The Make-Work Fallacy for the Gazillionth Time

by Don Boudreaux on June 20, 2011

in Myths and Fallacies, Seen and Unseen, The Economy

Here’s a letter to the Wall Street Journal:

Thomas Geoghegan’s outburst against Boeing’s plan to operate a factory in South Carolina is a swirl of disingenuous, illogical, and economically laughable assertions (“Boeing’s Threat to American Enterprise,” June 20).  To the extent that one deciphers this zany mess, Geoghegan’s argument boils down to this: by taking advantage of a less-costly source of labor, Boeing undermines its own quality and America’s industrial might while discouraging young people from going to college.

Nonsense.

Firms remain vibrant in a competitive economy by constantly reducing their production costs.  And switching production activities from high-cost workers to lower-cost workers is no less effective a means toward this goal – and no more unusual or ominous – than is switching production activities from high-cost workers to lower-cost machines.

Would Mr. Geoghegan argue that Boeing’s consistently increasing mechanization of its operations over the years promoted American industrial decline?  Would he support government efforts to force Boeing to destroy all of its computers and have its aircraft designed instead by armies of engineers equipped only with slide rules and pencils?  Would he want Boeing’s production-line workers to use only 1950s-era (or, better yet, 1920s-era) hand tools?  Does Mr. Geoghegan think that returning to such labor-intensive methods of aircraft design and production would improve the quality of Boeing’s operations and products while simultaneously promoting America’s industrial might and encouraging young people to go to college?

The head aches just to pose the questions – and aches worse to realize that his ‘arguments’ imply that he’d answer ‘yes.’

Sincerely,
Donald J. Boudreaux

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{ 75 comments }

A. June 20, 2011 at 4:15 pm

He says Boeing’s work force is an asset for the country. I would like to liquidate and collect my share, please.

Sandre June 20, 2011 at 4:26 pm

like

Daniel Kuehn June 20, 2011 at 4:26 pm

This passage was especially interesting: “There are reasons workers in the North get $28 an hour while down in the South they get $14 or even $10. Adam Smith could explain it: “productivity,” “skill level,” “quality.”

Don’t get me wrong – Adam Smith is a great guy to go to for just about any question in economics. However – when you talk about relative wage rates, you really don’t want to go to a pre-marginalist proponent of the labor theory of value.

Don Boudreaux June 20, 2011 at 5:35 pm

True dat.

MWG June 20, 2011 at 6:28 pm

Did the good professor really use the term ‘True dat’?

Awesome.

John June 20, 2011 at 9:38 pm

Regret to admit that I’m not familiar with that concept. Care to elaborate or offer a good link to read more?

Josh S June 21, 2011 at 8:03 am

Which, the labor theory of value, or marginal utility theory?

dave smith June 20, 2011 at 4:35 pm

The answer to all your questions for Mr. Geoghegan sadly might be “yes, he would advocate those things.”

Matthew June 20, 2011 at 4:39 pm

Amazed that wasn’t a HuffPo Editorial.

Scott G June 20, 2011 at 5:00 pm

Sounds like Thomas Geoghegan has been good about getting his treatments. Probably eating much cakes and drinks too.

What a Perfect Day everyday must be for him.

The Family thanks you Thomas. And thanks Uni too.

SweetLiberty June 20, 2011 at 5:13 pm

A few edits to just one of Geoghegan’s paragraphs…

We should be OVERJOYED that Boeing is sending a big fat market signal that it wants a less-BLOATED, MORE-RESPSONSIVE work force. This country is in a debt crisis because we BORROW abroad much more than we CAN AFFORD FOR SOCIAL PROGRAMS. Alas, because of this NATIONAL deficit, foreign creditors have INVESTED HEAVILY IN the country. That’s not SOLELY because of our OVER-BLOATED UNION labor costs—in that respect, we can undersell most of our high-wage, OVER-BLOATED unionized rivals like Germany WHO ARE WORSE OFF THAN WE ARE. It’s because we have too many poorly educated and low-skilled workers that are simply unable to compete DUE TO THE VIRTUAL PUBLIC SCHOOL MONOPOLY HELD BY TEACHER’S UNIONS.

