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

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.

you are asking me to believe that BLS figures show a growing field, with great pay - while at the same time, college matriculations for which are imploding. both cannot be true, because if it is, the entire concept of market driven forces has been turned entirely upside down. has it?

if the BLS told you that furniture manufacturing employment was doing well, would you believe it?

I don't know who they count as part of these numbers, whose salaries they are tallying. Managers, executives, anybody who says they "work in tech", or who holds a degree in it? I don't know, the BLS probably doesn't either, they just tally whatever the companies send them in the surveys.

Did enrollment in that field grow during the tech bubble? How much? Did it shrink after the bubble? Probably. Is it lower than before the bubble? You tell me.

Provide a fact. And please make sure it's from a good source, not the BLS. LOL!

"B'zzzt. Incorrect on your part. Imports are "foreign sources." You denied that they were included. You said it. I didn't."

No. I said that foreign travel wasn't included in the CPI. This is correct.

You said that meant that imports from foreign lands weren't included. That's incorrect.

Perhaps I'll have to repeat this multiple times before you grasp it. So be it.

its going lower, and the reason is - its not a decline related to economic activity. in other words, yes, there was a "bubble" in the employment in this field in the late 90s, and a matriculation bubble too. so the bubble burst accounts for some of this. but over the last 3 years, tech employment really isn't imploding, its just going offshore. Oracle has just as many engineers as ever, IBM too, probably more then they ever had - but they aren't in the US.

That's the difference this time - a decline related to an economic slowdown would be normal, but that's not what this is now. Most of the bubble was rung out by the end of 2001, 1st half 2002. For the last 3 years, we have been in a new phase of the decline in this sector, and its not due to economic contraction.

Its like looking at the north carolina furniture makers. are they losing their jobs because people are buying less furniture? no, in fact furniture sales are booming along with the housing boom. they are losing their jobs because they are moving to china. there isn't any way to turn it around, its not an economic cycle that is doing this. that's why I am so negative on tech employment, what's going to come around to turn it around? We aren't going to have 6+% GDP growth in the US anytime soon.

I certainly hope that your irrationality and cognitively challenged views don't spread any further [which is probably wishful thinking since the masses seem to embrace pessimism]. Though optimists, such as myself, will find an opportunity even if your style of pessimism proves infectious. Starting today, I will be buying up all the tin foil that I can get my hands on; speculating on a stronger future demand and subsequently creating an artificial scarcity. I might even employ some Chinese to turn the raw material into pointed hats - hats ready for people of your ilk to don. I need a model, though, so will you show me what your's looks like?

When I asked for a source I meant some source other than you. You know, with numbers and charts and stuff. Some source more trustworthy that the BLS. Some source more trustworthy than you.

Fed Chairman Alan Greenspan yesterday told Congress the U.S. economy is on ``reasonably firm footing'' and that policy makers can raise rates at a ``measured'' pace. The dollar is up 11 percent versus the euro and 4.8 percent against the yen in 2005 as the central bank lifted the rate eight times in the past year.

Dollar Trades Near Nine-Day High on U.S. Interest-Rate Outlook

Obviously we're at a tipping point. The dollar will only weaken faster and faster.

Euro Chart

It's so obvious, especially when you know the countervailing factorial influences and you note the tandem vector changes. Yup, no doubt about it. We're doomed. Especially when you show what is actually happening "on the ground" so to speak.

Thanks for the ping. Sorry I missed this one.

All I know is that sophisticated multidimensional signal processing algorthims are used to track and predict markets...and still people make mistakes.

Some of the graphs and data I see presented which puport to prove a trend are IMO childishly simplistic in their assumptions and methods.

Beware of the weighted average! People sometimes use it as a subtle ploy to get somebody to agree with their foregone conclusions...

That was interesting the way Greenspan tried, lamely, to wave away the hypothesis of many economists, that the decline is actually proof of economic weakness in the markets. He merely alludes to a couple healthy sectors in the "global" economy. Well, much as they confuse the issue, the "global" economy (wherever that is) is not the U.S. economy.

You're not going to convince me that a journalist has a better handle on economic decision-making than a free market.

He is not a journalist by trade, but an Supply-Side economist who worked for the Treasury under Donald Regan and President Reagan. He is simply doing a column nowadays, who knows why. Probably pays better than writing for any of the Federal Reserve's in-house publications. And certainly gets wider distribution.

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