U.S. Companies May Be Rethinking Their Exports of Jobs
The citizens of Springfield, Mo., were undoubtedly pleased when Jerry Pearlman, chairman and president of Zenith Electronics Corp., recently pushed through his plan to bring back to Springfield the 200 jobs he sent to Mexico in 1985 and canceled plans to export another 600 jobs across the border.
True, the number of positions involved were so few that Pearlman’s moves did precious little to help the millions of jobless Americans.
But Zenith’s action, along with several intriguing steps taken by other U.S. companies, just might indicate that corporate executives could be rethinking their ideas about moving plants to low-wage foreign countries or about buying Japanese goods because they are supposedly cheaper than U.S.-made products.
Creation of more jobs for their fellow Americans is not a goal of the executives who run giant, U.S.-based multinational corporations, which today have estimated assets of $350 billion and 20 million employees all over the world.
Creating jobs here doesn’t even seem to be much of a goal for smaller U.S. companies. If these firms think they can make more profit by closing plants here and buying lower-priced products from Japan, or by opening plants in Mexico, Taiwan or other low-wage countries, they usually will do so. This has been happening on a vast scale in recent years.
Foreign corporate officers take similar actions, seldom deterred by the harmful effect of their decisions on their own fellow citizens. That’s why it was refreshing to hear Pearlman say recently that Zenith is “taking every measure we can to keep jobs in the United States.”
In Mexico, Zenith pays its workers less than $1 an hour in wages and fringe benefits, compared to about $11 an hour for its employees in Springfield.
The tragic dilemma is that developing countries desperately need jobs. But that isn’t much consolation for Americans who see their own jobs going to another country. So, for jobless workers here, Zenith’s moves were wise.
Two other decisions that did not involve developing countries could also be at least faint harbingers of broader changes in corporate thinking about exporting jobs instead of products:
- General Electric said in February that it will resume some domestic production of its own television sets instead of buying sets from abroad. The company had planned to stop TV production in Portsmouth, Va., and buy sets from Japan’s Matsushita Electric Industrial Co. Now it will spend at least $20 million to expand its Bloomington, Ind., plant and drop Matsushita.
GE wasn’t motivated by an urge to help create jobs for Americans. For one thing, the dramatic rise in the value of the yen made Matsushita’s TV sets more expensive. And the company reached agreement with the International Brotherhood of Electrical Workers to cooperate in an all-out campaign to make the Bloomington plant the “world’s most competitive” in both cost and quality.
- Honda said early this month that it may soon begin exporting cars from its Marysville, Ohio, plant back to Japan within the next three years. The Japanese executives aren’t trying to solve America’s unemployment problem either. The value of the yen was a major factor in the decision.
But also it is exciting evidence that the Japanese are now producing cars in the United States for about the same cost and with the same quality that they can produce them in Japan.
In other words, Honda, like GE, rightly expects to profit by producing more of its products in this country than in Japan. And it’s fairly easy to see why, in view of dramatic narrowing of the gap between Japanese and U.S. labor costs.
Because wages and benefits are going up faster in Japan than in this country and because of the record high value of the yen, overall Japanese unit labor costs in manufacturing are only 8% below U.S. labor costs, according to recent studies. The differential is almost erased by transpacific shipping costs.
If cheap labor is the goal, it makes even less sense for U.S. companies to send U.S. jobs to Europe, where for the most part labor costs in manufacturing are now higher than in the U.S.
This means that labor costs no longer seem to be particularly significant in our competition with Europe or Japan.
In contrast, the cheap labor of Mexico was a significant factor to be considered in Zenith’s decision to keep jobs in the United States. The company had to reject the temptation to move jobs to developing countries, where the labor cost gap is still tremendous.
Like GE and Honda, however, Zenith doesn’t expect to lose by its decision.
For one thing, to build a TV production plant in Mexico instead of enlarging the Bloomington plant would have cost at least $20 million, probably much more. Also, production can be increased here relatively soon. Company officials say it could take four years or more to get a new Mexican facility up to comparable speed.
Those cost savings were a significant factor in encouraging Zenith to help America’s jobless.
Another inducement came from Zenith’s 1,600 workers in Springfield who accepted their union’s tentative contract agreement with management to take an 8.1% pay cut this year and freeze wages through 1989. They will go back to present levels by the end of 1991, according to terms of the union contract. Zenith has made a commitment to keep Springfield going for at least five years.
All of the workers will take the cuts, even though only 600 workers are helped directly, since only their jobs were going to Mexico.
They might have been partly motivated by the realization that another 200 of their former co-workers will be recalled, and, in the long run, all of the employees in Springfield will presumably benefit if the return of jobs to the United States is a success for Zenith.
Zenith isn’t deserting Mexico. It still has 22,000 employees there and only 12,000 in the United States.
But the rush to get cheap labor abroad has been reversed a bit at Zenith. And Honda and GE raise hopes that U.S. workers and managers might do better than expected in competition with countries where wages are not a key competitive factor.
Those hopes will be more easily realized if cooperation between labor and management increases, as it has at Zenith, GE and Honda.
Coalition Seeks Global Workers’ Rights Plan
From time to time, some of the more ardent free-trade enthusiasts voice outrage about proposals in Congress designed to discourage U.S. trade with countries that, among other things, have no worker protection laws and either outlaw unions or require them to be arms of their governments.
There are already some worker protection laws on the books. Others being considered would either initiate or force implementation of existing international agreements. They would, for instance, require our trading partners to enact laws at least limiting child labor, set minimum wages and hours and give workers the right to form independent unions.
Some critics wrongly think pending congressional legislation would require developing countries to pay wages and benefits comparable to those in the United States.
To aid in clarifying and promoting international standards for workers, former U.S. Labor Secretary Ray Marshall will lead the newly created Coalition for Workers Rights. Others joining the group include representatives of a broad range of religious, labor, civil and human rights organizations.
Countries whose lack of laws help their employers exploit workers, and also make them unfair competitors to law-abiding American firms, include Chile, South Korea, Malaysia and Taiwan, according to Marshall’s coalition.
The United Nations’ International Labor Organization has some rules to protect workers, but it has no enforcement powers. Some help was provided by the 1983 Caribbean Basin Initiative. But Marshall’s organization could add new impetus to the push for the much-needed laws.
Actually, the idea isn’t brand-new. Back in 1830, the United States banned imports made by forced labor. We’ve moved a good ways since then, but it’s time to move considerably further.