True Liberal June 20, 2011 at 7:23 pm

. . . This country is in a debt crisis because we BORROW abroad much more than we CAN AFFORD FOR SOCIAL PROGRAMS, WEAPONS SYSTEMS, AND MILITARY ADVENTURISM.

Fixed it for you!

Other than your slight oversight, it was a spot on perfect job of editing.

Scott June 21, 2011 at 9:14 am

I’d say remove the part about weapons systems and you’re on to something. America’s got to have advanced weapons systems if it wants to preserve its citizens’ liberties. And by having the most advanced means we should never have to use them.

tdp June 20, 2011 at 11:17 pm

Our students who can’t compete (roughly 1/3 of our students and current workforce) can’t compete for a lot of reasons.

A)They generally come from poor neighborhoods where parents:
1) Don’t have time to supervise their children and make sure they do their work,
2) Don’t stress the value of education and thus don’t demand better from their students and their schools
3) Aren’t very educated themselves, meaning the kids are on their own when it comes to help with homework and
4) Don’t volunteer at schools for events or donate to teams. clubs, programs, etc. that keep kids out of trouble.I’d venture there is a strong correlation between parental involvement and education levels and the success of their kids

B) The shitty inner city schools can’t hire good teachers because
1) Unions suck up money and sometimes prevent bad teachers from getting fired (and tenure counts more than performance)
2) No new teacher wants to work at these schools, so the only teachers they can find are shitty ones who couldn’t get jobs anywhere else
3) 75% of teachers graduate in the bottom quarter of their college classes

C) The bad public schools tend to have numerous problems with drugs, alcohol, violence, gangs, pregnancies, etc. that most of the money not spent on administrators’ salaries goes to metal detectors, police officers, etc.

D) Teachers can’t get hired anymore without taking a bunch of “Mickey Mouse courses”, as Thomas Sowell called them, about Learning Styles and touchy feely courses about understanding their troubled students and how they give too much work, etc. He had an entire column about the state of k-12 education that’s fantastic even though it was written years ago

E) Standardized, cookie-cutter curriculum that teaches to standardized tests and doesn’t stress learning for learning’s sake. The inflexibility and stubborn resistance to common sense in administrative policies (like Fairfax County, VA’s “Zero Tolerance Policy” that contributed to the suicide of a student) doesn’t help (though Fairfax County schools are among the best public schools in the country).

These problems feed off each other, and the desire of all parties involved to point fingers prevents these problems from getting fixed. Fixing schools is going to require a lot of things working together, but since most of them involve more individual accountability and decentralized decision-making, they are unlikely to occur.

GP Hanner June 20, 2011 at 5:21 pm

Lawyers argue any side of a case they are paid to argue.

Josh S June 20, 2011 at 6:08 pm

As an engineer for a large aerospace corporation, just the mention of doing what I do with slide rules and graph paper instead of computers has given me cold sweats. Thanks, Don, you jerk. ;)

vidyohs June 20, 2011 at 6:19 pm

“At this moment especially, deep in debt, we cannot afford to let another company like Boeing self-destruct. Boeing is not a product of the free market—it’s an extension of the U.S. government. Over the years, our taxpayers have paid to create a Boeing work force with exceptionally high skills. That work force is not just an asset for Boeing—it’s an asset for the country. Why should the country let Boeing take it apart?”

But you see people, Boeing isn’t Boeing’s, it is yours, the nation’s.

“But too often, alas, it was the beginning of the end, as it was for Outboard Marine Corporation, where I once represented workers. In the 1990s the company went from the high wage union North to the low wage South and was bankrupt by 2000. There are reasons workers in the North get $28 an hour while down in the South they get $14 or even $10. Adam Smith could explain it: “productivity,” “skill level,” “quality.”

That, as an example of the man’s ability to present an argument, is pathetic and tells me he is preaching to a choir of believers and ignorant.

“There are reasons workers in the North get $28 an hour while down in the South they get $14 or even $10.”

And that reason is government complicity in union thuggery.

W.E. Heasley June 20, 2011 at 6:22 pm

When major firms move to the South, it’s usually a harbinger of quality decline. Why let that happen? – Mr. Geoghegan, a lawyer in Chicago.

“Conservatives are in an uproar….”.

