America’s Workers Get Stiffed

Jobs aren’t scarce. and manufacturing jobs aren’t disappearing. No, really: there are more jobs—even manufacturing jobs—than ever! The federal government pegs the net job increase at U.S. multinational companies at about half a million since 2000. And let’s give credit to tax policy, too, which has freed up cash for companies to add those jobs. According to the Center on Budget and Policy Priorities, American companies are paying less in taxes as a percentage of GDP than ever recorded. In the quarter just ended, corporate profits soared.

Soaring profits and tax cuts translate into jobs, right? Yes!

Just not in America.

Those half-million jobs were created by multinationals cutting 2.4 million jobs in the U.S. while adding 2.9 million offshore. The invisible hand is working overtime these days, grabbing American corporate profits and putting them to work in other economies. Cash—whether from improved operations or tax cuts—continues to flow abroad, adding jobs and pushing up foreign income. Countries like China, Singapore, and India aggressively partner with their companies—and ours—to support further production and jobs for their people.

When Jennifer was governor of Michigan—trying everything, old and new, to create jobs—she saw clearly how taxes alone were seldom central to corporate decision making. Indeed, they were often on the periphery.

In 2005, for example, Michigan-based auto supplier Delphi filed for bankruptcy—at the time, the world’s largest manufacturing bankruptcy. Back then, Delphi operated 41 U.S. plants and employed 50,000 workers. Today it has just 5,000 employees in the U.S. with more than 100,000 factory workers in other countries. Then there was the small manufacturer that announced layoffs. The CEO said privately there was nothing the state could do. His voice quivering, he explained he was patriotic and had sworn he would always hire American, but now he had to go to China or close altogether. Taxes were a nonissue; material costs, wages, and proximity to customers and partners drove the decision.

Between 2003 and 2008, U.S. companies more than doubled their employment rolls in China. In the past decade, some 42,000 factories closed in this country. One third of all manufacturing jobs in the U.S. have disappeared. As profit margins get tighter in finance, law, or any number of other sectors, rational economic actors will move money abroad.

Here is the tragedy: by insisting on a small-government, tax-cut-only solution to produce jobs, we are living by an outdated map of the economic world. Indeed, we may be accelerating the job losses as our competitors take advantage of our passivity. Other countries are aggressively planning, developing economic clusters, partnering and creating jobs in new sectors, only too pleased that the U.S. is stuck in the starting blocks. China, for instance, clearly has every intention of leading the world in job creation in the clean-energy sector, pleased that we are a sleeping giant.

But there is hope. It was only when Michigan, with the support of the Obama administration, began to co-invest in partnerships with clean-energy companies that our economy began to recover. In 2010, our job-creation rate improved faster than that of any other state, according to the Gallup index. But it required strategic intervention to save the patient.

We do need to lower the corporate tax rate and aggressively close loopholes and credits that aren’t working. But tax cuts can’t be the only tool in America’s economic toolbox. This is a time for carefully crafted incentives that will spur public-private partnerships and create jobs again in America. Laissez faire is not a winning strategy in a global economy where the competitors play a much more muscular game. We need economic and manufacturing policy that puts America on our side, not on the sidelines, in the global race for jobs.

Granholm was governor of Michigan from 2003 to 2011. She and husband Mulhern teach law, business, and public policy at the University of California, Berkeley, and are coauthors of A Governor’s Story: The Fight for Jobs and America’s Economic Future, coming in September.