Friday, June 28, 2013

Offshoring Hurting Workers & Long-term Unemployed

The year 1979 may very well have been the year when the middle-class in America had first began it's long decent into oblivion. According the U.S. Bureau of Labor Statistics, manufacturing in the U.S. peaked in 1979 when we had over 19.6 million manufacturing jobs --- but it has been on a downward trend ever since. And 1979 was also when the mergers of labor organizations began increasing --- when the total number of union members had peaked at over 22 million. And so it' no coincidence that today the labor force participation rate is at the lowest it's been since 1979. And 1979 is also the year when the U.S. broke off formal diplomatic relations with Taiwan and established full diplomatic relations with China.

Major U.S. companies initially responded to heightened competition from Japanese and European multinational corporations by opening factories abroad during the 1970s and 1980s. They manufactured goods that were formerly produced by comparatively well paid, often unionized, factory workers in the U.S. (Read this December 2012 Congressional Report on the Offshoring Jobs).

It's unclear how many jobs were offshored between 1979 and 2001, but data shows there were 398,887 private manufacturing establishments of all sizes in the United States during the first quarter of 2001, and by the end of 2010, the number had declined to 342,647 --- a loss of 56,190 factories. So the onslaught has continued.

And according to the Wall Street Journal, since then, thirty-five big U.S.-based multinational companies have added jobs, but nearly three-fourths of those jobs were overseas. Collectively, these companies employed roughly 6.4 million workers world-wide.

As of 2013: Nike's factories in China
and other Asian emerging markets.

As of 2013 (from Nike's interactive map) Nike has 777 factories in 43 Countries employing 1,009,496 workers. Just in Vietnam alone Nike has 71 factories with 311,548 workers, mostly female, with an average age of 30.

For a complete list of Nike's factories and employees, down the PDF from Nike's website or the Excel version.

As with many other major corporations, the Vanguard Group is the largest institutional investor of Nike --- followed by many other banks and private equity firms.

From Nike's website: "When we look at our overall impact on the world, the needs of nearly one million workers in Nike’s contract supply chain overshadows any other group."

Nike is but one of many examples (albeit, a very classic example) of globalization.

On May 12, 1998 Nike's CEO Phil Knight gave a speech at the National Press Club where he spoke of Nike’s reasons for moving factories out of the United States and into mainly third world countries in Asia. "During the 1990s, all our experiences have caused us to really believe in the benefits of international trade. The uplifting of impoverished people, the better values for consumers in industrialized nations, and most of all, the increased understandings between peoples of different cultures."

That seems to be the morality and mindset of a typical globalist, someone who advocates a policy of placing the interests of the entire world above those of individual nations. As one major American hedge fund manager had privately admitted: "The U.S.-based CEO of one of the world’s largest hedge funds told me that his firm’s investment committee often discusses the question of who wins and who loses in today’s economy. In a recent internal debate, he said, one of his senior colleagues had argued that the hollowing-out of the American middle class didn’t really matter. His point was that if the transformation of the world economy lifts four people in China and India out of poverty and into the middle class, and meanwhile means one American drops out of the middle class, that’s not such a bad trade."

But then again, are they really so concerned about lifting the poor out of poverty in third world nations, or is it just a simple matter of plain old fashion human greed --- and they are only using these humanitarian excuses as a cause for their actions?

Since the 1990's many U.S. companies have been criticized for offshoring jobs. Businesses in the manufacturing, tech and apparel industries, such as Apple and Nike (to name just a few) have been often targeted for using cheap labor in unsafe working conditions abroad.

The World Trade Organization cites a report from 2000 by the US Department of Labor (Displaced Workers Survey) that used data from 1975–95. It found that rates of job losses were particularly high in sectors with high levels of imports and sectors with high import growth.

The Bureau of Statistics Displaced Workers Summary from August 24, 2012 reports there were a total of 12.9 million displaced workers from 2009-11. The prior survey, which covered 2007-09, numbered 15.4 million. The previous survey reflected the steep decline in jobs associated with the Great Recession that began in December 2007 and officially ended in June 2009. According to the Center on Budget and Policy Priorities, 8.7 million net jobs were actually lost during the last recession (not considering churn in the job market).

