Monday, July 25, 2005

Why Toyota chose Canada over the U.S.

My boss at NTDO clued me in on Paul Krugman's commentary about Toyota's decision to choose to establish one of its plants in Toronto in Canada rather than in the U.S. The article suggests that a country with stronger social programs, a country that invests more in education and health care for its citizens like Canada may in fact be a more desirable environment for a business division to locate. This goes against the belief that the less taxes that are spent on social programs, the better because not getting taxed will allow innovative businessfolk to create jobs (well that theory has been discredited but anyway). As Krugman says:
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.

...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.

1 comment:

Blue Cross of California said...

Interesting to see Toyota choose Canada over U.S. for health care benefits and lower wages.