance/status. These assholes who have fortunes of more than a billion dollars are ridiculous. If you spent $500,000 per hour, every hour of ever working day, by the end of a year, you would not have spent a billion dollars. What is it for then? It is a substitute for “my dick is bigger than yours,”

          Why we are letting these CEOs play their silly game on our dime is beyond me. Possibly because they are few and we are many, they were better organized.

          On Sun, Dec 18, 2016 at 8:46 AM, Class Warfare Blog wrote:

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          Comment by Steve Ruis — December 18, 2016 @ 8:50 am | Reply

          • Yes, it is incomprehensible on any scale I understand. Why do we allow it? I suppose many factors including futility, fatigue and imagined powerlessness. But there is also a calcified belief in the American psyche that still clings to the idea that the excess wealth will trickle down to me … all evidence to the contrary.

            Comment by Zachary — December 18, 2016 @ 8:56 am | Reply

            • A big part of our acceptance is the belief fostered upon us that economics/the stock market/the federal budget/etc. is complicated and only experts understand it. Add in all of the false narratives (Automation! Technology! Hey, this bullshit is really believable!) that are fed through corporate captured news media and you have a recipe for unbridled greed, my friend.

              The party line that technology costs jobs is belied by many facts that never make the news. For example, since the advent of automatic teller machines, what has happened to the numbers of human bank tellers? The number has gone … wait for it … up! The installation of an ATM machine or a lobby full of them to serve bank customers is not that far away from a full service branch. Banks have opened myriad small branches and hired human tellers to work in them.

              We just assume that technology always displaces jobs, but look at all the jobs that have been created in things like the alternative energy field, etc. Before there were none, now …

              On Sun, Dec 18, 2016 at 8:56 AM, Class Warfare Blog wrote:

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              Comment by Steve Ruis — December 18, 2016 @ 9:05 am | Reply

              • Agreed!

                Comment by Zachary — December 18, 2016 @ 9:18 am | Reply

                • Woo hoo! Wait until you read my next post! Your head will explode!

                  Merry Kwanza Zachary!

                  On Sun, Dec 18, 2016 at 9:18 AM, Class Warfare Blog wrote:

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                  Comment by Steve Ruis — December 18, 2016 @ 11:34 am | Reply

            • But there is also a calcified belief in the American psyche that still clings to the idea that the excess wealth will trickle down to me …

              “To dream the impossible dream … this is my quest … to follow that star … no matter how hopeless … no matter how far …”

              Comment by Nan — December 18, 2016 @ 11:12 am | Reply

              • LOL … LOL … brilliant! You got me!

                Nan … you … are … good!

                On Sun, Dec 18, 2016 at 11:12 AM, Class Warfare Blog wrote:

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                Comment by Steve Ruis — December 18, 2016 @ 11:35 am | Reply

  2. I saw something on TV recently that says American companies are always on the lookout for countries that pay the lowest wages because … well, you know the answer.

    Comment by Nan — December 18, 2016 @ 11:43 am | Reply

    • I’m shocked, shocked I tell you.

      Whatever happened to the idea that a company provided good jobs to the community it was in as long as reasonable profits were made? Oh, I see, the CEOs didn’t make a killing that way.

      On Sun, Dec 18, 2016 at 11:43 AM, Class Warfare Blog wrote:

      >

      Comment by Steve Ruis — December 18, 2016 @ 11:47 am | Reply

  3. Interestingly, those German companies like Volkswagen and BMW have built factories in the US. I guess that makes us Germany’s Mexico.

    Comment by List of X — December 18, 2016 @ 2:49 pm | Reply

    • And here I thought Mexico was our bitch and it turns out we are Germany’s! I wonder how much of this “build ’em where they are” is due to straight economics and how much is due to politics. I think the Japanese got the ball rolling by building cars in the U.S> Part of that was political, I am convinced, as we whipsawed the “imported car market” at the behest of native car manufacturers. Remember when we limited imports from Japan? When that happened, they stopped send the high gas mileage, low cost models here and started sending more high end models and their profits went up (way up I believe). By building some cars in the U.S. they were able to dilute the “non-Made in America” label they had been pasted with while producing profits. I gather, though, that Japanese executives were appalled by how messy labor relations and laborers were in the U.S. Volkswagen was also appalled at the anti-union fervor of our governments, preferring to work with function unions in a more orderly system.

      Comment by Steve Ruis — December 19, 2016 @ 8:01 am | Reply

  4. From 1990 to 2015, the US economy as a whole increased employment by about 30 million (30,056,664 according to the BLS). Employment in 1990 was 118,900,000, so that meant that there was a roughly 25% increase in employment over that 25 year period, with a little more than 1 million jobs added per year, on average.