“Yet the Boeing case has a scarier aspect missed by conservatives…..”

Lets see, conservatives are in an uproar and conservatives miss the point.

-Or- is it:

“….moving work on the Dreamliner from a high-skill work force ($28 an hour on average) to a much lower-wage work force ($14 an hour starting wage)? Nothing could be a bigger threat to the economic security of this country.”

“We should be aghast that Boeing is sending a big fat market signal that it wants a less-skilled, lower-quality work force.”

“It’s because we have too many poorly educated and low-skilled workers that are simply unable to compete.”

“If the history of runaway shops proves anything, it’s that many go “South” in more than one sense of the word. If that sounds unfair to the South, it is union busting that has inflicted the real unfairness in the region: income inequality and inferior schools.”

Lets see part two: southerners are hillbillies, uneducated, and low skilled.

Combining “lets see” part one with “lets see” part two we come up with part three which is Geoghegan-ism: conservatives are in an uproar and conservatives miss the point because they are southern hillbillies, uneducated, and low skilled.

One should note that not even one, not a soul, of the fine people of the south took it upon themselves to write such a notional, vilifying, “way things ought to be”, delivered through verbal virtuosity, putting forward notion as fact, painting the world in one’s own self image – letter to the Wall Street Journal. Only Mr. Geoghegan though this letter was a grand idea.

One final note, please type in “Geoghegan” then hit spell check. Number one correction: egghead.

Observer_Guy1 June 20, 2011 at 6:25 pm

What if GMU fired all its tenured professors and replaced them with less educated instructors? It would lower its costs, but quality would drop too, no?

A. June 20, 2011 at 6:34 pm

No doubt. No one is claiming that lower wages are always better. Who is in a better position to make the trade-off, Boeing or someone writing an op-ed?

Methinks1776 June 20, 2011 at 7:02 pm

Or what if GMU fired all of its unionized professors and hired non-union professors who all had a better education and more reason to be good at their job since they had to compete? That would lower the cost and increase quality, no?

brotio June 20, 2011 at 7:44 pm

*like*

And our hosts have posted similarly.

vidyohs June 20, 2011 at 7:44 pm

http://www.freerepublic.com/focus/f-news/2737109/posts

German Giant Says US Workers Lack Skills (Siemens)

And, what if GMU fired all its professors and couldn’t find any replacements skilled enough to the job and required GMU to have to provide remedial training to applicants? Would Krugman serve as the teacher?

Actually I am not picking at you m’lady, just having fun with this idea of Thomas Geoghegan that moving jobs south is prima facie evidence of lower quality………..God you just gotta love those superior intellects, skills, and ambitions found in the ghettos of Detroit, Cleveland, Buffalo, Chicago, and yes Seattle.

What with automation in so many of the critical functions of manufacturing, what is left for the average worker that is so technical that we can’t teach anyone to do it competently in a matter of a couple of weeks?

Perhaps I unjustly make light of that end of the discussion. Perhaps, but I still would have to be shown.

Methinks1776 June 20, 2011 at 7:58 pm

Would Krugman serve as the teacher?

Do you think Mr. Krugman is fit to teach remedial economics?

vidyohs June 20, 2011 at 9:59 pm

Let’s run that through Siemens Human Resources dept. and see what they say.

True Liberal June 20, 2011 at 7:18 pm

I read through this op-ed this morning and just about spilled my morning cup of coffee all over myself.

I think that to call this op-ed a piece of human excrement would be demeaning to human excrement. Aside from the stunning economic ignorance shown in the piece, Mr. Geoghegan deceitfully presents the case as one wherein Boeing is shutting down operations and laying off workers in Washington state and opening up shop in South Carolina. This is an outright lie. While Boeing began work on their new 787 plant in South Carolina, they concurrently EXPANDED operations in Washington state, hiring more than 1,000 new workers in their Puget Sound 787 plant.

Boeing’s decision to diversify their production locations was a sound one (see the effects on auto part suppliers after the devastating Japan quake). Further, if I remember correctly, Richard Branson gave Boeing an ultimatum during or after the last machinist strike at Boeing; Mr. Branson stated in no uncertain terms that Virgin would have to look to other aircraft manufacturers if Boeing continued to suffer regular strikes that disrupted their production and delivery schedules.