Prior to the last recession, there appeared to be enough job growth to compensate for most of the lost jobs due to offshoring, although, many Americans were forced into taking lower paying jobs (such as in the retail and fast food industries) and most often without any benefits (such as healthcare and pension plans). And many times they only found part-time or temporary positions, which set them on a never-ending course of "job hopping".

But since the recession, long-term unemployment has been a huge drag on the economy --- and according to the Bureau of Labor Statistics, with 11.7 million unemployed Americans, and 8 million working part-time, and another 7 million working multiple jobs to make ends meets, all those millions of offshored jobs are looking even more appetizing.

Since the Great Recession, although old news, major attention has again returned to offshoring (some even say "reshoring") --- and in conjunction to the Occupy Wall Street movement, an ever increasing focus has also been on wealth inequality, income disparity, corporate greed (and CEO pay), and stagnate wages and the minimum wage. And then it all comes back again full circle --- back to offshoring for cheap labor.

According to a new report by the research firm Audit Analytics, large U.S. companies have boosted their offshore earnings by 15 percent last year --- to a record $1.9 trillion, while avoiding hefty tax bills by keeping their profits abroad (rather than invest in American workers). Their overseas earnings stockpile has climbed by 70 percent over the past five years, but most American workers aren't sharing in the corporate booty. If they aren't under- or unemployed, 50% of the work force who are working take home $27,000 a year of less. And instead of seeing a pay increase, saw the biggest drop in hourly pay on record (workers haven't been reaping the same rewards that their employers have been).

Nike is NOT an American Icon, but a Typical One

Wall Street Journal (June 27, 2013) Nike's profits are up again --- their fourth-quarter profits jumped 22%. Nike also expects overall profits for fiscal 2014 to rise in the low double-digits as sales are expected to climb, helped as Nike gears up for the 2014 World Cup in Brazil. Margins are expected to strengthen throughout the year, helped by higher selling prices. Demand for athletic gear in the U.S. has also been strong in recent years, and Nike's sales have been bolstered by apparel tied to a contract with the National Football League.

Nike's grand strategy for reaping in huge profits every year is really quite simple: just don't pay workers. That's how they sell a shoe for $180 that only costs just $5 to manufacture.

The people who are laboring to make that $180 pair of shoes, and other Nike gear and apparel, are mostly young women, ages 16-24 (Although, in Pakistan, children were once sewing Nike soccer balls for $0.60 a day.) In Vietnam the average worker is paid about $0.20 an hour, or $1.60 a day. (The cost of eating is reportedly $2.10 a day).

And workers in Vietnam are forced to work 65 hours a week. Not only are they forced into overtime without compensation, the 65 hour work week is in clear violation of Vietnamese labor laws. In the Sam Yang factory in Vietnam there is only one doctor who works two hours a day to service 6,000 workers.

Employees in Vietnam have stated that verbal abuse and sexual harassment are frequent and that corporal punishment is often used. Supervisors have been reported to frequently grab the women's breasts and buttocks.

Nike has reportedly responded to many of these allegations by widely publishing their Code of Conduct in the factories --- but in Vietnam, few workers have even heard of such a code, nor ever learned what provisions were within it.

Although Nike argues that they enter a country only when it is ready to make shoes, and then leaves when it has developed past this point, the data suggest a different story. Nike's movement directly correlates with a increased standard of living and increased union bargaining power. When the pressure for wage increase is put on, just like with most other American-based multi-national manufactures, Nike moves on.

This corporate strategy allows for the cheapest labor costs and bargains with the worst governments. The result? Companies like Nike can keep manipulating their stocks, dodging corporate taxes and making shoes for only $1.60 a day --- just so that Nike's CEO can earn $96,000 a day. Heaven forbid if American workers ever made Nike shoes, or else Nike's CEO might only earn a measly $10,000 a day (unless Nike raised the price on their cow leather and rubber shoes to $500 a pair.)

And Nike is just but ONE of many U.S. corporations that operate like this. That's how they can afford to pay their CEOs too much. Here's a list of the top paid CEOs from Forbes and what they earn in just ONE year --- many of them on the back of cheap and exploited foreign labor.

Last year's congressional study on offshoring says 29% of U.S. jobs are prone to outsourcing --- and then add in all the new work visas with the new immigration bill --- on top of the long-termed unemployed (and the 99ers) that we already have, and there were be plenty of shoe-shine jobs available for a nickel a shine. Bring jobs back to America and pay workers a "living wage" excuses, Just Do It!

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