U.S. Labor Force: One Foot in the Third World

Chronicles Magazine ^ | Tuesday, June 07, 2005 | Paul Craig Roberts

[A. Pole]

In May, the Bush economy eked out a paltry 73,000 private sector jobs: 20,000 jobs in construction (primarily for Mexican immigrants), 21,000 jobs in wholesale and retail trade, and 32,500 jobs in health care and social assistance. Local government added 5,000 for a grand total of 78,000.

Not a single one of these jobs produces an exportable good or service. With Americans increasingly divorced from the production of the goods and services that they consume, Americans have no way to pay for their consumption except by handing over to foreigners more of their accumulated stock of wealth. The country continues to eat its seed corn.

Only 10 million Americans are classified as “production workers” in the Bureau of Labor Statistics non-farm payroll tables. Think about that. The United States, with a population approaching 300 million, has only 10 million production workers. That means Americans are consuming the products of other countries’ labor.

In the 21st century, the U.S. economy has been unable to create jobs in export and import-competitive industries. U.S. job growth is confined to nontradable domestic services.

This movement of the American labor force toward Third World occupations in domestic services has dire implications both for U.S. living standards and for America’s status as a superpower.

Economists and policymakers are in denial, while the U.S. economy implodes in front of their noses. The U.S.-China Commission is making a great effort to bring reality to policymakers by holding a series of hearings to explore the depths of American decline.

The commissioners got an earful at the May 19 hearings in New York at the Council on Foreign Relations. Ralph Gomory explained that America’s naive belief that offshore outsourcing and globalism are working for America is based on a 200-year-old trade theory, the premises of which do not reflect the modern world.

Clyde Prestowitz, author of the just published “Three Billion New Capitalists: The Great Shift of Wealth and Power to the East,” explained that America’s prosperity is an illusion. Americans feel prosperous because they are consuming $700 billion annually more than they are producing. Foreigners, principally Asians, are financing U.S. over-consumption, because we are paying them by handing over our markets, our jobs and our wealth.

My former Business Week colleague Bill Wolman explained the consequences for U.S. workers of suddenly facing direct labor market competition from hundreds of millions of Chinese and Indian workers.

Toward the end of the 20th century, three developments came together that are rapidly moving high productivity, high value-added jobs that pay well away from the United States to Asia: the collapse of world socialism, which vastly increased the supply of labor available to U.S. capital; the rise of the high speed Internet; and the extraordinary international mobility of U.S. capital and technology.

First World capital is rapidly deserting First World labor in favor of Third World labor, which is much cheaper because of its abundance and low cost of living. Formerly, America’s high real incomes were protected from cheap foreign labor, because U.S. labor worked with more capital and better technology, which made it more productive. Today, however, U.S. capital and technology move to cheap labor, or cheap labor moves via the Internet to U.S. employment.

The reason economic development in China and some Indian cities is so rapid is because it is fueled by the offshore location of First World corporations. Prestowitz is correct that the form that globalism has taken is shifting income and wealth from the First World to the Third World. The rise of Asia is coming at the expense of the American worker.

Global competition could have developed differently. U.S. capital and technology could have remained at home, protecting U.S. incomes with high productivity. Asia would have had to raise itself up without the inside track of First World offshore producers.

Asia’s economic development would have been slow and laborious and would have been characterized by a gradual rise of Asian incomes toward U.S. incomes, not by a jarring loss of American jobs and incomes to Asians.

Instead, U.S. corporations, driven by the shortsighted and ultimately destructive focus on quarterly profits, chose to drive earnings and managerial bonuses by substituting cheap Asian labor for American labor.

American businesses’ short-run profit maximization plays directly into the hands of thoughtful Asian governments with long-run strategies. As Prestowitz informed the commissioners, China now has more semiconductor plants than the United States. Short-run goals are reducing U.S. corporations to brand names with sales forces marketing foreign made goods and services.

By substituting foreign for American workers, U.S. corporations are destroying their American markets. As American jobs in the higher-paying manufacturing and professional services are given to Asians, and as American schoolteachers and nurses lose their occupations to foreigners imported under work visa programs, American purchasing power dries up, especially once all the home equity is spent, credit cards are maxed out and the dollar loses value to the Asian currencies.