Methinks1776 June 20, 2011 at 7:27 pm

It’s not so much human excrement (for, I agree, it’s an insult to human excrement) as it is political excrement. I doubt anything on earth is more vile. Well, maybe trial lawyers…..

muirgeo June 20, 2011 at 7:31 pm

“Firms remain vibrant in a competitive economy by constantly reducing their production costs.” Don

I believe you are wrong. When the economy is humming along wages are rising NOT falling.
Wages are the ultimate source of demand… as they fall… as they do under neoliberal policies… supply grows faster then demand, debt is used to make up the difference and the short story is you see the economy we have around us with old school doctrinaire professors cheering dropping wages blind to the destruction all around them.

Ravi Batra has the best explanation of our economy from the 1908′s to the present…written in 2007.
It makes so much more sense than what is promoted here and it fits the real world trends.

http://ablankspotonthemap.blogspot.com/2011/06/neoliberal-economy-in-nutshell.html

Sandre June 20, 2011 at 7:34 pm
Gil June 21, 2011 at 4:52 am

I picked up that book at one of those used books sales and it’s not actually a bad read. Some element of dealing with the doom&gloom could as easily come from goldbug Libertarians.

Ken June 20, 2011 at 8:06 pm

muirgeo,

“I believe you are wrong. When the economy is humming along wages are rising NOT falling.”

Your beliefs are wrong. Wages are NOT the only production cost. Are you completely unaware that machines do so much that a single person is about 100 times more productive than someone 100 years ago? Investing in machines and investing in the human capital both reduces production costs and increases wages.

For example, if I run a business, spending $1,000,000/month building 2000 widgets, paying 100 employees an average of $5000/month, then invest an addition $200,000/month in machines and $1000/month in employees (more mechanization means higher skills means higher wage premium) resulting in the production of 3000 widgets/month, I have reduced production costs from $500/widget to $433/widget.

It’s like you don’t understand 3rd grade math.

“supply grows faster then demand, debt is used to make up the difference”

Does this even make sense? Why would anyone need to go into debt to reduce a surplus?

Regards,
Ken

Methinks1776 June 20, 2011 at 8:08 pm

Watcha mean “like”? He doesn’t understand third grade math.

Krishnan June 21, 2011 at 4:04 am

There are some who do not seem to understand that some people cannot be reasoned with. If you wrestle with a pig in the mud pit, no one will know you from the pig.

vikingvista June 21, 2011 at 3:49 pm

“There are some who do not seem to understand that some people cannot be reasoned with”

That’s where insults come in handy.

nailheadtom June 20, 2011 at 9:52 pm

” (more mechanization means higher skills means higher wage premium)”

Don’t think that I can go along with that. Most mechanization means LESS skills required. Take well drilling, for instance. When cable tool drilling was the only method drill crews had to possess esoteric skills like the ability to set wire rope sockets with molten zinc, determine hole progress by the sound of the running machinery, determine down-hole problems with impression blocks and so one. Modern air-over rotary drilling requires none of these skills and the skills that are required are far more easily acquired. Productivity has increased by many orders of magnitude yet wages for production personnel have been stagnant for years.
In a competitive, free market economy gains in productivity result in lower prices to consumers, not necessarily increased wages to workers.

Dan J June 21, 2011 at 12:26 am

The business hires less people to pack boxes of pencils and just a few at higher wages to serve maintenance on the pencil packing machines. Overall, pencils cost less adjusting more discretionary income for consumers to other products and allowing for the business to allocate resources to other places like R&D, wages, expansion, or diversification….oh…… To investors who can allocate their extra money to other things.

simon... June 21, 2011 at 10:58 am

What’s unseen is a greater skills (and probably greater numbers) of whoever makes “modern air-over rotary drilling” (whatever it means) machines.

nailheadtom June 21, 2011 at 3:10 pm

Of course, you’re just guessing about this. In days of yore, most equipment, in drilling and other mechanical fields, was configured with complicated gears, cogs, pulleys, chains and shafts machined individually to exacting specifications. This is no longer the case. Power is now usually transferred hydraulically, a much simpler process that involves pumps, hoses and hydraulic motors and cylinders which are not difficult to make. While the newer equipment is much more productive than the antiquated but still useful designs it has replaced, the expertise required to both build and operate it is less than it once was, while wages have increased little, if at all. There’s nothing unseen about this.

