Homestead mailing list

[Gene GeRue <genegerue AT ruralize.com>]

Disclosure: Chris and I both drive Toyotas and have owned several before 
these. Chris's Corolla is now fourteen years old and still totally 
dependable. I expect the Highlander to give me at least fifteen years of 
trouble-free service and will not be surprised if it goes twenty years 
without the need of more than normal maintenance.

It is not just their products that I admire; it is their business 
intelligence. The following article is yet another illustration of their 
pragmatic approach to building the best vehicles at the best prices.

Toyota, Moving Northward

By PAUL KRUGMAN
Published: July 25, 2005

Modern American politics is dominated by the doctrine that government is 
the problem, not the solution. In practice, this doctrine translates into 
policies that make low taxes on the rich the highest priority, even if lack 
of revenue undermines basic public services. You don't have to be a liberal 
to realize that this is wrong-headed. Corporate leaders understand quite 
well that good public services are also good for business. But the 
political environment is so polarized these days that top executives are 
often afraid to speak up against conservative dogma.

Instead, they vote with their feet. Which brings us to the story of 
Toyota's choice.

There has been fierce competition among states hoping to attract a new 
Toyota assembly plant. Several Southern states reportedly offered financial 
incentives worth hundreds of millions of dollars.

But last month Toyota decided to put the new plant, which will produce RAV4 
mini-S.U.V.'s, in Ontario. Explaining why it passed up financial incentives 
to choose a U.S. location, the company cited the quality of Ontario's work 
force.

What made Toyota so sensitive to labor quality issues? Maybe we should 
discount remarks from the president of the Toronto-based Automotive Parts 
Manufacturers' Association, who claimed that the educational level in the 
Southern United States was so low that trainers for Japanese plants in 
Alabama had to use "pictorials" to teach some illiterate workers how to use 
high-tech equipment.

But there are other reports, some coming from state officials, that confirm 
his basic point: Japanese auto companies opening plants in the Southern 
U.S. have been unfavorably surprised by the work force's poor level of 
training.

There's some bitter irony here for Alabama's governor. Just two years ago 
voters overwhelmingly rejected his plea for an increase in the state's 
rock-bottom taxes on the affluent, so that he could afford to improve the 
state's low-quality education system. Opponents of the tax hike convinced 
voters that it would cost the state jobs.

But education is only one reason Toyota chose Ontario. Canada's other big 
selling point is its national health insurance system, which saves auto 
manufacturers large sums in benefit payments compared with their costs in 
the United States.

You might be tempted to say that Canadian taxpayers are, in effect, 
subsidizing Toyota's move by paying for health coverage. But that's not 
right, even aside from the fact that Canada's health care system has far 
lower costs per person than the American system, with its huge 
administrative expenses. In fact, U.S. taxpayers, not Canadians, will be 
hurt by the northward movement of auto jobs.

To see why, bear in mind that in the long run decisions like Toyota's 
probably won't affect the overall number of jobs in either the United 
States or Canada. But the result of international competition will be to 
give Canada more jobs in industries like autos, which pay health benefits 
to their U.S. workers, and fewer jobs in industries that don't provide 
those benefits. In the U.S. the effect will be just the reverse: fewer jobs 
with benefits, more jobs without.

So what's the impact on taxpayers? In Canada, there's no impact at all: 
since all Canadians get government-provided health insurance in any case, 
the additional auto jobs won't increase government spending.

But U.S. taxpayers will suffer, because the general public ends up picking 
up much of the cost of health care for workers who don't get insurance 
through their jobs. Some uninsured workers and their families end up on 
Medicaid. Others end up depending on emergency rooms, which are heavily 
subsidized by taxpayers.

Funny, isn't it? Pundits tell us that the welfare state is doomed by 
globalization, that programs like national health insurance have become 
unsustainable. But Canada's universal health insurance system is handling 
international competition just fine. It's our own system, which penalizes 
companies that treat their workers well, that's in trouble.

I'm sure that some readers will respond to everything I've just said by 
asking why, if the Canadians are so smart, they aren't richer. But I'll 
have to leave the issue of America's comparative economic performance for 
another day.

For now, let me just point out that treating people decently is sometimes a 
competitive advantage. In America, basic health insurance is a privilege; 
in Canada, it's a right. And in the auto industry, at least, the good jobs 
are heading north.

http://www.nytimes.com/2005/07/25/opinion/25krugman.html