What is more important for the economy - cheap prices, or keeping jobs in the USA?

Question

Every time we discuss ways of bringing back jobs to the USA, most people complain that it will raise prices. What's the use of having cheap prices if you have no job, so you can't afford it anyway?

Answer 1

You make a good point that many corporations are now realizing. By moving jobs to India and China, prices for goods didn't really decrease, but profits did. They did create consumers in those countries, but since the wages are so low, they cannot sell their products in those countries for the same price as they sell them in the US.



The best example of that was the rush for telecommunications to expand into India & China. The intent was not only to move customer service and manufacturing there, but to expand services there as well. They encountered a problem in that the Chinese & Indians can't and won't spend anywhere near the same on a cell phone & minutes nor a lengthy contract because what we pay for our cell phones is what they make in a month.



Many of those companies failed and pulled out because the volume didn't make up for what they were losing by charging so much less for the phones and service. Now, those Americans whose jobs were transferred to India & China no longer had jobs and they also lost those consumers who were paying more in the first place.



So, you are right, employees are your consumers and people without jobs as we are now seeing don't spend $$.

Answer 2

I'm really baffled by all these blatant assertions that low prices create jobs. I noticed that none of the answers explain how this works.



History shows just the opposite. Low prices drive companies out of business, which means less jobs.



During the Industrial Revolution, the USA had import tariffs that made prices higher here. Higher prices mean more profit for domestic producers. Foreign companies were actually moving factories to the USA to avoid paying the tariff and to get the higher profit.



Now just the opposite is happening. We don't have major tariffs, and companies are moving factories from the USA to China.



Sound like too many people here have the Wal-mart mentality: "Cheaper is better."



Sorry, but cheaper means less jobs. Wages are tied to prices. Low prices mean low wages. After a point, low prices mean having fewer jobs at all.

Answer 3

This is exactly what several economic nationalists throughout Latin America convinced their countries to adopt from before WWII until the 1980s. Do you really want to turn the USA into 1960s Argentina (which was run by a military dictator btw)?



Free trade keeps prices low which encourages new job creation. Policies designed to bring manufacturing jobs back to the US will hurt us in the short and long run. Increased input costs will force the business that use the things that were produced abroad cheap out of business, thus eliminating any gains. Declining demand for the goods produced by newly repatriated manufacturing jobs will ultimately eliminate those jobs anyway.

Answer 4

You own comment answers your question. To help the economy you need both. But it is not so important to keep jobs here as it is to create more jobs here. Keep in mind, that with all those "millions" of jobs being exported, our unemployment in this country has not budged more than a fraction of a point (not including the impact of the recession, which is not the result of "exported" jobs).



To have either, you need competition. Prices will go up due to a lack of competition in the delivery of goods and services. Jobs will be lost due to the lack of competition for labor. More competition in both areas will give you both cheaper prices and more jobs.



In the U.S., we have taxes and regulations that too often narrow the competitive playing field in favor of one interested party over another, or the taxes and regulations, in and of themselves, will drive up prices. For example, gas would be at least 30% cheaper if taxes were taken out of the equation. Same as your cell phone bill, etc. etc. Yet even with all those taxes and regulations, your cell phone costs a lot less now then it did ten years ago--thanks to competition.



As for labor, we have regluations like minimum wage and work hour restrictions (and of course, labor unions) that give other countries a competitive edge in that market. Why would a U.S. company open a plant in China? It surely is not out of conveinence. It is beacuse the cost of labor is far less, thus making it advantagous to do so. Sure, it is the companies' quest for higher profit as well. But that is no different than the laborers' quest for higher wages.



The thing is we CAN have our cake and eat it too. When people/individuals have more economic and individual freedom, more wealth is created/produced and thus the cost of living falls. While China is far from supporting individual freedom, as a result of the government allowing much more economic freedom, the whole population of China has become much less poor.



To make a more compelling argument, look at Korea. The people and culture are the same in the North as in the South, but the difference is the political/economic structure. Which one is thriving? Which one is desperatetly poor? What is the political and economic structure of each one. Which has more freedom?



Of course there are those who will argue the merits of free-market capitalism in favor of socialism. However, when one asks how many countries have been impoverised by socialism (too many) versus how many have been impoverished by capitalism (zero), the answer to which provides the most wealth for its people is quite clear. The poor in capitalist economies tend to be far less in numbers and far less severe than those of heavily socialized countries.



The thing is (free market) capitalism, socialism and communism are all capitalist (capitalism is "the means of production"). The difference is who owns and/or controls the capital -- the people/individuals or the state?

Answer 5

Cheap prices create jobs.

Answer 6

I think keeping jobs is more important. If people had jobs they would be able to support themselves. Cheap prices only help the people who have jobs and money.

Answer 7

Its a sliding scale obviously. Neither is more important absolutely, but at any given time one is more important than the other. The trick is to accurately figure out which one and adjust accordingly.