The United States has lost manufacturing jobs for a number of reasons. But, the implications of this job loss is resulting in a catastrophic effect on the US economy. Its long term effects will produce a lower standard of living for many Americans.

Why Manufacturing Job Loss?

Corporate profits has to be one of the primary factors. When labor costs are expensive, profits will be increased by reducing labor costs. Since the stockholders want to see higher profits, the logical plan of action is to cut labor costs. This can only be done by higher levels of automation or by decreasing the costs of labor. For the vast majority of products, using overseas workers will be the optimal method to cut back manufacturing expenses.

The next step involved was to approve tax and import/export laws that could permit outsourcing of manufacturing. Hoping for higher profits, manufacturers pushed the North American Free Trade Agreement (NAFTA) by encouraging politicians to vote for such outsourcing agreements. This law removed tariff taxes for imports and exports and removed barriers to trade between Canada, the US and Mexico.

NAFTA was a baby step that permitted manufacturers to shed US employees in favor of low priced overseas workers. Because of this both manufacturing and service jobs within the US were abandoned. Just look at the nation your clothes are manufactured in to see the effects of these types of laws and agreements.

What Are the Effects of Massive Outsourcing?

The Education Resources Information Center, a government information agency, predicted the effects of NAFTA on jobs. Their examination stated that the “North American Free Trade Agreement (NAFTA) will result in lower wages, fewer jobs, and generally reduced living standards for the majority of U.S. workers.”

While the federal government does not want to admit it, we have now lost many jobs. The AFL-CIO compiled statistics by ZIP code that showed that since 2000 we have now lost 5 million manufacturing jobs and 850,000 information sector jobs.

Once a person loses their manufacturing job, they stop spending and a lot of other jobs are lost. All sectors from grocery stores, beauty salons, car repair shops, restaurants and so on suffer. Cities where job loss occurs experience a reduced tax base that erodes city services and the quality of schools. Just when the former workers and their children need education the most, schools having a declining tax base must cut back their curriculum.

To help those unemployed workers, the federal government established the Trade Adjustment Assistance program to help in retraining. This program allows such workers to receive payments and gain instruction to qualify them for new jobs. Education includes associates and bachelors degrees to help upgrade skills.

The fact is, today workers in labor jobs have to increasingly compete with low wage workers in Mexico, China and other countries. Such competition must lower the standard of living of all workers involved in unskilled and skilled labor occupations.

Effects on the US Economy

People of the United States purchase more foreign goods than they manufacture for shipment abroad. This ensures that our national trade balance is a trade deficit. In January of 2011 we bought $46.3 billion in excess of what we sold to foreign countries. This floods other nations with US dollars. This reduces the value of the dollar on currency exchanges.

In addition, our financial system is so bad and our political system so broken that the Government has to borrow 42 cents for each dollar they spend. Because of this, the United States is the greatest debtor nation of all time.

The export of good paying jobs abroad together with the high trade deficits and an excessive rate of borrowing has made our economic stability questionable. The ever-increasing price of gold, a standard of value, shows that the US dollar is swiftly losing value. Unless the federal government makes corrections in our financial system, our future looks bleak.

Anyone with money in an IRA, mutual fund or savings plan should certainly consider purchasing gold. Find out how to buy gold bullion and help protect your assets for a brighter future.