Posted on 01/28/2006 9:28:18 AM PST by Willie Green
For education and discussion only. Not for commercial use.
There's a new glut on world markets. No, I'm not talking about the gluts of Chinese apparel or shares of Google stock bought at $475 each or of sub-prime U.S. lenders. I'm talking about the new glut of studies claiming that what really ails the U.S. economy is a shortage of skilled workers.
In fact, all these studies really show is that there's still another glut that's engulfed the economic policymaking world – of raw, unadulterated chutzpah. What else could explain the contention that, as American multinational companies continue offshoring even the nation's most knowledge-intensive, best-paying jobs, the biggest problem these same companies face at home (along with smaller firms) is finding enough qualified workers to take advantage of all the extraordinary career opportunities they're creating?
Not surprisingly, these studies are all coming from the outsourcing lobby itself. In November, the National Association of Manufacturers, whose sector of the economy has lost 3.34 million jobs since employment peaked in 1998, reported finding "a widening gap between the dwindling supply of skilled workers in America and the growing technical demands of the modern manufacturing workplace." In fact, 39 percent of the firms responding to a NAM-sponsored survey reported shortages of unskilled production workers.
The U.S. Chamber of Commerce chimed in shortly after the new year, declaring in its new State of American Business report, "We are staring right in the face of a severe worker shortage as 77 million baby boomers prepare to retire in the next five years...." Added the Chamber, "Many new jobs will require more technical skills and a greater understanding of math and science, subjects in which American students fail to show a suitable level of competence or even interest."
And the leading lobby for high- tech outsourcers, the Information Technology Association of America, continues to warn of a crisis in the availability of technically skilled workers and the need to greatly expand the number of scientists, engineers, and mathematicians graduating from American colleges and universities.
What's wrong with these findings? Only two things: First, the main studies themselves are slipshod methodogically and internally contradictory. Second, they clash with everything known about major trends in the U.S. labor market, and about labor shortages themselves.
The study attracting the most attention has been NAM's effort, a survey of manufacturers conducted by Deloitte Consulting. To put it mildly, NAM should ask for its money back. Only 10 percent of the 8,000 companies contacted by Deloitte replied, and as Wall Street Journal columnist David Wessel noted, lots of self-selection surely was at work. Specifically, employers not perceiving any shortages probably were much less likely to bother responding than those that did.
Further, Deloitte ignored a major irony that practically shouts out from the results: Although the consulting firm recommended that companies spend at least three percent of their payrolls on employee training, it found that fully three-quarters of all respondents fell short of this threshold. Moreover, only half the total respondents have increased their training expenditures over the last three years. And 64 percent of total respondents are training 60 percent of their workers or fewer. Does this sound like the behavior of firms that value trained workers and are desperate to secure them?
Similarly, many of the policies long championed by these multinational-dominated business groups thoroughly undercut their professed concerns about labor shortages. For example, it's hard to imagine that talented people will flock to manufacturing production careers in a nation whose trade policies encourage the massive offshoring of such jobs. And it's hard to imagine that talented people will flock to research, development, engineering, and design careers in manufacturing in a nation that not only encourages the offshoring of these jobs, too, but that admits large numbers of immigrants who will do this work for bargain basement pay. Yet that's exactly the kind of nation that Washington has given us – at the behest of the same multinationals now crying "Labor shortage!" Talk about creating a self-fulfilling prophecy!
Indeed, U.S. Chamber of Commerce President Thomas Donahue has declared that passing a new immigration reform bill with a guest worker program is one of his organization's top priorities this year.
Just as important as the incoherence of these multinational positions is the overwhelming evidence from the U.S. labor market exposing the shortage claims as bunk. Actually, according to mainstream economic theory, the very idea of long-term shortages or surpluses of any commodity (including, by definition, labor) is a non-starter. And if you think about it, the theory makes perfect sense. It holds that through the workings of the price mechanism, markets will eventually clear and stability will be restored.
In the case of worker shortages, employers simply need to increases wages enough, and before too long, they will be able to attract whatever workers they need – either from the ranks of the voluntarily or involuntarily unemployed, or from competitors. Of course, the opposite is equally true. As long as workers are in over-supply, businesses can offer meager wages in full confidence that qualified workers and jobseekers will have no choice but to swallow them.
In other words, anyone believing in modern economics should recognize that manufacturers aren't facing a chronic labor shortage. If they were, they wouldn't be cutting wages. Instead, they face a shortage of workers willing to accept the paltry wages they have been offered. How paltry? The latest figures from the U.S. Department of Labor show that after peaking in1978 – yes, 28 years ago, inflation-adjusted wages for manufacturing workers have fallen back to levels they first hit in 1972.
