Companies Should Not Be Penalized For Exporting Jobs


A few years ago, during the height of the economic recession, I met up with some friends to hang out with a buddy of ours we hadn't seen for a few months.

He worked in the wine industry as a sort of remote sommelier, consulting with customers over the phone and by email to suss out their tastes and help them select wines suitable to their palates and budgets. Alcohol is a reliable, recession-proof industry. If anything, people hit the bottle more when times are tough, and so our friend had been working 12-hour days, helping thousands of customers order wine for their seasonal gatherings, corporate parties and holiday gifts to clients.

The whole company was in overdrive, spurred on by corporate sloganeering and demanding managers.

And then, about a week before Christmas, the employees were rewarded:  One by one, they were called in by their managers and given pink slips.

Laid off. A week before Christmas. After all that effort and hard work, through early mornings and late nights. Were the company's managers soulless jerks? Sure. Were they selfishly eyeing their own bonuses, not caring whether their employees' kids had presents under the Christmas tree? Probably.

Were they behaving immorally?

Well, that depends on who you ask. This isn't post-World War II America, where employee loyalty is rewarded, people enjoy job security, and bigwigs in board rooms care about the people who work for them. (Did that time ever really exist?)

This is cold, investor-driven America, where employees are unceremoniously dumped so managers can say they cut costs before the end of the fiscal year. This is purely profit-driven corporate America, where the only thing that matters is meeting revenue forecasts and keeping shareholders happy.

There's no room for concepts like loyalty, duty and morality in profit-driven corporate America. But penalizing companies for cost-cutting and moving jobs overseas, like an April 11 New York Times editorial suggests, would only hurt workers and the economy in the long run.

Corporations are molded by the rules of the game, and right now the game is rigged against regular Americans. Decisions like Carrier Corporation laying off 1,400 American workers and moving its manufacturing arm to Mexico don't happen in a vacuum. They're the product of government policies. Policies that make it more attractive and profitable for companies like Carrier to move operations overseas, where the cost of labor can be a tenth of what it costs to employ Americans.

"The transfers of domestic manufacturing jobs to Mexico and Asia have benefited Americans by bringing cheaper consumer goods to our shores and stores," physicist -- and stockholder of Carrier's parent company -- Michael Riordan wrote in The New York Times. "But when the victims of these moves can find only lower-wage jobs at Target or Walmart, and residents of these blighted cities have much less money to spend, is that a fair distribution of the savings and costs?"

In his column, Riordan proposes "serious penalties for corporations that export well-paid jobs, particularly those that have been major beneficiaries of hundreds of billions of dollars in research and development spending by the federal government, which helped create many high-tech products and industries and the jobs that came with them."

Penalizing companies for moving jobs overseas misses the point, and would do more harm than good.

Maybe penalizing corporations would feel good, and maybe it would yield results in the short term. But multinational conglomerates like United Technologies, the parent company of Carrier Corporation, employ entire armies of top-tier attorneys and accountants whose sole function is to sidestep taxes, tariffs and penalties that could eat into profits.

The companies would find ways to adjust, and there's no indication that penalties would force them to move operations back stateside.

Even if they didn't, the penalties would have to be enormous to make the cost of going overseas prohibitive. It's like the NBA fining a player for a rude gesture or obscenity during a post-game press conference. A $10,000 fine is chump change to someone who makes $15 million a year.

Real solutions are more difficult, but would address the fundamental reasons why companies move jobs overseas. America's political and business leaders need to make the U.S. an attractive place to do business again.

That means using the carrot as well as the stick -- closing tax loopholes that corporations are so fond of, while offering tax breaks for companies that return operations to American soil, as President Barack Obama has advocated. Rethinking trade agreements and economic policy to restore balance. Rewarding innovative companies that remain in the U.S. and excluding companies who move overseas from rewards, tax breaks, government contracts and other perks that could convince executives to do business in the U.S.

Corporations are products of their environment. The only way they'll truly change is if the world around them changes first.

Click here for the opposing view on this topic.

Sources: The New York Times, Politifact, Economic Times / Photo credit: Wikimedia Commons

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