by Mike Alkire
During his State of the Union Address, President Obama declared 2010 the year of job creation. He has a good reason to promote this agenda. In just over a year, the United States has lost more than seven million jobs, more than half (55%) of which are permanent losses. So how can the nation create new jobs for the millions of Americans actively seeking employment?
The President’s solution is to call for the creation of “green” jobs. While this may be a worthy endeavor, we can’t afford to wait for this fledgling economic sector to grow into an employment opportunity. A better near-term approach is to bolster U.S. manufacturing, particularly for healthcare goods, by reclaiming jobs that have been shipped overseas.
The U.S. is dependent on foreign manufacturing, importing $4.50 worth of goods from countries like China and India for every $1 we export. In healthcare, more than 90% of all nutritional supplements, face masks, exam gloves, enzymes and amino acids are manufactured overseas. Even basic items aren’t produced in the United States--China for instance manufactures two-thirds of the world’s aspirin and 70 percent of its penicillin, and could become the sole supplier within a few years.
This has decimated domestic manufacturing. Thirty years ago, manufacturing was an economic engine, employing 20 million Americans. Today, the numbers are halved, largely lost to foreign nations. If we returned these jobs to the United States, we would have more than enough work for every American seeking a job.
Typically, the reason to manufacture overseas has been cheap labor. But with every job shipped overseas, there is a comparable loss of American wealth. Manufacturing workers laid off today aren’t finding work or are taking pay cuts. In fact, pay has been stagnating or decreasing since 2004. This is a death of a thousand cuts--jobs go overseas, creating downward pressure on the economy and pay. Americans who make up the bulk of all consumer markets earn less and limit spending, which leads to further economic contractions. These recessions trigger still more jobs shipped abroad to recoup lost revenues.
To stop the cycle, we must make domestic manufacturing more attractive by automating to lower total production costs, while creating a viable long-term consumer base for manufactured goods.
In health care, there are even more compelling arguments for domestic manufacturing. Not only could markets stabilize with good jobs returning to the country, but the safety and security of the public health could be enhanced. With so many supplies produced abroad, we are held hostage to foreign governments’ ability to regulate manufacturing and supply products at an attractive price. That’s a dangerous proposition.
Consider these examples from China:
- In 2008, 95 Americans died after receiving counterfeit heparin that was not inspected by the Chinese, who don’t regulate raw materials bound for shipment abroad.
- Two years ago, the largest manufacturer of exam gloves experienced supply delays as they struggled to comply with pollution-controls, sending providers scrambling to find alternate suppliers.
- In September, a trade battle with China could have dangerously limited raw material exports, leaving the U.S. stranded for healthcare supplies and threatening our federal budget with increased costs.
- In January, the Chinese Banking Authority announced it would slow spending, indicating a possible recession linked to foreign debts held by the country; such a dip would devastate free flows of supply.
- Recently, China imposed sanctions on U.S. weapons and aircraft manufacturers after a sale to Taiwan, which could strain already tense relations and bring the supply of vital products to a halt if not resolved.
The reality is that this could happen at any time, with any imported supply, depending on the geopolitical factors.
There are ways to build capabilities in the United States using advanced technologies that would decrease our dependence on the cheap foreign labor, create new jobs, and reestablish the United States as a center for sophisticated manufacturing.
Tax credits to encourage domestic expansions would make up for some of the labor wage gap while keeping the overall markets for goods strong. Similarly, tax cuts to match the Organisation for Economic Cooperation and Development rates could stimulate growth and investments in efficiency technologies that improve U.S. competitiveness. Although a near-term drain on the federal budget, investments could be paid for by prioritizing stimulus funds for healthcare manufacturers, and recouped in the future with higher taxable corporate profits and employee wages.
Our economic prosperity can no longer be tied to things we buy--it has to come from things we make. With the right investments in 21st century equipment, we could make products safer, better and faster than competing economies, creating sustainability and competition for foreign labor. Rather than chase a “green” economy bubble like we did with dot.coms or real estate, let’s invest in a healthcare sector that has predictable and growing demand, as well as urgent safety and security challenges that can be best met by domestic companies.
Mike Alkire is president of Premier Purchasing Partners, a division of the Premier healthcare alliance.