The dollar is receiving a short-term respite as a result of the rejection of the European Union by France and Holland. The fate of the Euro, which rose so rapidly in value against the dollar in recent years, is uncertain, thus possibly cutting off one avenue of escape from the over-produced U.S. dollar.

However, nothing is in the works to halt America’s decline and to put the economy on a path of true prosperity. In January 2004, I told a televised conference of the Brookings Institution in Washington, D.C., that the United States would be a Third World economy in 20 years. I was projecting the economic outcome of the U.S. labor force being denied First World employment and forced into the low productivity occupations of domestic services.

Considering the vast excess supplies of labor in India and China, Asian wages are unlikely to rapidly approach existing U.S. levels. Therefore, the substitution of Asian for U.S. labor in tradable goods and services is likely to continue.

As U.S. students seek employments immune from outsourcing, engineering enrollments are declining. The exit of so much manufacturing is destroying the supply chains that make manufacturing possible. The Asians will not give us back our economy once we have lost it. They will not play the “free trade” game and let their labor force be displaced by cheap American labor.

Offshore outsourcing is dismantling the ladders of America’s fabled upward mobility. The U.S. labor force already has one foot in the Third World. By 2024, the United States will be a has-been country.

[jb6]

By the way:

1. while Walmart buys $20 billion in Chinese sales, (this will deflate your ego) that's $20 billion in goods that carry the direct Walmart brandnames, you conviniently (as always) don't bother to count in all the none-Walmart brands purchased from suppliers now manufacturing primarly or exclusively in China.

2. You lie like the typical Free Traitor. We are not protectionists, we are for Fair Trade, vs the whores who sell their own nation's future out for Free Trade. When China lowers its trade barriers, allows labor negotiations and floats their currency then we allow their products in minus tariff. If the playing field is not even but tilted towards China, then the trade is nothing but a rip off.

[jb6]

Yeah, I keep charts from Dept of Labor and numbers from Walmart's 2004 reports. All you've got between your ears is one chart (that does not exclude outliers, how convinient) and half wit insults.

[Paul Ross]

As noted by Last Dakotan before: The hourly average wage increase over a decade, in your chart, after deducting the CPI, is a paltry 60 cents/hr? And for that sum, that pocketful of coins, you have sacrificed the livelihoods of millions of your fellow Americans on the altar of your economic dogmatism? You would do well to consider the sayings in Proverb s 21:10-13.

That asserted 60-cent wage increase is easily overwhelmed by the drop in the dollar against the major currencies of the last 4 years. And, anticipating your lame argument, the EU's recent dip (which likely will not persist) is not shared by the other major currencies...hence not significant.

Wake up and small the coffee Todd. You have lost the argument on the trade deficit. US Dollar Debauchment is not a fair trade for letting you guys destroy America's industrial base, which was never desireable in the first place. All for ephemeral short-run savings at Walmart and Target?!

It destroys all of your theories.

All of your "facts".

All of your reasonings. All brought to nought.

Now with the cinders of your wage studies crashed down around your ears, let's take a look at your inquiry about PPP, purchasing power parity.. I'm not particularly doctrinnaire on this (which perhaps you are, since it is you asking), but in general, it is widely understood by economists that Purchasing power parity means that the domestic currencies in different nations have the same ability to obtain goods in the different nations' markets.

The formula for PPP is P = EPf where P = the domestic price of a good, E = the exchange rate and Pf = the foreign price of the good.

This means that the domestic price of a good equals the foreign price times the exchange rate when PPP holds. Hence, PPPs as inter-country deflators are preferable to the exchange rate based comparisons on both conceptual and empirical grounds.

There of course can be wide variances as between actual measures of the purchasing power, just as there are disputes over the U.S. CPI. It depends on what "baskets" you measure, i.e., how they are weighted. It would be interesting to know what sources "Li333" was alluding to.

Chinese Communists such as "Li333" clearly believe they are winning a trade war, and are going to be calling shots in all things. They envy and hate the power and wealth of the U.S....and wish to displace us as the pre-eminent super-power. And the quickest way to accomplish that is to take away our manufacturing industries directly. Strengthens them. Weakens us. And all you do is work for the other side, by stubbornly denying it is happening.

