What is Really Killing US Jobs

Here is an interesting posting by Robert X. Cringely on his blog. The key bit points out the runaway health care costs are the killer:

What happened two years ago was IBM deciding to move most of its jobs offshore to save money after a sobering look at the life cycle cost of its U.S, workers. If you look at the total future cost of an American employee for the next 15 years — it is a pretty big number. Then add the double digit inflation cost of U.S. health care and that number becomes bigger still. The only way companies like IBM see themselves being able to continue to operate is by cutting retirement benefits and/or shipping jobs off shore. In IBM’s case they are doing both.

This is at the heart of the current health care debate, because the cost of medical care is killing U.S. jobs.

So what is the Republican response: let those costs soar, don't "socialize" medicine, let the jobs disappear overseas where the health costs are half as much and aren't growing at double digit rates.

The Obama response: try to "sell" health care by approaching Republicans and asking for a kumbaya moment.

Pathetic.

And what does the future hold?

The IBM USA pension plan was nuked a couple years ago. Many U.S. workers got less than 15 cents on the dollar for the present value of the pension they would have received. Retirement health care benefits for IBM workers are now down to the equivalent of about 18 months of present coverage. This trend is not limited to IBM. How many auto workers have just lost pension and retirement benefits?

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Now some of IBM’s American workers are being asked to consider taking jobs in Bangalore and other foreign outposts. This program creates new expatriots, giving each a one-way plane ticket. Pay will be in local currency, possibly at local pay scales. IBM is being very elusive about these details. But it is clear that the transported workers will be off U.S. benefits.

But as I say, IBM is merely one example of how messed up things have become for U.S. companies.

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The automotive industry on the other hand has ignored the long term in their business planning. As a result most car companies were completely blindsided by the recession.

IBM has watched the growing costs of maintaining its U.S. work force. For years they have been cutting staff and moving work offshore. The U.S. auto industry on the other hand was dependent on future car sales to cover obligations made in the past. IBM planned ahead and started shifting the business out of the U.S. Other firms did nothing and have suffered horribly.

What this means is that we should expect more of the same in all industries. Benefits will decrease and jobs will depart.

The new reality at IBM is that if you’re brilliant, work really hard, and earn a world-class degree from a U.S. university, IBM may well have a job for you at one of its U.S. research sites working as a “complementary worker.” But don’t expect that job to last for long. Be prepared to ship out to India or China as a “long-term supplemental worker” after you’ve soaked up knowledge for 13 months.

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“IBM is one of the multinationals that propelled America to the apex of its power, and it is now emblematic of the process of creative destruction pushing America to a new, less dominant, and less comfortable position,” Newsweek said.

This is the HR equivalent of a neutron bomb, which kills people but leaves structures unscathed. So all these companies will be leaner and meaner — mean enough that there may be nobody left to buy their products.

It comes back to the common perception that the sole function of public companies and their CEOs is to “maximize shareholder value” — a phrase that is interpreted to mean “maximize next quarter’s earnings-per-share.” This philosophy works beautifully with the slightly less than four year average tenure of a U.S. public company CEO. Long before the effects of these bad decisions can show the CEO has bailed, descending beneath his golden parachute toward some retirement heaven.

Where did this cult of shareholder value maximization come from? And who says that’s the prime directive and nothing else ought to matter? Not me. In fact it is bad policy both for the companies and for our society in general. Here’s a good explanation of this phenomenon and what’s wrong with it.

What's peculiarly funny about American politics is that you can't get a crowd of protesters on the street to chant about bad investment decisions or the corrupting influence of lobbyists. But you can get an "energized" mob to shout about abortion or "death panels" or any other fictitious issue that the radical right wants to use to get the ignorant and ill-informed out protesting. I supposed these people will still be shouting about gay marriage as the last high tech job is shipped overseas.

I guess the good news is that the US can then join Canada as a "branch plant" economy, you know, the kind where decisions are made elsewhere. The kind of economy that when the real powerhouse hits a hiccup, then you get severe pneumonia because your branch plant industries are obliged to shut down to allow the mother country to preserve jobs.