The Affect of Economic Policy on Unemployment

The rise in poverty, reduction in the standard of living in the United States, and disappearing middle class can be traced to economic policies favoring big corporations. The people in power not only have huge sums of money at stake, but are actually the puppets of even bigger players in this game of money and power. These people make decisions and laws that suck wealth from the lower classes into the bank accounts of the few at the top of the food chain.

One of these factors is monetary policy. What reason is there for unfair currency manipulation? According to The Economic Policy Institute, the single best way to increase exports of US goods and decrease imports of foreign goods is to devalue the dollar.(1) I agree and have felt this way since first working in China in 2006. I was amazed at how much the US dollar would buy there. I was considered wealthy, while in the US I was barely middle class. The difference in the value of currency became glaringly obvious, as did it’s implications.

If the dollar is worth 6-8 times the value of the Chinese yuan, then Chinese manufacturers make 6-8 times the profit by selling their goods in the Us versus China. Even at that rate, Chinese manufacturing goods can sell at a cheaper price than American. Chinese companies do not have to abide by the same costly safety, health, and environmental regulations that US companies do. The unbalanced trade with China is also propped up by Chinese taxes on imports. The VAT, or Value Added Tax rate is currently 17% on all imported goods.(2) Meanwhile, how much import tax do Chinese companies pay? According to an article on TradeReform.org “The difference in border taxation between the US and China is a major reason why American companies have difficulty competing. Chinese border taxes make it more difficult for American manufacturers to export to the Chinese market, even as Chinese companies enter into the US market essentially tax-free.” (3)

It isn’t hard to see why corporations would move their operations to countries like China. It is not only manufacturing “assembly line” type work that has been affected. Outsourcing white collar jobs is hugely popular. We have this from Democratic Underground “… “When you can get great talent at 20 percent of the costs, it isn’t about waving the American flag. It’s about doing what’s right to have a good company,” said Carol Bartz, chief executive and chairman of Autodesk Inc., a San Rafael software firm. The company announced last fall that it will cut as many as 650 employees, even as it was hiring at its new development center in Shanghai. (4) In 2009, nearly half of the long term unemployed were formerly white collar workers.(5) Many of these people who were able to find jobs only found part-time low paying jobs.

When all is said and done, companies move manufacturing plants overseas and outsource high paying white collar jobs to increase profits. The US GDP falls and so the US inches ever closer to circumstances beyond the control of lower and middle classes. More people are forced to enroll in entitlement programs such as food stamps, HUD, and WIC just to keep a roof over their heads and keep their family fed. Ponder these things the next time you take a shopping trip through WalMart, Target, or your local mall.

(1)http://www.epi.org/publication/briefingpapers_bp149/

(2)http://www.worldwide-tax.com/china/chi_other.asp

(3)http://www.tradereform.org/2011/07/how-we-pay-chinese-taxes-20-of-their-government-revenue/

(4)http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102×405182

(5)http://www.sfgate.com/business/article/Joblessness-hits-white-collar-workers-hard-3215098.php

Also see these articles for further reading on the subject:

http://www.epi.org/publication/bp260/
http://www.whitehouse.gov/administration/eop/cea/E…
http://economistsview.typepad.com/economistsview/2…
http://forbes.house.gov/uploadedfiles/crs_-_offsho…
http://www.ces.ncsu.edu/depts/agecon/trade/two.htm…
http://www.heritage.org/research/reports/2009/01/r…
http://www.epionline.org/study/r131/
http://cwcs.ysu.edu/resources/CWCS-publications/so…
http://thinkprogress.org/economy/2012/07/16/525221…
http://www.businessweek.com/the_thread/economicsun…
http://fpc.state.gov/documents/organization/46688….
http://lost-jobs-usa.livejournal.com/315.html#
http://www.usnews.com/debate-club/should-congress-…

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