The US needs to stop hemorrhaging jobs to other countries. For starters, we need to do three things:
- Impose financial disincentives for offshoring jobs,
- Change the mindset among corporate executives that offshoring jobs is the right and acceptable thing to do, and
- Reverse the resignation among workers and the public who believe that the offshoring of jobs is inevitable.
To create financial disincentives, we should pass laws that place special taxes or restrictions on corporations that have offshored say 100 or more jobs in the last five years. Possible examples include:
- Bar such corporations from receiving federal contracts. Or there could be demerits subtracted from the scores of proposals from such corporations in competitive bidding situations. Or there could be financial penalties on existing federal contracts such as the deduction of $10,000 per offshored job or of 1% of a contract’s annual payment per 1,000 offshored jobs, whichever is greater.
- A corporation’s taxes could be increased by $10,000 per offshored job or its tax rate could be increased by 1% per 1,000 offshored jobs, whichever is greater – with no offsets to allow a corporation to avoid this tax.
- Bar such corporations from receiving government tax breaks, loans, or grants.
- Require such corporations to pay a special, unavoidable, and substantial tax on aggregate executive compensation that is over $1 million. [1]
Senator Bernie Sanders has announced that he will introduce a bill in Congress that will include provisions similar to these to discourage the offshoring of jobs. He is calling it the Outsourcing Prevention Act. [2]
To counter the mindset that favors offshoring jobs, we should pass laws or establish executive branch procedures that publicize a corporation’s offshoring of jobs. Possible examples include:
- Require such a corporation to hold a public hearing in the community losing the jobs 90 days before the termination of the jobs. If the number of jobs is 500 or more, a hearing in Washington before a congressional committee should be required.
- Establish a new anti-offshoring czar in the Office of the President who would visit any such corporation’s CEO to make it clear that offshoring jobs is viewed negatively.
Providing financial rewards to corporations to keep jobs in the US is not an efficient way to stop offshoring. Typically, state or local governments provide tax abatements or other tax benefits to corporations to keep jobs. However, state and local taxes are generally only 2% or so of a corporations’ costs. Labor costs are a far greater portion of operating costs. Therefore, tax abatements are not likely to offset the savings in labor costs provided by offshoring. For example, in the recent United Technologies / Carrier (UT/C) case in Indiana, the state will provide $7 million in tax benefits over 10 years. However, UT/C estimated was that it would save $65 million per year ($650 million over 10 years) for offshoring 2,100 jobs. [3]
Corporations’ demands for financial benefits from state and local governments to keep or create jobs are really just blackmail. To stop this job-based blackmail, which robs states or municipalities of needed tax revenue, the federal government should put a 100% tax on these financial benefits, so there is no overall financial incentive for the corporation. The federal government should also reduce grants to state and local governments that give financial incentives to corporations to keep jobs. For example, awards under the Community Development Block Grant or other economic development programs could be cut for states or municipalities that agree to pay job blackmail to corporations. The federal government has used a similar strategy in other instances to get states to change policies. For example, the federal Transportation Department used cuts in federal transportation grants to get states to raise their alcohol drinking ages to 21. This reduced car accidents and saved thousands of lives. [4]
I encourage you to contact your US Representative and Senators and ask them what they plan to do to reduce the offshoring of US jobs. Request that they support a systematic approach to discouraging offshoring such as that offered by Senator Sanders’ Outsourcing Prevention Act.
[1] Greenhouse, S., 12/8/16, “Beyond Carrier: Can Congress end the green light for outsourcing?” The American Prospect (http://prospect.org/article/beyond-carrier-can-congress-end-green-light-outsourcing)
[2] Sanders, B., 11/26/16, “Sanders statement on Carrier and outsourcing,” Press release from Senator Bernie Sanders (http://www.sanders.senate.gov/newsroom/press-releases/-sanders-statement-on-carrier-and-outsourcing)
[3] Leroy, G., 12/7/16, “Can Trump’s wild one-off at Carrier combat corporate welfare?” The American Prospect (http://prospect.org/article/can-trumps-wild-one-carrier-combat-corporate-welfare)
[4] Leroy, G., 12/7/16, see above
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