In the last six installments of this series, Egalitarius’ management encouraged its workers to unionize, and then instituted several aggressive cost-cutting measures to offset the cost of more expensive unionized labor.
In another scenario, Egalitarius’ unionized workforce went on strike. In the last two scenarios, Meritocratus’ management moved its production facilities offshore, and both companies struggled through a crippling recession.
Throughout these examples, Egalitarius’ concern for society’s well-being resulted in its bankruptcy, while Meritocratus’ ruthless pursuit of the bottom line left a trail of human wreckage in its wake.
Both companies represent caricatures of the left’s and right’s idealized worldviews carried to their natural and extreme conclusions.
What then, can we learn from this cautionary tale?
1. People and Corporations Respond to Incentives
People and corporations are not naturally bad. They just behave badly when they work in environments that provide the wrong incentives. These examples showed unions pushing for higher wages, because it was in their interest to do so. Yet their actions resulted in the company’s ultimate bankruptcy and subsequent loss of everyone’s jobs.
In the same vein, the corporation, Meritocratus, callously abandoned its workforce because labor was cheaper and taxes were lower overseas.
2. Unions Are An Anachronistic Impediment to Progress
When companies worked children to death and workers died frequently on the job, unions were a critical element in protecting workers’ lives and welfare.
Today, they are simply an impediment to progress.
As these examples showed, unions make American companies less competitive and destroy shareholder value. They are a thing of the past that has no place in modern America. Until state and local governments come to this realization, corporations will continue to shift jobs overseas as they struggle to survive in a fiercely competitive global market.
3. Corporate Tax Regime Encourages Firms to Act Against Society’s Interests
As the offshoring example demonstrated, corporations can generate a tremendous amount of value by finding ways to reduce their tax burden. If that means moving their production facilities overseas and hiring cheaper foreign workers, they will likely do so.
Until the United States government lowers corporate taxes, provides tax incentives for corporations to create jobs domestically, and closes loopholes that indirectly encourage corporations to offshore their labor, Americans will continue to lose jobs.
The solution to offshoring is not a simple one. However, it is incumbent upon current politicians to find ways that slow or halt the flow of American jobs overseas.