Toyota had been making its popular RAV-4 only in Japan and was looking to open a plant in North America. Canada offered the company $125 million in incentives to help cover research, training and infrastructure costs. Alabama offered Toyota double. Where’s the new plant going? Canada — because Toyota decided it couldn’t afford to gamble on American workers and the American health care system.
As the CBC recently reported, Gerry Fedchun, president of the Automotive Parts Manufacturers’ Association, said Toyota found this to be a fairly simple choice.
Several U.S. states were reportedly prepared to offer more than double that amount of subsidy. But Fedchun said much of that extra money would have been eaten away by higher training costs than are necessary for the Woodstock project.
He said Nissan and Honda have encountered difficulties getting new plants up to full production in recent years in Mississippi and Alabama due to an untrained – and often illiterate – workforce. In Alabama, trainers had to use “pictorials” to teach some illiterate workers how to use high-tech plant equipment.
“The educational level and the skill level of the people down there is so much lower than it is in Ontario,” Fedchun said.
In addition to lower training costs, Canadian workers are also $4 to $5 cheaper to employ partly thanks to the taxpayer-funded health-care system in Canada, said federal Industry Minister David Emmerson.
“Most people don’t think of our health-care system as being a competitive advantage,” he said.
And as Paul Krugman explained today, Toyota’s choice came after southern voters made a choice of their own.
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.
Bitter irony, indeed.
But let’s not forget that it’s not just education. Toyota also faced a choice between a country in which the government finances a national-health care system, and a country in which corporations bear the costs.
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.
Kevin Drum has mentioned this more times than I can count, but it’s inevitable that Big Business in the U.S. will jump onto the nationalized healthcare bandwagon with both feet. The status quo simply costs too much.
In this context, a federally-financed system can and should be included in any discussion of globalization. As Ezra Klein recently noted, “Rather than making this a moral crusade about treating the sick, make it an economic campaign to restore the competitiveness of the American worker. Bundle it with a variety of other programs like enhanced science/math spending and well-funded retraining programs and you should have a highly sellable package that attracts support on multiple fronts, at least from the general electorate.”
Politically, the Toyota example is also an embarrassment that Dems can use as a valuable lesson. The Republican message is that we can’t afford to invest more in education and health care. The Dem response is simple: we can’t afford not to.