Upton Ethelbah June 21, 2011 at 6:53 pm

When discussing “wages,” it is important to distinguish between nominal wages and real wages. The number of dollars per hour earned (“nominal”) may decrease in the scenario you mentioned, but the purchasing power of each dollar (“real”) may increase because of the greater efficiency of production and the resultant decrease in prices.

To quote Mises, “There is but one way toward an increase of real wage rates for all those eager to earn wages: the progressive accumulation of new capital and the improvement of technical methods of production which the new capital brings about. The true interests of labor coincide with those of business.”

tdp June 20, 2011 at 11:22 pm

Why is it that you constantly expect muirgeo to A) understand your argument (it uses “facts”, far too complex of a concept for muiron to understand) and B) admit that he/she/it (as muirgeo might possibly be of so low a life form as to reproduce via asexual budding) is wrong? Muirgeo daily sticks his hand on a hot stove, gets it burned, and then sticks it back on again.

Never argue with an idiot. They’ll drag you down to their level and beat you with experience.

Methinks1776 June 20, 2011 at 8:07 pm

I see you are not the only one with a blank spot for a brain. Ravi Batra is part of your empty head club.

Low minimum wage is a cause of poverty. Yup.

muirgeo June 20, 2011 at 8:46 pm

He wrote that in 2007 . Show me here where the good professors predicted the crash… I’m not even sure they think we are in a crash now.

As far as I am concerned that summary makes plenty of logical sense and it fits with the history, the facts, the data and our current regime.

Come on methinks … come up with some sort of wager. The economy will not improve until the wage productivity gap improves… which looks like it will be a long long time considering our broken legislative process and the bought and sold politicians selling out. And further policy trends in the neoliberal direction will be disastrous but I suspect what we will see is policy stagnation and a rotting economy for some time. The change will come from citizens finally get tired of this bullshit and taking it to the man.

Methinks1776 June 20, 2011 at 9:36 pm

Don’t you mean “sticking it to the man”, Karl?

Gil June 20, 2011 at 11:52 pm

Duh muirgeo! All Austrian-minded economists predicted the crash – they predicted all 20 of the last 5 crashes.

Scott June 21, 2011 at 9:18 am

The economy will recover when Americans start making more for less. It won’t recover by forcing employers to pay more for labor.

muirgeo June 21, 2011 at 9:55 am

Uhh Scott… that is what happened… you’ve lost the bet. More of the same will only make things worse.

Simply question… when workers make MORE for LESS who buys the MORE now that everyone is being paid LESS?

Who?

Methinks1776 June 21, 2011 at 11:24 am

Muirdiot,

That is but one of the stupid flaws in that idiotic piece to which you linked. If you could pay your employees less to produce t-shirts, what would you do? Produce more t-shirts and drop the price of the t-shirts. This shit for brains you’re linking to is telling you that the workers (now paid less) have to go into debt to buy your t-shirts. A supposed economist who has never heard of the law of demand. What stupidity. I mean, you do notice how stores get rid of their excess inventory, don’t you? Companies that regularly produce more than they can sell go broke.

By the same token, every economist on the planet acknowledges that a minimum wage does absolutely nothing for poverty. You’ll be hard pressed to find an economist (not this shit for brains, of course) who doesn’t understand that minimum wage increases poverty because it prices the labour of very low skilled workers out of the market. These people are caught in a hopeless cycle of poverty because of it.

I don’t know what committee of idiots handed this moron an economics degree. They’d probably give you one too. Your lack of understanding of basic economics is about on par with this joker’s.

brotio June 21, 2011 at 3:36 pm

Yasafi,

I’m waiting on an update from you about your progress in putting your opinions (and your money) where your mouth is.

You told us last week that a 32-hour work-week (with 40-hour pay) would lead to prosperity, and I suggested you prove it to us. Are you laying any groundwork for opening a practice of your own where none of the staff works more than 32 hours? I’m sure you’ll have doctors, nurses, and receptionists beating a path to your door, wanting to work for you,

If 40 hours pay for 32 hours work is the path to prosperity, you should soon be wealthy enough to take twenty carbon-spewing pilgrimages each month to Exit Glacier!

