Tags: Reich | Corporate | Profits | Spur | Hiring | robert

Reich: Soaring Corporate Profits Won't Spur Hiring

Monday, 02 Aug 2010 01:35 PM

Booming corporate profits don't signal more jobs being created in the United States, says economist Robert Reich, because lots of corporate profits are coming from companies' overseas operations, which is where they're investing and expanding production.

"GM now sells more cars in China than it does in the U.S.," and the firm is planning a $250 million advanced technology center there to develop batteries and other alternative energy sources, Reich writes in his blog.

"The company now employs 32,000 hourly workers in China. But only 52,000 GM hourly workers remain in the United States — down from 468,000 in 1970," wrote Reich, now a professor of public policy at the University of California at Berkeley.

"You and I and other American taxpayers still own over 60 percent of GM. We bought GM to save GM jobs, remember?"

GM officials, Reich notes, say no American taxpayer money is being used to expand in China. But money is fungible, he points out: Taxpayer subsidy means GM can now use the dollars it doesn’t have to spend in the United States meeting its American payrolls and repaying its creditors, for new investments in China.

Reich says there are two other reasons why corporate profits aren’t being used to hire. One is that big U.S. businesses are investing their cash in labor-saving technologies that boost productivity, not payrolls.

The other is that corporations are using their money to pay dividends to their shareholders and buy back their own stock – thereby pushing up share prices, wrote Reich, who served in three national administrations and was a secretary of labor under President Bill Clinton.

Big companies have shown few signs they're ready to hire, The Associates Press reports, even though consumer confidence in the economy faded further in July, and Wall Street's recent rally was fueled by upbeat earnings reports from big businesses fueled by cost cuts like layoffs and overseas sales.

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Booming corporate profits don't signal more jobs being created in the United States, says economist Robert Reich, because lots of corporate profits are coming from companies' overseas operations, which is where they're investing and expanding production. GM now sells more...
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2010-35-02
Monday, 02 Aug 2010 01:35 PM
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