Of course, the policy whizzes at the NAM have an explanation. As stated by Jerry Jasinowski, the organization's former president and how head of its Manufacturing Institute, the stagnating wage figures are much less important than the increasingly lavish benefits received by the typical manufacturing worker. NAM Chief Economist David Huether has added that, since 2000, wages have fallen from 84 percent of total manufacturing compensation to 80 percent, with growing health care costs the main reason.
But do these NAM bigwigs really mean to suggest that industrial workers are making out like bandits as a result – pocketing most or all of the higher health care payments to boost their real living standards? Surely, Jasinowski and Huether know that today's health care costs are eating up the benefit payments – meaning that workers' other needs and wants have to be paid for by their shrinking wages, or by more borrowing. And surely these NAM experts know that the multinational outsourcers that dominate their organization's leadership, along with so many other companies, are starting to reduce the absolute levels of these non-wage benefits. Again, companies really facing a labor shortage would be doing just the opposite.
In addition, everything known about the dominant trends in the U.S. labor market clashes with claims of chronic labor shortages. For example, Secretary of Labor Elaine Chao has echoed the outsourcers' claims of shortages of skilled labor, of lots of great jobs going begging, and of greater shortages looming ahead.
But she clearly hasn't read her own Department's latest projections of national workforce trends. They anticipate that nearly 40 percent of the new jobs that will have been created between 2004 and 2014 in the economy's fastest-growing occupations will require only short-term or moderate-term on-the-job training – i.e., no post-secondary school at all. Moreover, another 9 percent of these jobs will only require a two-year (Associates) degree. The predominance of jobs lacking B.A. requirements is even greater in those professions that will remain America's largest employers in absolute terms. This sounds more like a Wal-Mart-centric economy than a technology-centric economy.
And here's a result that made me, for one, laugh out loud: These Labor Department projections do indeed generally show that the more training a job requires, the higher the pay. But do you know what the Labor Department considers "very high" pay – its highest pay category? A grand total of $43,600 in total annual earnings. Not exactly a high bar.
In fact, there's only one sector of the economy that could plausibly be suffering a genuine shortage of skilled labor. The NAM report found that small employers are slightly less likely than large employers to report shortages. But this claim conflicts not only with anecdotal evidence I've run across recently, but common sense.
Some smaller manufacturers I've met over the last year say that business has recovered since the recession, and they're once again hiring. But they feel victimized by two related problems. First, their margins have been squeezed relentlessly by their bigger manufacturers they supply, who keep threatening to turn to Chinese suppliers if the little guys don't match Chinese costs. Therefore, smaller companies are struggling to generate the earnings they need to offer workers higher wages. Second, some little guys observe that the skilled workers they laid off during the last recession aren't returning to compete for their old jobs. One possible explanation: These missing workers fear another round of layoffs, and are sacrificing pay for greater job security.
Many multinationals face price squeezes, too, but of course unlike a 20-worker machine shop in northeastern Ohio, they often can respond by offshoring to China. This option explains much of the record profits these companies have been earning – profits that clearly aren't being spent on attracting skilled workers with better pay offers, or on training existing workers.
It's clear, then, that most labor shortage claims are simply meant to justify the multinationals' continued resort to the low-wage strategy to greater short-term profits, either through offshoring jobs and production, or through flooding the U.S. labor market with immigrants. But give credit to the outsourcing lobby – it's not only pressing on, but has added a new twist to their argument: The outsourcers are turning up skilled-labor shortages in China and India, too, according to numerous news reports like the January 4 Wall Street Journal item titled "India's Talent Pool Drying Up."
Apparently even most university graduates from two Asian giants with science and technology degrees lack the qualifications multinationals say they need. The reason? The higher education in these countries varies wildly in quality, and often badly lags American standards. One big difference between the Asian situation and the American, however, is that the outsourcers have been bidding up wages abroad for the all-stars they're seeking – though their pay is still orders of magnitude lower than U.S. levels.
Luckily for them, even lower-wage countries like the Philippines, Russia, and Vietnam are beckoning. So before too long, look for wages for skilled labor worldwide to resume falling. I can't help but wonder how the outsourcers will sell their products when every major world population is becoming steadily pauperized. Presumably, they'll cross that bridge when they come to it.
Sounds exactly like Bill and Hill.
Why do I have this vision of a conservative that owes everything they have to "mom and dad".
It's not about being against trade, it's just the type we're seeing with third world countries that allows them unfettered access to our markets while they protect theirs. It's recent policy begun in the nineties. No wonder corporations are packing up and moving to them.
I hope more than that. I own Walmart stock...
Traitor. [smirk]
The proportion of Americans who're employed is greater than it was in the '90's. Real family wealth is greater now than before NAFTA. Real income is higher. Industrial production and exports are up. Ordinarily I try to avoid messing with someone's weird belief system. My concern on a forum like this however, is that someone else might actually swallow this nonsense and do something really stupid --like vote to raise my taxes.