Methinks1776 June 21, 2011 at 3:45 pm

Bro,

C’mon now. He’s not sure where his money or his mouth is.

vikingvista June 21, 2011 at 3:51 pm

With a capacity for a 20 word vocabulary, you can’t expect him to know 2 “m” words.

brotio June 21, 2011 at 5:41 pm

He’s not sure where his money or his mouth is.

Do you know why Yasafi’s belts have his name on the back?

So he’ll know who he is when he pulls his head out of his ass.

Scott June 21, 2011 at 10:39 pm

No muir, that’s not what happened. They started making less not more, because they couldn’t control costs.

muirgeo June 22, 2011 at 3:03 am

“If you could pay your employees less to produce t-shirts, what would you do?”

Methinks

You would have them build Great Pyramids in honor of you, or you could have them pick your cotton for free, or you could have them live as serfs on your land…. THAT’s what you would do if you could pay them less to make t-shirts.

The point being at some point they couldn’t even buy the t-shirts they produced… and your argument…not mine… fails. Epic Fail as they now say…. and your argument has lead to the global epic failure we see all around the world… it wasn’t minimum wage that did that.

brotio June 22, 2011 at 1:40 pm

Yasafi,

You didn’t answer Methinks’ question: If you could pay your employees less to produce t-shirts, what would you do?

And I presume that your silence regarding opening your own practice, and paying your employees 40-hours of wages for 32-hours of work means that you’re not at all interested in putting your money your mouth is. So much easier to tell people, “do as I say, not as I do”.

Krishnan June 21, 2011 at 3:36 am

People who imagine that the way out of poverty for non skilled, low skilled workers is by raising the minimu wage are impossible to argue with. You can ask them to go listen to Walter Williams – or read what he has written – or try and show what happens when GOVERNMENT demands that some particular wage be paid – but they will remain unmoved. They’d rather see high unemployment amongst the very group they claim they are trying to help than agree to any change in wage rates. They would cheer imposition of higher minimum wage even as the unemployment rates amongst the least skilled go up. They DO NOT CARE – Simple as that. If we leave it upto them, they would force employers to hire more skilled workers at whatever wage they consider “livable”.

We will see this issue with minimum wage play out as we see the implementation of the War on Illegals in Alabama, starting September 1, 2011. We will see a slow by steady trek out of the state of some employers who will be unwilling to pay whatever the locals may demand for doing as little as they could when they do agree to work for a living.

Dan J June 21, 2011 at 12:17 am

Wages are the biggest costs to a firm that they can CONTROL. For, they cannot control the business hampering environmental costs, taxes and costs of sifting through the thousands of pages of ever changing rules, regulations, and of course the ever expanding litigation abilities of morally and ethically challenged lawyers.
Did it ever occur to leftists like Muirgeo and politically motivated NLRB, who support all things Obama, that Boeing would also need access to the Atlantic?
Boeing is simply speeding the wealth around. Do People in Carolina not deserve good jobs?
Or, are the people in the South lower quality folk who will bring the company into BANKRUPTCY from their lowered skills and lack of education.
Shame on the lawyer from Chicago….. But what else are we to expect from Chicago, but low grade attempts at political chicanery? His piece is in the Chicago, gutter style of politics.
This Chicago lawyer, the same ilk as Obama, is probably looking for his next big heist, direct thru some liberal judges court room.

Methinks1776 June 21, 2011 at 2:38 pm

Wages are the biggest costs to a firm that they can CONTROL

What makes you think that companies can control the price of this input any more than they can control the price of other inputs to production? Barring minimum wage and union activity (neither of which the company controls), the price of labour, like every other commodity, is set by the market. Companies are price takers.

River June 20, 2011 at 7:46 pm

Just a couple of inconvenient facts. The largest manufacturing exporting state is Texas, full of redneck losers by Mr. Goeghegans reckoning. It’s second behind California nationally. Companies are flocking to Texas, not so much to CA. Second, GE, every collectivists favorite company, has the worlds largest Gas turbine manufacturing plant in South Carolina. Don’t see them moving it to IL, CA, NY any time soon.