    I’m not going to surprise anyone by saying that these 30 million jobs were not spread equally across the entire US. What I didn’t have a good sense of, personally, was how disparate the change in employment was across the US. This post is just some documentation about the absolute size of the change in job distribution across the US. I don’t know that I have a broader point, but I don’t really internalize the information until I play with it, so this is me trying to internalize the information on shifts in jobs within the US over time.

    The BLS provides county-level employment totals for 1990-2015, hence the time frame I’m looking at. And I can calculate the change in total employment in that 25 year period for each county. I could use the size of the labor force instead (employed plus unemployed) but the patterns I’m going to show you here don’t change appreciably.

    Binary job gain loss

    First, of the 3,133 counties for which I have data, 909 of them lost jobs in absolute terms from 1990 to 2015. The map highlights those 909 counties in pink. The location of these counties are not terribly surprising, although I don’t think I realized how much upstate New York’s employment numbers had dropped over time. You can see the smudge of pink in coal country of West Virginia and Kentucky, along with a big set of job-losing counties in the deep, deep south of Mississippi, northern Louisiana, and southern Arkansas. Downstate Illinois and a swath across the Great Plains also saw absolute declines in the number of employees over 25 years. In total, those counties saw employment fall by 1,471,436 jobs in this period, from a base of about 19.5 million jobs to just over 18 million jobs.

    Beyond the 909 counties that lost jobs in absolute terms, a number of counties lost jobs in relative terms. What I mean by relative loss is as follows. Total employment in the US grew by 25% from 1990 to 2015. If the distribution of jobs across counties stayed fixed at the 1990 distribution, then all counties should have seen job growth of 25% as well. A county that had job growth below 25% then saw a relative decline in employment compared to the rest of the country, and one with job growth above 25% saw a relative increase in emploment.

    There were 2,188 counties that saw a relative decline in employment over this period, or roughly two-thirds of the counties in the US, and includes the 909 counties with absolute losses. Those counties started with roughly 73 million jobs, and finished with 78.4 million in 2015, an increase of about 5.4 million jobs, or about 7.4%. If those counties had instead grown at 25%, like the US as a whole, they would have had about 91 million jobs, an increase of 18 million jobs.

    These 2,188 counties fell about 13 million jobs “short” of what we’d expect given the 1990 distribution of jobs. Which means that jobs moved out of those 2,188 counties, and moved into the other 944 counties that gained in relative terms.

    Those 944 counties started with 45.5 million jobs in 1990, and ended in 2015 with 70.5 million jobs, for a gain of about 25 million jobs, which is a percent gain of 55%. The 944 counties that gained in relative terms over this period gained 13 million more jobs than we would expect.

    Relative job bins

    The map here plots the relative job change, in number of jobs, for each county in the US over this period. I didn’t include the legend because it got too busy, and shrinking it down made it unreadable. The darker green the county, the more jobs, in relative terms, that it gained over this period. The darker the pink/red the county, the more jobs, in relative terms, that it lost over this period.

    Harris county (Houston), where I live, is a dark green smudge down on the Gulf Coast of Texas. It gained 663,757 jobs over 1990-2015. That is 291,540 more jobs than you would have guessed based on the 1990 distribution of employment, the relative job change. Other counties with big relative gains include Maricopa County, AZ (Phoenix) with 566,974 extra jobs, Clark County, NV (Vegas) with 477,942 extra jobs, and Riverside County, CA (greater LA) with 341,434 extra jobs. You’ll also see dark green counties in North Carolina (Charlotte and Raleigh), Texas (Dallas, San Antonia, Austin), Colorado (Denver), and Florida (basically everything but the panhandle).

    The biggest relative losers in job terms are generally older cities. LA County came in 628,796 jobs under what you would have thought – it gained only 441,710 jobs but we would have guessed it should have gained over 1 million based on the distribution in 1990. Cook County, IL (Chicago) lost 558,190 jobs in relative terms. Wayne County, MI (Detroit) lost 378,043 jobs in relative terms. Cuyahoga County, OH (Cleveland) lost 225,300 in relative terms. Other big relative losses happened in Philadelphia, Milwaukee, Pittsburgh, St. Louis, Baltimore, Hartford, and big swaths of upstate New York (Buffalo and Rochester, mainly).

    These big losses are dominated by big cities because they start with big populations. We can look instead at scaled relative change of jobs. That is, take the relative change in jobs (e.g. -225,300 relative jobs lost in Cuyahoga County) and divide by the initial level of jobs in that county in 1990 (e.g. 642,367 in Cuyahoga County) for a scaled loss (e.g. -0.35 for Cuyahoga).

