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Last night my sister and I had a good hearted debate about the state of our country and how it seems to be spiraling out of control on so many fronts. We talked about the evils of WalMart, cheap products from China, and a Massachusetts pickle grower (Cains), that outsourced their crop production to India. Yes, I said India. If you take the time to follow the link and read the press release, the cost of fuel is stated as one of the leading reasons for the outsourcing. I say bull crap! Yes fuel is getting expensive, but if you over simplify the economic situation (which I need to do to fit it in my head,) there are two key factors for why we lost jobs to India and your pickles will now have a slight curry taste:

1. Americans want cheap stuff – period. We won’t pay $10 for a jar of pickles just because it says made in the USA on the label. The days where there was a significant quality gap between domestic and import goods are largely gone, so why not buy the $4 jar from India, Right? Wrong – it’s a death spiral.India is going through what I would consider the equivalent of our industrial revolution. However, where we mechanized, they are tooling up their workforces to take on the jobs in a global marketplace and because of their low wages and lack of restrictions on business, they are able to undercut most US business. But guess what? Eventually their workers are going to want a raise and that will get passed on to us in the form of price increases.I read an article a few weeks back that addressed the fact that China is no longer cheap enough ( I was shocked too.) It went on to explain that China used to be cheap because the unskilled/uneducated labor and crude manufacturing facilities kept their cost down. But this led to issues with quality. Let’s face it; you would most likely trust anyone in China to make a napkin, but how about a special piece of medical equipment? Maybe not. As time went on, China had to invest in their people, processes, and facilities and we see this in the form of rising prices. Guess where India is on this curve and what your pickles will cost in ten years? Until we as Americans wake up to the simple fact that we need to support local businesses; both with our purchases and by making it easy to employ us in a manner that still allows a business to make a profit, we will continue to lose jobs.
2. Stop forcing minimum wage down the throat of business. I know increasing the minimum wage is a feel good piece of legislation and sounds great in a speech, but the reality is that it does more harm than good.Look at your highly skilled workforce for a moment. Have you ever heard of a doctor or a CPA working for minimum wage? That’s because their skills merit higher wages and in a free market, they can offer their services to the highest bidder. Don’t like what you’re making? Shop around and sell your skills to the highest bidder. Chances are you will get a raise if you are worth a crap.I haven’t seen minimum wage since I was in High School working part time at auto parts store in a small town outside of Seattle. I worked hard and got a small raise within a couple months. The harder I worked and the more I learned, the more I made. The business was willing to pay more for me because they saw value in what I contributed to the business. In contrast, there were also employees who looked for every reason to not work. They were too sick to come in, they didn’t feel like being there, they did just enough not to get fired. I bet you work with one or two of these types right now.So if you are a top performer and managed to get yourself some skills, do you think the low performers should get paid the same as you? Of course not, but boosting minimum wage has the same effect. After my first year of employment, I was making about a $1 more than when I started, and I was also earning more than the low performers in our store. A dollar increase in the minimum wage effectively took the dollar premium that I was earning and gave it to the low performers without them needing to produce. Worse yet, it makes it more expensive to do business in the US and take away the need for the top performers to try harder. Pile on all the regulations, taxes, unions, watchdog groups, and class action lawyers, and we have the perfect excuse to move our pickle production overseas.Here is the dirty little secret of minimum wage; if you earn minimum wage for any length of time in our economy, your probably aren’t even worth that. Time to reevaluate your skills, work ethic or attitude!

How did we get here… oh yeah, fuel costs are so high we need to grow our pickles in India – now I remember. Truth be told, there were many reasons why they outsourced their plant and I’d bet it was not an easy decision. The cost of fuel happens to be such a significant issue today that most people are willing to accept this as a plausible excuse for just about anything.

We recently had our roof replaced and on the invoice there was a $50 fuel surcharge (nothing else was itemized on the bill.) The cost metal has dramatically increased over the past year, but they didn’t call out the nails, flashing, and drip edge “surcharges” even though it’s every bit as important to their profitability as fuel is.

Energy is no different. Take my utility company, APS (Arizona Public Service, Co.) for example. They are regularly in the news over requests to the corporation commission for healthy double digit rate increases. Rarely do they get what they ask for, but typically our rates go up each year between 5 and 15 percent. This means that the same amount of power I used this year will increase in cost by about $70 or roughly 5 percent. Compound this over time and my annual power bill will jump from $1355 this year to more than $5,500 in 30 years. Sure that’s a long time, but it also a lot of money to fire up your toaster.

How to Safeguard Against Rising Energy Costs

Google Goes Solar

Our pickle company above clearly did not do enough to safeguard themselves against the rising cost energy. However, there are some leading companies that are factoring energy prices and the “green factor” into their overall business model. Maybe one of the most publicized, Google has taken corporate solar installation to the next level. At 1,600 kilowatts, this photovoltaic, grid tied system will meet 30% of the business’ peak demand or power roughly 100 homes in California. This means that at the height of their power consumption, Google is sucking down a whopping 5,333 kilowatts! Even a giant like Google can see that the cost of reliable energy is a component in their overall strategic plan. In true Google fashion, they have even built a web page so we can all monitor the system output.

Several other major businesses that are converting to solar including:

Kohl’s Department Stores – Kohl’s is in the process of converting 75% of their California stores to Solar and evaluating other states for possible installation.

Macy’s Department Stores

Macy’s is installing systems on 26 stores throughout California. They are also taking on other energy-saving projects like upgraded lighting and HVAC systems. Macy’s expects to reduce dependency on the grid by 40 percent in 26 stores or about 24 million kilowatt-hours annually. Macy’s is investing about $25 million in its solar initiative.

Wal-Mart

Maybe in an attempt to offset their other destructive forces, Wal-Mart, is toying with a pilot project that will install solar power at 22 locations in California and Hawaii. Total solar production is expected to reach 20 million kilowatt-hours per year. Each system will supply as much as 30 percent of the power for a store.

Target

Not to be bested by Wal-Mart, Target has jumped on the band wagon adding solar power to four of its stores in California and is looking to add solar power to 14 more.

Tax credits and rebates are one on the driving forces behind the expansion into California and given their success we should see this program expand across southern states. Currently a business can offset nearly half the cost of installing solar power and then capitalize the rest. This makes it very easy for CFOs to swallow and has a long-term feel-good effect. Sure it reduces the load on carbon belching power plants, but maybe more importantly it helps keep jobs in America by responsibly addressing the rising cost of energy.

Technorati Tags: California Tax Credits, Google Solar, Job Loss, Kohl's Solar, Loosing Jobs Overseas, Macy's Solar, Reducing Power, Responsible Energy Management, Target Solar, Wal-mart Solar, Walmart Solar

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