Posted on 04/23/2006 2:44:37 PM PDT by Dialup Llama
Is your job safe? Not if it can be done abroad. The only safe jobs are in domestic services that require a "hands-on" presence, such as barbers, hospital orderlies, and waitresses.
For a number of years the Bureau of Labor Statistics’ monthly payroll jobs reports have been sending US policymakers dire warnings, only to be ignored. The March report repeats the message. Ninety-five percent of the new jobs created are in domestic services. The US economy no longer creates jobs in export or export-competitive sectors.
Wholesale and retail trade, waitresses and bartenders account for 46% of the new jobs. Education and health services, administrative and waste services, and financial activities account for another 46%.
This has been the profile of US employment growth for a number of years, along with some construction jobs filled by legal and illegal immigrants. It is the job profile of a third world economy.
From January 2001 to January 2006 the US economy lost 2.9 million manufacturing jobs. The promised replacement jobs—"new economy" high-tech knowledge jobs—have failed to materialize.
High-tech knowledge jobs are also being outsourced abroad. According to the Bureau of Labor Statistics, US employment of engineers and architects declined by 189,940 between November 2000 and November 2004 (latest data available). Economist Alan Blinder estimates that as many as 56 million American jobs are susceptible to offshore outsourcing. That would be about half of the US work force.
Offshoring has contributed to the explosion of the US trade/current account deficit over the past decade to $800 billion annually and rising. The US has a trade deficit in manufactured products, including advanced technology products, of more than a half trillion dollars annually, a sum far larger than the oil import bill.
To cover the trade deficit, the US has to turn over to foreigners ownership of its accumulated wealth. This worsens the current account deficit as the income streams on the US based assets now accrue to foreigners.
Many economists pretend that the whopping US trade/current account deficit is evidence that the rest of the world has great confidence in America. They pretend that it is foreign investment in the US that causes the trade deficit, whereas the simple fact is that it is the US trade deficit that gives foreigners the dollars with which to purchase our existing assets.
Traditionally, a trade deficit might indicate that a country’s industries were not competitive against imports from abroad, resulting in a decline in the exchange value of the country’s currency. This would make foreign goods more expensive for that country and its goods cheaper for foreigners, thus restoring a balance.
This does not work for the US for three reasons:
(1) The US dollar is the world’s reserve currency. The dollar can be used to settle all international accounts. Therefore, there is a world demand for dollars. This demand absorbs what would be an excess supply for any other country running such large deficits.
(2) China pegs its currency to the dollar, thus preventing an adjustment in the price of the two countries goods and services. Other countries, such as Japan, intervene in currency markets by purchasing dollars in order to support the dollar and prevent their currencies from rising in dollar value.
(3) Offshoring turns US production into imports. Much of the US trade deficit results from offshoring, not from traditional trade competition. The collapse of world socialism and the advent of the high speed Internet made cheap foreign labor available to US companies. US firms use foreign labor to produce offshore the goods and services that they market to Americans. For example, more than half of the large US trade deficit with China is comprised of goods and services produced by US companies in China for American markets.
How can the US reduce its trade deficit when it deprives itself of exports and fills itself with imports by offshoring its production of goods and services, and when the devaluation of the dollar is limited by the dollar’s reserve role and by other countries pegging their currency to the dollar or by intervening to support the dollar? Obviously, when balance returns to US trade, it will not come through traditional means.
One way balance can return is by the US oversupplying the world with dollars to the point at which the dollar is abandoned as the reserve currency.
Another way is through the limit placed on Americans’ ability to consume that results from replacing manufacturing and engineering jobs with waitress, bartender and hospital orderly jobs. A country that loses high value-added jobs and gains low value-added jobs is in danger of losing its prosperity. Offshoring raises corporate profits in the short-run at the expense of destroying the domestic consumer market in the long-run.
Most economists are confused about offshoring. They mistakenly think offshoring is an example of free trade bringing mutual benefit through the principle of comparative advantage. It is not. Offshoring is an example of companies obtaining absolute advantage by combining high-tech capital with low-cost labor. The gains from absolute advantage are asymmetrical or one-sided. The cheap labor country gains, and the expensive labor country loses.
As Morgan Stanley economist Stephen Roach pointed out on April 7, "average hourly compensation of Chinese manufacturing workers is only 3-4% of levels in the US, 10% of the pay rate of Asia’s newly industrialized economies, and 25% of levels in Mexico and Brazil." Roach also notes that with a rural population of 745 million (about two and one-half times the total US population) and headcount reductions of more than 60 million workers from state-owned enterprises, China will not experience a labor shortage any time soon.
This means that it will be a long time before Chinese wages rise enough to offset the benefits of offshoring. The same can be said about India. Consequently, a large percentage of US jobs is vulnerable to being moved abroad.