    Scaled changes

    The map shows these scaled changes, and the message is similar to before. It was relative loss in the Upper Midwest, Northeast, and some core parts of the South and relative gains in very concentrated urban areas that generally lie in the Sunbelt, plus Denver. So it is not only

    Again, I’m not claiming that this is some kind of revelation here. The movement of population, and hence jobs, from the Northeast/Midwest to the Sunbelt is well known. What I found interesting was putting some tangible numbers of the shift. The little counter-factual I’m doing here is not very rigorous; there is no particular reason to believe that the 1990 distribution is the “right” distribution of jobs to compare against. But the 1990 distribution does have the feature of being prior to NAFTA and prior to China’s accession to the WTO, both of which are at times cited as sources of manufacturing job losses in the upper Midwest and Northeast.

    The scale of the relative job changes, though, indicates that more of the losses have to do with free trade within the US than free trade outside of the US. The areas with relative decline lost 13 million jobs compared to the 1990 distribution of jobs. In total the US shed 6 million manufacturing jobs from 1990 to 2015 (18 million to 12 million, roughly). So this relative decline cannot possibly be a function only of manufacturing and international trade in manufactured goods. There is just too much relative movement out of the declining counties to attribute to this. This is a sloppy way of thinking about how this would work counter-factually (I’m ignoring spillovers entirely), but if you magically added 6 million extra jobs to those counties in relative decline, they would still be in relative decline compared to the Sunbelt in terms of jobs. They’d have 84.4 million jobs (as opposed to 78.4 million), but you’d expect them to have 95.6 million based on the 1990 distribution, so they would still be 11.2 million jobs off the pace.

    The breadth of relative loss, though, seems striking, and is the one thing I did not appreciate prior to looking at this data. 909 counties lost jobs in absolute terms, which is 29% of all counties. Another 1,279 counties, 41% of all counties, gained jobs in absolute terms buy lost in relative terms. 944 counties, 30%, gained in relative terms. Just as many counties gained in relative terms as lost in absolute terms. The winning locations – Houston, Dallas, Atlanta, Miami, Phoenix, Denver, Vegas – won big, but the losing was spread across a wide area.

    More jobs in 2015 are still located in places in relative decline (78.4 million) than are in places in relative ascent (70.5 million). Of those 78.4 million, 18 million (or about 12% of jobs) are in counties that experienced absolute job losses over the last 25 years. Most jobs are still in places that look to be losing out to Sunbelt cities over time. To the extent that your local economy plays a role in forming your opinions, this seems relevant, although I am going to stop now before I try to do any amateur political science or sociology.

    Comment by mintlysocial — December 19, 2016 @ 4:40 am | Reply

    • In your time frame, 1990-2015, the U.S. total population rose somewhere between 20-25% (I used rough numbers), so job creation over that period was (roughly) keeping up with population growth. I think what most people are talking about when they are discussing “jobs” are the jobs that have good pay and benefits being replaced by jobs that do not. The increase in median wages over this period barely kept up with inflation, so it cannot be claimed that high wage jobs were being replaced with low wage jobs but when one looks back and sees that wages were climbing in a fashion that indicated that they were somehow linked to productivity, and that this trend decoupled the two and wages became stagnant (while productivity continued to increase apace), then something can be said regarding the quality of those jobs and the benefits they offer being a problem.

      Interestingly, the “winners” in the redistribution of US jobs seem to be more concentrated in the South, where the cost of loving is lower than on the left and right coasts. Since the COL is lower there, I suspect wages are too, which tells us something.

      Thanks for the reasoned argument and the data. If we do not start to deal with the real problems rather than the imaginary ones, we will only see more and more trouble.

      Comment by Steve Ruis — December 19, 2016 @ 7:54 am | Reply

  5. The map shows these scaled changes, and the message is similar to before. It was relative loss in the Upper Midwest, Northeast, and some core parts of the South and relative gains in very concentrated urban areas that generally lie in the Sunbelt, plus Denver. So it is not only

    Again, I’m not claiming that this is some kind of revelation here. The movement of population, and hence jobs, from the Northeast/Midwest to the Sunbelt is well known. What I found interesting was putting some tangible numbers of the shift. The little counter-factual I’m doing here is not very rigorous; there is no particular reason to believe that the 1990 distribution is the “right” distribution of jobs to compare against. But the 1990 distribution does have the feature of being prior to NAFTA and prior to China’s accession to the WTO, both of which are at times cited as sources of manufacturing job losses in the upper Midwest and Northeast.

    Comment by mintlysocial — December 19, 2016 @ 6:59 am | Reply

    • The national statistics don’t always account for locality. I think many in the “Rust Belt” would gladly trade in their poor job for a much better one in the Southwest. Many, though do not have the wherewithal to make such a move. I did as an academic and it cost me a great deal of salary and consequential retirement income to make a relatively short move. So, “brave” moves to find work happen all of the time, but many cannot take that option.

      Comment by Steve Ruis — December 20, 2016 @ 11:45 am | Reply


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