Steelmakers Downsize Once Again - WSJ.com

Steelmakers Downsize Once Again - WSJ.com

Let's talk about jobs and salaries and why the US worker is unhappy with their pay and why the jobs aren't staying in the US. It's not a pretty picture - but too many people would rather not consider some basic facts.

This is the lesson many in the US don't want to hear about. They reject it outright - almost like someone religiously motivated being told there is no god!

But, it would be better if people would listen and politicians would pay attention and make some changes.

But, is this likely - clearly not at the moment. The US is going in exactly the opposite direction.

What is at play here? Part of it is making the US an attractive place to do business. This includes a favorable immigration policy, trade policy, lower taxes, lower employment costs (particularly benefits), etc. To sum up, this would encompass making the US a country that out-and-out wants to compete with the rest of the world and will make changes in how it does business to make this happen.

Right now, the US and many Americans take exactly the opposite tack. They want to blame other countries and they don't want to give up anything. Rather, they want more benefits (see Healthcare bill).

A big consideration is wrapped up in the capital required to produce a job that in a global economy has a certain gross productive earning power. What does this mean?

Let's say a company can earn $1,000,000 in profit and has 10 employees. This would mean the gross productive earning power is roughly $100,000 per worker. Let's assume this million dollars is after all capital costs are paid, etc.

So, let's assume the business can allocate this full million to salaries and benefits.

Now let's assume the company has to pay all of the social security, retirement, healthcare and other costs out of this money. People have told me this is often 3 to 4 times the actual gross salary the company can pay the employee.

If it was four times, then if a worker was paid $20,000 as a gross salary, 4 times this salary would be $80,000 and the total would take up the $100,000.

Now, from the $20,000 the worker would be paying social security, etc. plus taxes. So, the worker might only take home $15,000 in net pay.

If the US wants to have workers paid more, then it needs to cut down on the $80,000 plus in costs that the worker doesn't get to decide on spending for themselves - rather, government has decided!

Now compare this with a country where for the same salary ($20,000) and gross earnings to pay to salaries ($1 million), the burden is only 2 times. How many added workers could their be?

Or, if the burden was only 2 times and the salary was the same, how much less earnings would be required.

On and on one can go with these examples.

However, the US doesn't want to make any changes so its is being forced upon it with companies relocating production in order to compete. There is also less employment in the US and the capital to make changes is being bled off in social benefits and jobs and production lost.

It would be nice if current policies had any hope of turning this around. Instead, they seem to be accelerating the loss of jobs.