What person in their right mind will go into tech anymore just to see their career outsourced to India, Malaysia, Costa Rica, or etc.?
So anyone who doesn't agree with you has a "weird belief system"? Well I happen to think that the policy of exporting jobs while importing people is not only weird but one of the dumbest any nation could pursue, especially for the long term health of its middle class. And if you notice we're only ones doing it except for maybe Canada so that must tell you something.
No problemo. George W. and Vincente have it covered. Another 30 million illiterate Mexicans + Free Viagra will fill the void in no time ;-)
Sure, if you count people who work one hour a month as employed.
do the tech jobs that require a clearance. When those start getting outsourced, you know the fit has hit the shan.
Ouch!
Instead, they face a shortage of workers willing to accept the paltry wages they have been offered. How paltry? The latest figures from the U.S. Department of Labor show that after peaking in1978 – yes, 28 years ago, inflation-adjusted wages for manufacturing workers have fallen back to levels they first hit in 1972.
bump
So let them eat cake. That's exactly the type of attitude that's going to take the Republicans out and give us another 40 years of democratic/socialist rule.
So you want to pander to the liberals who want to eat their cake every day and not work for meat and potatoes like everyone else?
Forget it!
No way I'm supporting constricting the economy so certain sectors can have the cushy positions they think they're entitled to.
Even though our history is marked by many different phases of free trade and protectionism, I think it would be more honest to say that our country has prospered in spite of trade restrictions. Mainly because we have been laissez faire within our own borders.
Since WWII, we've been, for the most part, a free trade economy (thanks in part to Smoot-Hawley). Adjusted for inflation, our household assets have increased from just $6 trillion in 1945 to more than $60 trillion today. There is no doubt that freer trade has contributed greatly to this incredible building of wealth.
If you also look at our history you'll find that a lot of third world countries of the past have now become valued trading partners. Why would you would want to keep third world countries impoverished and unable to ever buy any of our value added goods and services?
Not only do we still have the greatest economy in the world but we in the U.S. also have the highest standard of living in the history of the civilized world and it continues to improve year after year.
Even the so-called "poor" in our country have big-screen TVs and microwave ovens in their homes. They have so much food to cram down their throats that if they had any more money, they'd probably have to hand it over to Jenny Craig anyhow. We in this country tend to have no idea just how good we have it compared to the rest of the world.
I've been listening to the doom-and-gloomers for the past thirty years now and they are proven wrong year after year after year after year. Each year, our standard of living increases and now it seems to be accelerating now that we are outsourcing all our jobs (if you are to believe the doom-and-gloomers).
Somehow, despite all the outsourcing of jobs and the illegal aliens coming over to take our jobs and all the factories closing down and yadda, yadda, yadda, our unemployment rate continues to maintain itself at historically low levels. Which is a far cry from the days of double-digit unemployment rates when we didn't trade so much with other countries and all the factory jobs were over here.
Personally, I think the doom-and-gloomers need to come up out of their basements and out into the sunshine. They might find that their chronic depression is lifted.
Nope I want the Republican party to go back to its core principles of looking out for the interests of all working Americans. Protectionism was consistently in their party platform and actually practiced through the eighties.
Free Trade as we know it today was repudiated by traditional Republicans for exactly the reasons we are seeing, it would drive down wages and force people to compete with those willing or driven to work for far far less and under harsher conditions. I want the free market to work on our terms, not those of third world countries.
What you're saying is tough we're in a global economy now thanks to our own government's policies so if anyone isn't willing to work for minimum wage then they're lazy bums who don't want to support their family. It's the perfect recipe for the democrats to come back into power using their well worn class warfare tactics.
When plants begin to close up left and right and move to cheap labor countries because of our own government-sanctioned policies encouraging them to do so then it's obvious that unless we change or modify those policies they'll keep doing it until there's little left of a strong, vibrant middle class.
Bear in mind that's coupled with a policy of massively importing people. California may be a beautiful state but look at it economically and politically, is that what you want for the rest of the country? Just because you are doing good today don't think it's going to last forever.
In reality, the only form of fair trade is free trade. How do you define fair trade? In the name of fairness, different groups advocate different protections for their specific industries and call the comparative advantage of other countries "unfair."
So called "fair trade" is really nothing more than protectionism that requires government intervention to determine what industries will be protected, what tariff will be applied and for how long.
It amazes me that so many conservatives here can, out of one side of their mouth, bash Bush for causing bigger government while, out of the other side, demand government do something about their perceived inequities in trade as if, when it comes to these things, government is instantly transformed into a responsible, capable and reliable entity. I see a lot of inconsistency with that argument.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.