Krishnan June 21, 2011 at 3:28 am

Jeff Immelt may be the perfect example of a crony capitalist – but even he knows that building the same products using less expensive labor makes sense for GE. Slowly but surely we will see reduction in capital expenditures in the high wage, high regulation states and see a movement towards states where employers are welcome and where employees are ready to work for wages that the employers are willing to pay

John Dewey June 21, 2011 at 7:13 am

Krishnan: “Slowly but surely we will see reduction in capital expenditures in the high wage, high regulation states and see a movement towards states where employers are welcome and where employees are ready to work for wages that the employers are willing to pay”

I agree with everything in this statement except the word “slowly”. The auto industry is fairly rapidly moving to right-to-work states in the Sun Belt.

Other industries have been moving from the North to the South for quite a few decades. It was just that migration of jobs in the 1950s which caused Senator John Kennedy to argue for a large increase in the national minimum wage.

muirgeo June 21, 2011 at 10:08 am

And you don’t see the southern states donating their fair share to the federal pie.

They are our 3rd world nation equivalents. The factories go to where the standard of living is poorest…. that’s the southern states. Then the leave them for Mexico and China.

So pointing out that corporations arbitrage labor, environmental standards and other aspects of a civilized society isn’t pointing the way to success. You are pointing the way to a lower standard of living for most and you seem to think you are making a good point….you’re not.

STATISTICULOUS June 21, 2011 at 11:07 am

Why isn’t it good that companies take their factories to where the standard of living is lowest? Don’t those people deserve jobs and growth too?
The low wages in the south are a signal to employers that supply of labor is high and the opportunity costs of workers is low- ie people there want these jobs and are willing to do them for less.
Muirgeo, why do you hate southerners so badly?

Upton Ethelbah June 21, 2011 at 6:58 pm

*like*

crossofcrimson June 21, 2011 at 1:11 pm

“So pointing out that corporations arbitrage labor, environmental standards and other aspects of a civilized society isn’t pointing the way to success. You are pointing the way to a lower standard of living for most and you seem to think you are making a good point….you’re not.”

And you think that artificially raising the cost of production is going to lead to an increase in the standard of living? Have you ever taken an economics class? If you’re right, then we should raise the minimum wage to $100.00 an hour and we’ll all have a fabulous standard of living. If you understand why that idea is stupid, then you shouldn’t have trouble dismantling what you just tried to pass off as an argument. If you want to make it harder on the poor, then by all means push for policies that make things even more expensive.

Kirby June 20, 2011 at 7:47 pm

It’s all been going downhill since the government didn’t stimulate the economy to counteract the jobs the mules lost because of the wheel.

tdp June 20, 2011 at 11:23 pm

Protectionism= Luddism

EG June 21, 2011 at 12:51 am

Well, I have been working for Boeing now for a bit of time, and have been immersed in the details of what the author is talking about enough to know that what he is saying is utter nonsense.

Not that its nonsense you don’t hear from the Union here on a constant basis. But seeing how my job is primarily focused on driving efficiency, I may have a different perspective than the authors.

1) The wage difference between Puget Sound and North Charleston is primarily due to AGE difference in the employees. The average Boeing employee in Washington state has been working here for 20+ years. This “experience” does not necessarily translate to “skill”, as it is primarily an artifact of Union policy of promoting on seniority (and preventing the hire of new people). In fact, the “LBS” curve sets in pretty quickly as a result of this climate (Lazy Bastard Syndrome)

2) If Boeing continues down this path of being hostage to Unions, it will continue to suffer tremendously. Not only will its costs continue to grow, its ability to attract new talent (or even hire new talent) will be (and is) severely limited. It will lose any notion of efficiency in its manufacturing, and eventually (as is happening), there will be little choice but to offload more and more product to outside companies. The Union will kill its own host, as it has done in the past.

3) Union work rules make it virtually impossible for people like me, and others, to try and implement any meaningful process improvements. And if you think you’re going to get to keep your job, by preventing the host from making a living, than good luck to the Union.

Unless you have actually worked in such an environment and tried to do what every other company that focuses on delivering value to its customers does, you will have a hard time understanding what a Godsend North Charleston is. Boeing airplanes are probably 30% more expensive than they need to be, just because of the Unions that build them.

