Posted on 02/26/2004 3:09:59 PM PST by A. Pole
Since January 2001, a three-year period during which the economy has experienced one year of recession and two years of recovery, the U.S. economy has lost 2.6 percent of its private-sector jobs. These losses are not evenly distributed. Construction employment has declined by only 0.1 percent, and employment in oil and gas extraction by 0.7 percent.
Employment declines in manufacturing and knowledge jobs, however, have been dramatic.
Tables prepared by Charles McMillion of MBG Information Services from government data show employment in primary metals down 24 percent; machinery 21.6 percent; computer and peripheral equipment 28 percent; communications equipment 38.8 percent; semiconductors and electronic components 37 percent; electrical equipment and appliances 22.8 percent; textile mills 34.1 percent; apparel 37.3 percent; chemicals 8.3 percent; plastics and rubber products 13.8 percent; Internet publishing and broadcast 40 percent; telecommunications 19.4 percent; ISPs, search portals, data processing 22.6 percent; securities, commodity, investments 6.8 percent; computer systems design and related 17 percent.
Where has employment grown? Private service sector jobs have declined by 0.1 percent. Growth in state education jobs and local government jobs has boosted overall service employment by 0.6 percent.
During the past 12 months, the second year of economic recovery, the U.S. economy eked out 57,000 net new jobs in nontradable low-pay services, leaving the economy millions of jobs short of normal performance.
This is not a picture of an economy that is doing well. Low income jobs in nontradable services are the only sources of employment, while high value-added jobs that pay good incomes continue to disappear.
This job record is not one of a powerful U.S. economy dominating world markets and building consumer incomes for sustained recovery. It is not a record that promises jobs for university graduates. It is not a record that promises a future.
Economists have apologies, but no real explanations, for the loss of jobs in tradable goods and services. They are careful not to blame outsourcing of manufacturing and service jobs, which they claim creates as many new jobs as it loses.
Outsourcing platforms, especially the knowledge jobs platforms in India, are commissioning U.S. think tanks and consultants to do "independent" studies that prove "outsourcing is good for the U.S." Certainly, the people who are benefiting from outsourcing want us to think it is good for us.
For years as U.S. multinationals moved manufacturing offshore, Americans were told that their future was in "knowledge jobs." Today, knowledge jobs are being moved offshore more rapidly than manufacturing jobs were.
What are the unemployed computer engineers and information technology workers supposed to retrain for? What high value-added job can't be outsourced? Only those in the nontradable sector, such as dentists and surgeons. If everyone becomes a dentist or a surgeon, those incomes will be driven down.
Many young engineering graduates have discovered that they invested in acquiring skills for which there are no jobs and are headed to law schools in an effort to retrieve their future. I know young software engineers who are substitute teachers in middle schools, and others who are trying to organize rock bands to play the club and bar circuits.
They have no idea what to retrain for, and neither do the economists who tell them retraining is the answer.
What is happening is easy to discern from the daily announcements of the multinationals themselves. Cheap foreign labor is being substituted for U.S. labor over a wide range of goods and services produced for U.S. markets. Americans are losing the incomes associated with the production of the goods and services that they consume. Because of extraordinary differences in domestic prices and living standards, foreign labor can offer its services to U.S. capital and technology for far lower wages than can Americans. Capitalists maximize profits, not employment in their home countries.
This is a new development. Until the collapse of world socialism and the rise of the Internet, first world capital stayed in the first world, and offshore production was not the motive of foreign investment. As offshore production takes hold and spreads, the United States will lose more high value-added jobs.
A rise in Asian currency values could dampen and eventually end the exodus of jobs from America. The question is: How long does the exodus last before there is a new equilibrium?
In an important new work in trade theory (Global Trade and Conflicting National Interests, MIT Press, 2000), Ralph E. Gomory and William J. Baumol show that it very much matters which industries and occupations countries retain. They explode the free trade assumption that free trade always produces mutual gains. Gomory and Baumol show that in many cases, perhaps a majority, gains for countries come at the expense of other countries. The authors explain why the "man in the street," so derided by economists, is right in his understanding that free trade produces winners and losers.
University of Maryland economist Herman Daly has been making this point for 15 years and Senator Charles Schumer and I more recently. Now, Gomory and Baumol have provided powerful demonstration that trade has winners and losers. Right now, the United States is losing.
. The reason it has worked is because the capital that these companies made before free trade was invested back inside the borders of our country in factory expansions and modernization and the building of new factories which in turn created more jobs.
You cannot create new jobs of any kind without capital to invest. That money is gone, overseas, it's not hear building factories,it's creating jobs in Red China and elsewhere. That's where the jobs are going. Jobs follow the money, always have, always will.
If you want your business to grow you have to put money into it. If you want your checking account to grow you have to put money in it.If you want your country to grow you have to put money in it.If you keep taking out more than you put in you're going to come up empty.
Those of you who laugh and say it can't happen to me, well I can introduce to about 9,000 people who where saying the same thing about 7 yrs ago.It started in the early 70's before some of you where born.
We watched the others go for 25yrs. before they got to us, the steel mills, oil companies, appliance manufacturers,the textile, the shipbuilding, the auto workers, all the support industries ,parts and equipment makers and the construction trades etc. etc. they're gone and the fraction that's left of these skilled workers, that are working, are doing so at greatly reduced wages and benefits.
The reason they're getting to the high tech is because they already got most of the good paying blue collar workers. If you are making good wages with good benefits you can bet one thing you're next. If they can get it done cheaper, and they can, they will. If you're in you're late 20's early 40's and have a good paying job, better start reducing you're debt load if you can, you're in the crunch zone .
I would certainly approve that deal in a New York minute. But my guess is that we would see a combined 'Chorus' of 'bipartisan' ridicule against the idea. The RATs would say that it 'rewards the rich' and the GOP would claim that it 'Unfairly punishes American Business and the economy'.... well, maybe they would come up with something more persuasive....but that is the gist of it.
And GWB has not been in favor of doing anything this boldly dramatic. He sure wasn't in 2000 and hasn't changed since. Keyes was the closest thing we had to a 'revenue tariff' guy back then. He still regards the income tax as unconstitutional.
One problem with your analysis is that the money is not static, and more is being generated each year. There are many companies who went abroad for cheaper labor only to discover that human error (Mexico) and low productivity (India) more than even out the cheap labor. They are now evaluating whether the job move was a smart one.
Its easier to move phone answering jobs offshore, because the cost of capital is much less and long distance phone costs have come down. So some jobs may go overseas and stay. But the world was not a static thing when you and I started work. I remember a book on the accelerating rate of change by Alvin Tofler, Future Shock. We don't hear much about this anymore, but the times change with amazing rapidity due to the internet and employment will just have to change with it. Have a little faith that our country has the means to compete despite what the socialist unions are doing in our schools.
Actually, free trade-guru Peter Drucker is extremely skeptical of the productivity gains being asserted. Mere substitution via outsourcing of high-cost U.S. labor with the low-cost foreign sources may be creating all of this anamolous 'productivity'...even though the foreign outsourced labor could be horrifically inefficient.
I would certainly approve that deal in a New York minute. But my guess is that we would see a combined 'Chorus' of 'bipartisan' ridicule against the idea. The RATs would say that it 'rewards the rich' and the GOP would claim that it 'Unfairly punishes American Business and the economy'.... well, maybe they would come up with something more persuasive....but that is the gist of it. ~ Paul Ross
What they'll ultimately "give" us is a minuscule temporary tax cut AND high tariffs...
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