Driving Jobs Offshore
William Norman Grigg
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The New American, November 3, 2003
The crushing burden of government regulation plays a key role in the ongoing exodus of American jobs. |
Why are thousands of American jobs disappearing, only to reappear overseas? Since early 2001, the economy has shed nearly three million jobs, many of them well-paid positions in manufacturing and the hi-tech sector. Initial estimates from the Labor Department suggest that 15 percent of those jobs have materialized in low-wage countries such as China, India, Mexico and the Philippines.
The Bush administration, parroting a refrain favored by many Establishment economists, insists that most of the job losses reflect dramatic increases in productivity. In other words, fewer employees are needed to do the available work. This analysis does provide a plausible explanation for at least a portion of the job losses in the manufacturing sector.
However, as the October 5 New York Times correctly observed, “lately the work sent abroad has climbed way up the skills ladder to include workers like aeronautical engineers, software designers and stock analysts as China, Russia and India, with big stocks of educated workers, merge rapidly into the global labor market.” This phenomenon, sometimes called “downward harmonization,” was famously described by Ross Perot as the “giant sucking sound.” But jobs aren’t merely being “sucked” offshore because of lower wages abroad; they’re also being pushed abroad by insupportable levels of domestic regulation here.
Regulatory Assault
Last September, Briggs & Stratton Company did something unusual: It tried to beat back a regulatory assault that would have cost tens of thousands of Americans their jobs. The Wisconsin-based company manufactures small engines, such as those found in lawn mowers and generators.
The California state government proposed a new pollution standard requiring small-engine manufacturers to put catalytic converters on their motors beginning in 2008. “We could not do that economically here,” protested Briggs & Stratton senior vice president Thomas Savage, warning that retooling to meet the standard would probably result in outsourcing the work overseas.
That warning caught the ear of Senator Herbert Kohl of Wisconsin, Briggs & Stratton’s home state. Although Kohl is a liberal Democrat, he also relies heavily on the support of blue-collar, industrial voters in a state where the manufacturing base has radically eroded over the past decade. Accordingly, Kohl suddenly displayed an atypical skepticism regarding the value of environmental regulation. “In this economy in which 2.5 million manufacturing jobs have been lost, including 75,000 in Wisconsin, regulations that will force more jobs overseas need additional scrutiny,” Kohl declared.
The impact of the envisioned outsourcing by Briggs & Stratton would have been felt in nearly half the states of our union. According to a study released by the company, 22,000 jobs in 24 states would be lost if California imposes the new standard. And the relocation would have an impact far beyond the company’s payroll. “California is attempting to impose unreasonable standards that force us to consider moving operations overseas, and this would have a tremendous impact not only on our workers but on our suppliers and customers,” company vice president Thomas Savage explained.
Savage further noted that Briggs & Stratton is “one of the last remaining U.S. manufacturers of small engines and [we’re] doing everything we can to keep good high-tech manufacturing jobs from moving overseas.” This included making a counter-proposal to the California Air Resources Board (CARB) “that would reach a level of emissions reductions comparable to CARB’s own proposal, but without the high costs and potential job losses.”
Unfortunately, Briggs & Stratton’s attempt at conciliation also included supporting a congressional measure promoting “a uniform national emissions standard set by EPA. A patchwork of state laws would make large scale engine manufacturing nearly impossible.” Rather than solving the company’s problem in California, this measure would simply spread the misery nationwide — and set the stage for future regulatory impositions that would drive even more companies to “outsource” the work abroad.
Briggs & Stratton succeeded in getting a U.S. Senate committee to block implementation of the California air quality rule. This prompted the Clear Air Trust — a prominent member of the huge, foundation-funded Establishment environmentalist lobby — to demand that the Securities and Exchange Commission (SEC) investigate the company for supposedly misrepresenting its financial status in an official report.
In a filing with the SEC, Briggs & Stratton said that it did not believe the proposed California air quality rule “will have a material effect on its financial condition or results of operations....” Senator Dianne Feinstein (D-Calif.), a proponent of the proposed rule, denounced the company for its “unsavory” tactics: “They are either not telling the truth [in their SEC filing] … or they are not telling the truth to the American people, or specifically the Senate.”
The Prime Directive
In fact, Feinstein and her eco-radical allies, in their eagerness to punish Briggs & Stratton for impeding the regulatory juggernaut, were engaged in deliberate misrepresentation: The company didn’t stand to lose money if it relocated the jobs offshore. At issue was the financial health of the company’s American workers, not the company itself.
“Can Briggs & Stratton live with California’s proposed regulation? Yes,” observed Ernie Blazar, a spokesman for Senator Kit Bond (R-Mo.). “But that would require moving almost 2,000 good-paying jobs from Missouri to other countries....” “We never said that we would lose money, and we never said that in our filing with the SEC,” explained Briggs & Stratton vice president Savage. “What we said … is this California action would have terrible effects on the employees.”
This episode offers a revealing glimpse of the process that has led many American companies to “outsource” their production abroad. Too often, news coverage of such corporate decisions is designed to portray corporate leaders as greedy, unpatriotic opportunists clinically indifferent regarding the welfare of their employees. More often than not, however, those decisions are driven by government policies — draconian environmental regulations, invasive affirmative action and equal employment standards, irrational standards of workplace safety, tax codes, licensing regulations, etc. — that make it economically impossible for companies to remain in the U.S.
Briggs & Stratton’s refusal to play by the accepted script provoked a notable reaction. For fighting on behalf of its employees, the company was threatened with a bogus SEC investigation — a potential corporate death sentence in the post-Enron era. But this is actually fairly typical of the behavior of the federal regulatory leviathan, which often operates as if it has been assigned the task of job extermination as its prime directive.
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