I rarely like to get politcal, but the amount of campaign rhetoric being slung around about our unemployment crisis gets fatiguing, especially since it’s a smokescreen for what I consider to be the real reason so many people can’t find work:
Large corporations used the economic crisis as an excuse to lay off hundreds of thousands of workers so that they could replace them with offshore workers.
Most of the S&P 500 have recovered quite well from the Great Recession and are sitting on large stockpiles of cash. Here is a link to a Wall Street Journal article. Instead of using this money to hire back workers in the U.S., they have used it to invest in capital equipment and technology and/or setting up shop outside the U.S. The result is a leaner, meaner, and in many cases cheaper workforce which benefits the corporation’s financial statements which in turn makes stockholders happy.
The article states: The performance hasn’t translated into significant gains in U.S. employment. Many of the 1.1 million jobs the big companies added since 2007 were outside the U.S. So, too, was much of the $1.2 trillion added to corporate treasuries. Two-thirds of Apple Inc.’s $82 billion in cash and marketable securities as of Sept. 30 was held by foreign subsidiaries, for example.
While this is great news, of course, for investors, this is bad news for people back here in the U.S. While the recovery has been great for large corporations, smaller companies continue to struggle. “It’s a real winners-versus-losers phenomenon,” says John Graham, a professor of finance at Duke University. This is most likely due to the lack of resources and infrastructure that smaller companies have. This makes them ripe pickings for buyouts by the bigger companies, leading to more layoffs.
Although companies and investors at the top of the food chain are “winning”, this success is short-sighted, in my opinion. Unless companies invest in workers here at home, people will have less money to spend, and the falloff in consumption will eventually take its toll on corporate revenues. Unfortunately, this may take longer than expected, given that consumption has gone up in other parts of the world. But lower consumption here has a cascading effect on smaller companies.
Perhaps the new normal in this country will be an overall lower standard of living?
My question for readers is this: What role should government play in providing incentives to companies of all sizes to create jobs here in the U.S.? Any ideas? Or should government be completely hand-off with the large multi-national corporations?