Carrier & UTEC Relocations To Mexico Expose Middle-Income Trap In America

"China is ripping us off like nobody has ever seen.  Vietnam's a new one, Mexico's a disaster.  Mexico's the new China.  They are taking so many businesses." - Presidential candidate Donald Trump speaking to a large crowd in suburban Charleston, SC on Monday.

 

"The challenge we face & everyone is facing is a skilled labor shortage.  It's probably getting worse every year." - Doug Macpherson, General Manager @ the Baltimore office of Construction Labor Contractors a staffing agency.

 

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Last week two subsidiaries of United Technology announced they were shutting down operations in Indiana & moving 2,100 jobs to Monterrey Mexico.  Engineering, marketing, & some administration jobs will remain in Indiana.

 

Carrier – subsidiary #1, a manufacturer of heating, ventilating, air conditioning, & refrigeration systems (the company founder, Willis Carrier, invented the modern air conditioner), eliminated 1,400 jobs & will complete the move over three years starting in 2017.

 

United Technologies Electronic Controls (UTEC) – subsidiary #2, a designer & manufacturer of microprocessor-based controls, thermostats, & zoning systems for heating, ventilation, air conditioning & refrigeration systems eliminated 700 jobs & will complete the move over two years starting in 2017.

 

Click here to hear management's announcement to the work force @ Carrier.

 

The relocations are being made following the continued migration to Mexico of the companies' suppliers & competitors.  The minimum wage in Monterrey is 70.10 Mexican pesos per day (less than $4.00 per day @ current exchange rates) placing it below most of its peers in Latin America & last among the 34-country Organization for Economic Cooperation & Development (OECD).  The total compensation for union workers in Indianapolis is comprised of an average wage $23 per hour plus employer contributed fringe benefits of health & welfare benefits, supplemental dental & vision benefits, disability benefits, death benefits, pensions, & annuities. 

 

Indiana Governor Mike Pence, upon learning about the relocations, said in a written statement that "federal regulations continue to stymie our national economy" & Washington (meaning BO's deliberate plan) is @ least partially to blame for the moves.

 

In summary the Carrier & UTEC moves are just the latest example of BO's purposeful plan to make Americans miserable & dependent on government for their existence.

 

I researched the above after hearing about it from Tucker Carlson – an excellent reporter.  But in this case Carlson emphasized the "downside of globalization" saying that low prices of imports are the tradeoff we make in losing jobs to cheap-labor countries as if this is a fait accompli.  By this logic we are all just counting down to the end of the prosperity of our society as more & more companies relocate jobs & their operations to cheap-labor countries or engage in tax inversions to the point where Americans aren't producing any wealth @ all & ultimately can't afford to buy a stick of chewing gum.

 

Carlson should have "checked his premise" based on the best book he ever read in that he discounted the power of America's free enterprise system unshackled from BO's purposeful onslaughts designed to produce the very result Carlson was describing – how undiscerning on the part of a usual clear thinker to promote the very mindset we should all be working against. 

 

Now it is true that the 2,100 people described above who are losing their jobs in Indiana are caught in what Professor Peter Coclanis calls the "middle-income trap" - meaning a situation where economies stagnate after reaching a certain middle level, usually because their manufacturing & labor costs no longer allow them to compete with lower-cost producers, but their work forces aren't skilled enough to compete higher-up the value chain.  To paraphrase – "I'm pretty expensive & not very skilled." 

 

The emphasis that I make is that even Americans skilled to make air conditioners & controls find themselves not being able to compete with Mexicans who make pennies on the dollar compared to them while making the same products.  This is part of the global economy.

 

But what is missing is the other part of the global economy or more specifically the free enterprise economy that America was founded upon & followed until the 1930s when FDR began the socialization of America that BO, Hillary, & Sanders are poised & ready to complete.