[SwankyC]

Like I said. I'll get back to you when you're right. Meanwhile, stick your head back into your arse to keep your ears warm.

[indthkr]

<> Dead-on correct. Having worked both in DoD and commercial industry, I've witnessed the lack of "market forces" to provide a selection pressure for excellence. The bureaucracy and political non-sense can't provide the cycles of learning that are possible in a commercial enterprise. It's better if the industry in question can make both swords and plowshares.

[Logophile]

You can play word games with the terms "mature" and "dying," but the result either way is exactly what you admitted.

First off, I was not playing "word games." The petroleum and chemical industries are not dying; they are not in danger of disappearing any time soon, if ever. I expect the oil and chemical companies to continue to generate profits for many years to come.

Second, to say that I admitted that ChE employment is down in those industries is to imply that I conceded the point reluctantly. That does not represent my attitude. I am not reluctant to say that the ChE profession must adapt to changing realities; indeed, I proclaim it to my colleagues whenever the opportunity arises.

There are fewer jobs today for chemical engineers. Some chemical engineers are moving into other fields, but the traditional chemical engineering jobs are withering as you admitted. Under those conditions, it's silly to encourage people to go into chemical engineering.

As I pointed out, there are fewer jobs for chemical engineers in traditional industries. Consequently, many chemical engineers are moving into other industries. The profession is changing. The result may very well be that the demand for chemical engineers will decrease (although that is not certain).

It does not follow, however, that young people should be discouraged from pursuing a career in chemical engineering. There will always be a need for ChE talent. If someone has a passion and an aptitude for the field, he need not worry too much about finding work. Currently, the situation is rosy. Starting salaries for ChE graduates continue to rise: the average this year is $54,000, up 4.3% from last year.

Mechanical engineering is also going to follow chemical engineering. Many of the same plants that employ chemical engineers to run the processes employ mechanical engineers to run the equipment. I agree that many mechanical engineers will be forced to adapt, but the final numbers are still going to be lower in mechanical engineering.

You may be right about the future demand for mechanical engineers—or you may be wrong. I will repeat what I said before: If someone has a passion and an aptitude for the field, he need not worry too much about finding work.

It's silly to encourage young people to go into fields where they will immediately find themselves scrambling to adapt to loss of jobs. They'd be much better off going into fields where the training matches the available jobs.

And what fields are those? No one can predict what new technologies and products will be developed in the next ten or twenty years.

As for scrambling for jobs, that appears to be the norm for most people. According to the FCIC (http://www.pueblo.gsa.gov/cic_text/money/save-fit/save-fit13.htm), "the average worker changes jobs 10 times and careers three times in a working lifetime."

[ninenot]

China's already won a great portion of what they were after--see this AM's news about the "surprising" military-intelligence demonstrating that PRC now has air-to-ground, surface-to-surface, and ICBM MIRV capabilities which uh, ahh, well, the CIA and other US intel agencies just didn't know about.

The econo-only bozos on this thread STILL don't understand that this is a war--with both economic and military fronts.

Sure hope their daughters like Chinese cuisine (in a manner of speaking.)

[Toddsterpatriot]

You are dillusional.

I'm a pickle?

[Toddsterpatriot]

Vlasic Pickles was roped into a contract with Wal-Mart, in which Wal-Mart sold a 3 gallon jar of whole pickles for $2.97.

Roped? Wow!! Did you learn that in an MBA class?

[superiorslots]

Quote: I'm a pickle?




Why don't you take me up on my bet????

[Toddsterpatriot]

while Walmart buys $20 billion in Chinese sales, (this will deflate your ego) that's $20 billion in goods that carry the direct Walmart brandnames, you conviniently (as always) don't bother to count in all the none-Walmart brands purchased from suppliers now manufacturing primarly or exclusively in China.

Then please find a source that shows these non-direct purchases from China.

[superiorslots]

Quote: Roped? Wow!! Did you learn that in an MBA class?




jb6, notice that whenever someone is losing an argument they revert to insults and snide comments?? Toddster is a pro at insults BTW.

[Toddsterpatriot]

You posted the wrong years stats. You're not doing too well in the accuracy department. Got any more charts from India to prove your points about America? LOL!

and half wit insults.