Krishnan June 21, 2011 at 3:23 am

“Union killing the host” – Ah yes, in the end that is what they really do. They demand and demand and demand – and have NO IDEA what it takes to run a company – or that the world has changed … It is very primal – The Union Bosses are always protecting their own salaries and benefits to the exclusion of any newcomers – In their mind, once they are in control, they feel they can make the goose keep laying the golden eggs no matter how they abuse the goose.

Sooner or later – the goose will cry uncle. Boeing CANNOT afford to be forever blackmailed by union bosses – even as they expand the union payroll.

It is truly incredible – yet commonplace – to see unions interested in punishing progress and desirous of remaining mired in some strange frozen time zone – Now, if the President of the US believes that ATM’s cause unemployment and so (indirectly) wishing for something he could do with technological progress – I can understadn why union thugs want the same – Stay steady – no change, a “Moratorium on Brains” imposed on the employer and still expect the employer to “provide well paying jobs”

Methinks1776 June 21, 2011 at 8:57 am

We’re talking about the same president who screwed over the bondholders of GM in favour of GM’s union? In his world all companies are merely conduits through which property stolen from tax payers is funneled to unions, which then fund his campaign.

Scott June 21, 2011 at 9:31 am

To “our dear leader” capital is bad and those who hold capital are evil.

If the host has cancer and shallow breathing, that must mean he has a little more to give. If he dies, so what, there’s another patient that just came in one room over.

Scott Murphy June 21, 2011 at 8:38 am

Being mad at Boeing for employing people in another state? How about lobbying congress to re-write military contract specifications so they can’t lose? Boeing has way bigger problems, like not being able to get a new design to market. If their old work force can’t do it perhaps this new one will be able to.

Matt C. June 21, 2011 at 10:40 am

I was thinking I would write a letter to the editor ask if Mr. Geoghegan truly believed that SC workers are really less skilled than WA workers. The only reason I wondered about this was because two very large companies produce very high quality products in SC. The first is BMW and the second is Honda. But maybe I’m the ignorant one here, maybe those crazy Germans aren’t so much sticklers for quality as we have been duped into believing. I might be wrong too, that Honda believes that there Civics can be made by “poorer quality, lower skilled” labor all the while maintaining their ability to be seen as reliable cars.

After that point about lower skilled labor comment I stopped reading, it was too painful to continue.

EG June 21, 2011 at 1:39 pm

It is indeed very silly. If you base “skill” on the hourly rate of employees, than GM must have some very highly skilled people. The reality is rather different. Washington state employees of Boeing have an average age of 45. Now if you’re hiring 20 some year olds in Charleston, you’re going to be paying them differently.

Of course, the reason why most Boeing employees are nearing or at retirement age, and no one in sight to take their place, is because of the Union which discourages (and makes it impossible in many cases) to hire and retain new people. Even the Union has realized by now what a dangerous situation it has created, so it has allowed Boeing to go on a hiring binge recently (ie, doing it in the worst possible way)

The massive abuse of overtime in such environments also adds at least another 20% to labor cost (and it becomes virtually impossible to control overtime costs, when the Union is involved)

For an organization that introduces itself as the “defender” of the weekend and the “creator” of the 8-hour day, the Union at Boeing surely does try its hardest to create the incentives for continuous overtime.

If any leftist labor crusader ever wants to run an interesting experiment on who and what drives 10 hour days and 1 weekend months…they should come to a Union-run enterprise like Boeing. It ain’t the evil capitalists ;)

EG June 21, 2011 at 1:48 pm

“The factories go to where the standard of living is poorest…. that’s the southern states. ”

When I go to Charleston and walk into a store, and forget to take my Boeing badge off, they treat you like a king. Automatic discount if you’re from Boeing! The people there don’t seem to be complaining!

I’d love to live in that “poverty” stricken area, where houses cost 1/3 the price of Seattle, commute times are 1/3 as long, and you don’t have nasty-looking hippies to ruin your view.

vikingvista June 21, 2011 at 3:54 pm

Air conditioning has made many good people realize that they don’t have to put up with the looting North any more.

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