How to Create Jobs in America
Wednesday, 8 June 2011 12:20 PM ET
By: Ivory Johnson
Scarborough Capital Management, Inc
Our beloved two party political system is currently negotiating an increase to the debt ceiling, all in the name of fiscal responsibility.
While the weekday warriors of Washington, D.C. spar over ideological dogma, it turns out that 75 percent of the budget deficit is the direct result of lost tax revenue from the recession.
Tax hikes and spending cuts notwithstanding, job growth could go a long way in solving the nation’s debt problem.
Some blame big business for outsourcing jobs, but corporations took the same course of action as American consumers who purchased goods and services from overseas manufacturers to increase their household’s bottom line.
Just as the employees bought Sony [SNE 19.50 -0.13 (-0.66%) ] televisions to save money, their employers hired Asian workers to book a profit.
In a strange twist of fate, both the goose and the gander knew what was good for them. The middle class can’t possibly like what it bought, having successfully financed its own demise one gadget at a time.
If Americans took such extraordinary exception to outsourcing, more people should have driven a Ford [F 10.11 0.06 (+0.6%) ].
Imagine, however, if consumers voluntarily agreed to pay higher prices for goods and services made in the United States, mitigating the incentive for corporations to hire cheap workers overseas.
Naturally, consumers would demand an audit to verify which stages of product development were conducted domestically, ranging from manufacturing to customer service. As luck would have it, such a business model already exists.
Whole Foods Market [WFM 65.67 1.19 (+1.85%) ] generated $9 billion in revenue in 2010 by selling common merchandise with unique characteristics at higher prices to a loyal target market.
All ingredients are reviewed by the quality standards team to validate claims that the food was organically grown and to ensure compliance with nutrition, freshness, appearance and taste guidelines.
Despite the economic downturn, the company grew revenue by 15 percent in the 4th quarter of 2010, attributing growth to customer demands for healthier food, animal welfare and sustainable seafood.
According to their latest annual report, sales of natural products grew by five percent over the previous year.
What would prevent consumers unaffected by the recession from spending an additional $20 for a pair of jeans at Old Navy [GPS 16.20 0.20 (+1.25%) ], provided they were manufactured in Detroit?
The American public literally has the ability reshape the economy, reduce the size of the debt and increase wages, not by way of the voting booth, but through our spending habits.
If businesses had a target market for American made products, the higher prices would compensate them for the additional costs.
Reconstituted workers would not only pay social security and ordinary income taxes that account for 81 percent of government revenue, but their footprint on state support systems would shrink, reducing the need to increase taxes on those of us fortunate enough to be gainfully employed.
Moreover, recent retirees might renter the workforce and delay the receipt of entitlement benefits.
In the process, an entirely new industry could flourish, absorbing outsourced white collar workers to audit the production process.
Providers of services need only the credible research to indicate viable price entries for suitable merchandise, the kind of information that small businesses could market without regulation.
We’re not helpless. Americans can alter the landscape of the job market just by changing our spending habits and making a few sacrifices along the way.
Given the projected budget shortfalls, this country will be subject to higher prices one way or another, as deficits put pressure on the value of the dollar, the root cause of inflation.
One can only hope that ideas like these are in abundance so the law of averages can exact some measure of success – if this one fails, another will rise in its place.
The alternative to free market ideas are higher taxes, severe cuts to entitlement programs and unadulterated hypocrisy, the sort of things most Americans oppose. Gloom and doom is overrated; what we need are common sense solutions.
Ivory Johnson is the director of financial planning at Scarborough Capital Management, Inc. He is a Certified Financial Planner, a Chartered Financial Consultant and a frequent guest on CNBC. Mr. Johnson attended Penn State University, where he received a Bachelor of Science degree in finance.