PCR doesnt understand that the economic policies he pushed in 1981-82 are primarily responsible for the trade deficit.
1. lower tax rates increased US GDP growth relative to the rest of the world
2. lower taxes on capital created a huge influx of foreign capital which stregthened the dollar
i am earning more than ive ever earned in my life.
That's great. Hope it lasts.
The biggest cause of lack of quality American jobs is greedy liberal-leaning unions, which constantly demand absurd benefits for their workers. Why should an employer deal with that crap, when they can hire a worker abroad who won't demand such benefits, and comes at a much cheaper cost?
Worse yet, our government makes it harder for employers to hire domestically by forcing them to pay all sorts of payroll taxes (which also is the reason workers demand benefits, because these taxes make it more difficult for them to afford health insurance, etc, on their own).
Kind of like with gas prices, Americans have screwed themselves when it comes to quality job growth in the US.
Why the disconnect between Americans' anxiety about jobs and all the positive news about the economy?
PCR answers this puzzle:
1. Good jobs are being lost but the new jobs are low pay ones with no benefits.
2. The monthly happy talk about employment is NOT backed up by actual counts of jobs from the BLS. The jobs aren't there.
3. Even in a moderately recovering field like IT, the total employment count has not recovered completely. Its just the IT employment has stopped falling like a rock. But those soft number actually include H1Bs! So that the picture for a US resident seeking IT employment is not a bright as the stats would have you think.
Here's a fun fact about labor stats. When a foreign programmer takes a job from a legal US resident under the H1B program, that job is actually added to the total of US IT employment measured in the gov't stats!
Funny, I just got a better paying job in IT few weeks ago..
The biggest cause of lack of quality American jobs is greedy liberal-leaning unions, which constantly demand absurd benefits for their workers
Yep, that explains the loss of the textile industry in the South. /sarcasm/
The head of Lockheed Martin just wrote an editorial in the Wall Street Journal indicating that LM needs 14,000 engineers a year for the next 10 years just to replace those who are retiring -- and that is 22% of the total graduating class for engineers in this country.
A LOT of homeland security-type jobs cannot be outsourced because of security issues. Virginia has a lot of these jobs, our NoVa unemployment is like 0.8%, and you can't find american hi-tech workers available without paying thousands of dollars (My employer offers I think $3,000 for each person I find who takes a job).
1. Rubbish (this has been the economic populists cry since the 1980s, garbage them garbage now). It also makes no sense that only low wages jobs, the vasry jobs that foreigners can so easily do, are being created
2. Rubbish (the monthly job counts COMES from the BLS)
3. And it wont. IT was in a bubble, why should it recover if it was unrealistic to begin with?
""It is the job profile of a third world economy.""
He makes this claim yet contradicts himself when he says all the manufacturing jobs are going to third world countries...well which is it?? Do third world countries only produce low wage service jobs or are third world countries taking all the manufacturing jobs..you cant have it both ways
By changing jobs several times, I've been able to remain near the highest level of compensation I've ever made also. I do not think that is the predominant situation these days.
I personally know people who haven't had a raise in five to ten years. I also know others whose raises have been once every two or three years for a total of 2%.
Inflation is stripping these people of purchasing power.
We have set up several layers of competition for wage earners in the United States. We have sent production off shore. We are flooding the nation with tens of millions of foreign nationals. We are moving clearical positions off shore.
Let's be honest here. Capitalists seem to understand every supply and demand scenario there is, until it comes to setting up tens of millions of short-circuits to salary support in the U.S. We have oversaturated the workforce through the methods I've mentioned, but I'm am constantly told this has had no negative impact whatsoever on U.S. employees. That just does not compute.
I don't like what I see and the caption that I copied at the top of this response should cause any honest person some sobering thoughts on this subject.
freud made the same mistake, you know. oh, well. you may be wrong, but at least you're in good company.
""I personally know people who haven't had a raise in five to ten years""
then they need to get a new job in a new field.
"We have sent production off shore"
that isnt true. Industrial production in the US is higher now than it has ever been. and Guess what, next month it will be higher still. Of course all the foreign plants here dont count to the PRC/Buchanan brigade....Hyundai setting up a plant in Georgia is seen as weakness by the populists.
Just this morning I was saying that I failed to understand why the President thought todays kids would pursue engineering degrees when they'll have to compete with Chinese and Indian wage scales. These figures make it pretty clear that isn't going to happen. Just what will it take to indicate to some people that we have a problem, when we've lost 75 to 80% of our engineering positions?
Let me know if you need any more help.
And the price of high-tech products has tumbled.
Pick your poison.
I often hear the mantra that "only low-paying service jobs" are being created. But the dramatic growth in these sectors infer that there are a whole bunch of people who are buying things, going out to restaurants and on top of that, having additional money to go bar-hopping.
Where are those people coming from?
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