On Friday every main stream media organization was hyperventilating over the amazing NFP number and the Unemployment rate. Three years after the great recession ended JOBS were created. Hallelujah - end of story. But has anyone really thought about what kinds of jobs are being created (other than Zerohedge). Has anyone thought about how their tax dollars are being used to support the very generous compensation packages of Executives (higher stock prices are always good for executives who are compensated in stock) while the “newly employed” are compensated with barely sustenance level wages and NO benefits. Has anyone raised the notion in this election cycle about how the “soft landing” in American living standards, is going to affect GDP growth going forward, considering that the US is an economy based 70% on consumption.



On Friday Caterpillar announced they were closing a factory in Canada. They had wanted the workers to take a 50% pay-cut plus a substantial cut to benefits. The workers understandably were not excited at the prospect of going from earning $67,000 a year to $28,000. One might think that Caterpillar was a struggling company, asking workers to accept a 50% pay-cut, one couldn’t be more wrong. Profit was up 36% in 2011 vs 2012. Oddly the CEO’s (also Chairman of the Board) pay package in 2010 (latest available numbers) was quadrupled from 2009, to a total of $22.5 million including a $16 million stock grant.

Caterpillar's decision, ending a standoff with locked-out workers huddled around barrels of burning scrap wood outside the London factory gates, may benefit another downtrodden manufacturing city: Muncie, Ind., where Caterpillar last year opened a locomotive plant and where it is trying to fill jobs at about half the pay workers in Ontario received. At a job fair in Muncie Saturday, Caterpillar will be offering jobs at that plant at wages ranging from $12 to $18.50 per hour. Wages for most workers at the Ontario plant are about 35 Canadian dollars an hour.

If Caterpillar does move theses jobs to Munice what does it stand to get from the City and the State?



When Caterpillar agreed to revitalize a former Westinghouse electrical-equipment plant in Muncie that had been idle for 12 years, state and city officials provided incentives that could reach about $28 million, assuming Caterpillar meets its goals for adding as many as 650 jobs. Those incentives include tax credits, infrastructure improvements and worker-training funds.

If Caterpillar increases its investment in Muncie to replace the Ontario capacity, Muncie officials said it may qualify for further incentives. "We're going to do all we can to help them," said Jay Julian, chief executive officer of the Muncie-Delaware County Economic Development Alliance.

So the State will pay $28 millon for the privilege of having Caterpillar employee 650 people at about an average yearly salary of $24,000 (a level that the federal government defines as just a hair above the poverty level)? By the way, the CEO could pay all 650 salaries for one year and still have almost $8 million left over.

Some will say a job is a job is a job. But is a skilled labour job that barely pays $100 a day before taxes (state taxes),really something state’s should be begging for? Does the USA really want to start applauding the creation of poverty level jobs? Are new households created on $24,000 a year? Is demand stimulated with $24,000 a year.

Further who do you think is going to be left to pay the tab for these workers’ medical care, and pension benefits? Yes dear taxpayer that would be you. You, who paid for the privilege of having these jobs placed in your state to begin with, are now subsidising the compensation (benefit) packages of all the “newly employed”. The Corporation, well they don’t really pay as much taxes as they used to (corporate tax receipts as a share of profits are at their lowest level in at least 40 years), all those tax breaks/loopholes etc, really do add up.



U.S. companies are booking higher profits than ever. But the number crunchers in Washington are puzzling over a phenomenon that has just come into view: Corporate tax receipts as a share of profits are at their lowest level in at least 40 years.

Total corporate federal taxes paid fell to 12.1% of profits earned from activities within the U.S. in fiscal 2011, which ended Sept. 30, according to the Congressional Budget Office. That's the lowest level since at least 1972. And well below the 25.6% companies paid on average from 1987 to 2008.

This is reverse socialism. It is the redistribution of wealth from the lower to the upper class with explicit State support. It is the sort of wealth redistribution that if allowed to go unchecked leads to social instability.

So in this the election season, we will all be told which Person or Party will be the best job creator. President Obama will take a victory lap as a “job creator in chief.” We will hear much about the “re-shoring” of jobs.We will hear about GE revitalizing manufacturing in the USA (they have closed 29 factories in the US since 2009). We will cheer the amazing profitability of GM ($45B tax break courtesy of the US taxpayer).The narrative on taxation will include the common line that Corporate taxes are to high and capital gains tax should be zero. What we won’t hear about is Corporations, like Caterpillar, taking money from workers and taxpayers, to enrich Corporate profits, and Corporate executives. We won’t hear about a CEO who got his pay quadrupled, and in turn cut his workers salary by 50%. Most of all we won’t hear about the soft landing in living standards for 80% of Americans.

Sources:

http://online.wsj.com/article/SB10001424052970203889904577200953014575964.html

http://online.wsj.com/article/SB10001424052970204662204577199492233215330.html

http://online.wsj.com/article/SB20001424052748704462704575590642149103202.html