Well, when I'm dealing with half wits, what kind of insult should I use? Find the source for the government borrowing $912.5 billion yet? Or were you wrong (lying?) there too?

[Paul Ross]

China's already won a great portion of what they were after--see this AM's news about the "surprising" military-intelligence demonstrating that PRC now has air-to-ground, surface-to-surface, and ICBM MIRV capabilities which uh, ahh, well, the CIA and other US intel agencies just didn't know about.

US News

U.S `surprise` at China military buildup
By UPI
Jun 9, 2005, 19:00 GMT

WASHINGTON, DC, United States (UPI) -- U.S. intelligence agencies failed to recognize China`s recent military buildup, The Washington Times reported Thursday.

The newspaper, citing a \"highly classified\" report prepared for Director of National Intelligence John D. Negroponte, said U.S. intelligence specialists played down or dismissed signs China was increasing its military capabilities.

Among developments missed, the Times reported, were China`s work on a new long-range missile and the launching of a ship that allegedly includes U.S. Ageis technology stolen by the Chinese.

The newspaper cited unnamed officials as saying the word \"surprise\" was used more than a dozen times in the report in reference to U.S. efforts to anticipate Chinese military developments.

The Bush administration has been highly critical lately of China`s military buildup. In a speech Sunday in Singapore, Secretary of Defense Donald Rumsfeld questioned why China was expanding its missile capabilities when it faces no threats.

Copyright 2005 by United Press International

Gee, wonder who those analysts were....don't you? For some reason the codenames names Horse and Poohbah springs to mind.

[Toddsterpatriot]

The hourly average wage increase over a decade, in your chart, after deducting the CPI, is a paltry 60 cents/hr? And for that sum, that pocketful of coins, you have sacrificed the livelihoods of millions of your fellow Americans on the altar of your economic dogmatism?

I thought you said wages were dropping? And which millions have been sacrificed? The 20,000,000 who have jobs who didn't before NAFTA? Be specific.

That asserted 60-cent wage increase is easily overwhelmed by the drop in the dollar against the major currencies of the last 4 years.

Yeah, if we lived in Europe and had dollars to spend you'd be right. Otherwise, it's irrelevant.

Wake up and small the coffee Todd. You have lost the argument on the trade deficit.

So the deficit destroys jobs? How many jobs does each $1 billion increase in the deficit destroy?

Purchasing power parity means that the domestic currencies in different nations have the same ability to obtain goods in the different nations' markets.

Finally, an answer. So, if the hourly wage in China is 20 cents and a Big Mac in China is 10 cents and the hourly wage in the US is $9.00 and a Big Mac is $4.50 PPP would say our economies are equal?

[Toddsterpatriot]

Why don't you take me up on my bet????

Because you're scary. Stalker scary.

So, any luck finding out how many separate items WalMart carries in inventory? You should know, you counted them.

[Toddsterpatriot]

notice that whenever someone is losing an argument they revert to insults

That wasn't insulting him, that was mocking him. There's a difference.

[Toddsterpatriot]

The hourly average wage increase over a decade, in your chart, after deducting the CPI, is a paltry 60 cents/hr?

From Mase's post #337:
a pre-NAFTA comparison is in order. From 1984-1994, hourly wages for all workers rose 33.5%, while the CPI rose 42.2%, indicating a fall in real wages. The same happened for manufacturing jobs with hourly wages rising only 33%, well under the rise in prices. So it looks like workers did better in the years after NAFTA went into effect than before.

Even you should agree that a 60 cent increase is better than a 60 cent decrease?

[superiorslots]

65-75% of the separate items were marked made in china. If there was 5 GE toasters of the same make only one was counted.

I randomnly picked up around 25 items on each visit from all departments. 18-20 said made in china 3 said made in mexico and 2 said made in US.



O.K. I quit saying that I won the bet(because you are chicken sh*T) so you wont get me for stalking.
Anyway this is the last time this will be brought up. You know the truth....so does everyone else on this site.

[Toddsterpatriot]

I randomnly picked up around 25 items on each visit from all departments. 18-20 said made in china 3 said made in mexico and 2 said made in US.

So, 25 items in each department? How many departments?