 

To see how value producing jobs are created think of the world economy as a ladder with the U.S. currently on the top rung & developing nations with low tech labor intensive jobs like Bangladesh or Mexico on the bottom rungs. The other countries are in between. All countries try to climb to the next rung. This works well if the topmost countries create new industries & products, thus adding another rung to the ladder like when we replaced horse drawn carriages that used buggy whips with cars. Older industries can move overseas while new jobs are generated @ home. It is when innovation stalls @ the highest rung that the portion of Americans near the bottom of the income distribution must compete with workers in developing countries. This is what we are facing today as far too many Americans are so poorly educated that they have skills so limited that no employer can use them which is exactly the plan BO is implementing in making people ever more dependent on government. Source of the ladder metaphor – Professor Robert Carbaugh of Central Washington University.

 

In summary, Americans should not be doing jobs that are classified as "third world jobs".

 

But America no longer has a free enterprise economy that will produce ever higher rungs on the ladder – we have a mixed economy that is somewhere between a totally free market economy (pure capitalism) & a government directed economy (socialism).  The current mindset in America is favoring more socialism because BO has intentionally produced a business climate that few entrepreneurs want to enter.

 

The first step in correcting this problem – if people are smart enough to want to - is for everyone suffering in this middle-income trap to admit their skills are limited to the point that fewer & fewer employers have need for them.  Accordingly they need better education & training – this will take looking yourself in the mirror & admitting the predicament you are in without casting blame on someone else.  You have to confess (to yourself) that you have not adapted to the fact that your old job can now be done by someone in a third world country who makes pennies a day or by a machine in a sophisticated computer controlled factory.  This is exactly the condition that Carrier & UTEC employees find themselves in.   Since you always have to make a living – there is no such thing as retirement from receiving bills – you will have to learn new skills & retrain.  Part of the cost of freedom is that everyone has to bear the cost of investment in themselves - both time & money – so they can make a living to support themselves.  For example, a toll collector could have seen his problems coming if he just looked @ the number of E-ZPass lanes (or other similar electronic toll collection system) & admitted his toll-collecting job prospects were not bright.  Carrier & UTEC employees could have connected some dots when they saw their competitors & suppliers moving to Mexico as mentioned above. 

 

The government has brainwashed far too many people to think they don't have to take care of themselves.  In 2011 I posted the stats that some 50.5 million Americans were on Medicaid, 46.5 million are on Medicare, 52 million on Social Security, 5 million on SSI, 7.5 million on unemployment insurance, & 44.6 million on food stamps & other nutrition programs.  Some 24 million get the earned-income tax credit, a cash supplement.  In 2010 such payments to individuals were 66% of the federal budget, up from 28% in 1966 – see graph below that shows 71.3% of the total federal budget is dedicated to payments to individuals.  This is a lot of momentum toward government dependence & it has only gotten worse since these statistics were compiled & ObamaCare will further swell the Medicaid, unemployment (& SSI by extension), & EITC numbers.

 

click on graph to enlarge

 

This post presents the way forward to break the government dependence spell that has been cast on America the past 80 years.  The solution is grounded in limited government, personal responsibility, & the free enterprise capitalistic system – the only cure for socialism that I know of.

 

The next step is for liberty loving leaders (or leader) to explain how capitalism is the only alternative to turn the socialist mindset & middle-income trap around by countering the destructive path far too many of our citizens are experiencing – our society either lurches further toward socialism & destructed lives & livelihoods or returns to the excellence of high achievement that is earned through capitalism by freeing entrepreneurs from BO's burdensome government regulations that have hamstrung our economy. 

 

This revitalized start begins with everyone facing the fact that something different happened in November 2008 & it was confirmed in 2012 – & that something is evil & a deliberate deception to overrun our country.  What happened to the people @ Carrier & UTEC is an example showing how this deception leads to people becoming dependent on the government.  The last seven years has not been about the usual sort of things the two parties argue over & take turns winning elections over.  These years have been about robbing liberty from people by increasing dependency on government & promoting destructive class warfare & envy & there is no end in sight to this nightmare & no foreseeable practical solution other than for those of us who still unabashedly believe in America to teach & live the libertarian principles that our country was founded upon.  Start with the thought of freedom & explain that all prosperity comes from unleashing the free human intellect.  If we lose with that message all is lost anyway @ least until John Galt comes forth.

 

Click on the reference post below for specific solutions to problems regarding Medicare, Social Security, federal spending, & the FairTax.

 

Reference post:  Four Points Highlight The Needed Change In Mindset