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.
No, I'm not. And this company isn't doing massive layoffs on this side of the Indian Ocean, just a peaceful, gradual changeover in the intewrest of penny ante cost cutting. The internal Help Desk is now being outsourced to a US company whose employees will be answering phones (hopefully, in a language we understand ) from Mexico City, Hong Kong and Budapest. Ironically, the Indians here are shaking in their saris, afraid they might be replaced by... Indians!
The reason I don't like getting into these issues much, is because of the dishonest bull-sh-t that accompanies the debate. Here you present the increase in household wealth since 1980. You also mention that this was a larger increase than in the previous 200 years. Nowhere do you mention that our population has increased by 70 million people, and that due to inflation the actual growth in real dollars is grosely misrepresented.
You could make a claim that manufacturers are getting more for their products than ever before today. LOL, a new car in 1920 cost a few hundred dollars. Today they are $30-40k. This is essentially what you are doing by claiming the largest increase in household wealth 1980 to today vs 1776 to 1980.
Look at what it cost to build a bridge in 1900. Look what it costs to build one today. In the next twenty-five years, we may increase household wealth by a larger margin than we have from the nation's inception until today. Will that mean that actual wealthy grew in real dollars? No.
Thanks for the additional comments for what they were worth.
I agree. If you own stock today, it's considered to be the most wonderful things in the world. Well I know a number of people who lost hundreds of thousands of dollars in the last decade on stocks. It's basicly a big cr-p shoot. Sometimes you do great and other times you give it all back.
"Yes, worker bees are being hired here in the U.S. to do the work; however, where is the profit going? To another country, not to a U.S. company."
Not a durn thing is stopping you from buying foreign stocks on the stock market.
That ratio has meaning. And means that the time between starting to look for a job, and finding one is acceptably short.
You may recall something called the Phillips Curve. That was a Keyesian notion, that the government could assure a low unemployment rate by inflating the currency, or could control inflation by permitting higher unemployment. That blue up during the Carter administration, when people figured out inflation. They needed to get a big pay raise to make up for the inflation that would occur before their next pay raise. Accordingly we had high inflation AND high unemployment. Now we have low unemployment and low inflation rates.
Of course since we calculate inflation by the price of a certain package of goods, higher productivity at producting that basket of goods gives the Fed license to inflate the currency. When the Fed inflates the currency, the government spends it first. If we have a 3 percent productivity increase per year, the government gets to spend 3 percent of the GDP, without obviously taxing. 3 percent of the US GDP is rather a lot. The total US government budget is what? About 17 percent of the GDP?
The problem is that if we inflate our currency, that taxes the money that other countries hold, encouraging them to hold something else. They would hold Euros, but that is also being inflated, and the Dollar can look good by comparison.
Like the two lawyers who encountered the bear: One said "run!" the other said "you can't outrun a bear!"
The first said "I don't have to outrun the bear, I only have to outrun you!"
You're right. I neglected to point out that our economy has added 70 million people since 1980 and has produced jobs for all that want them. While creating this incredible job growth, we've been able to increase household wealth from $22 trillion in 1980, in inflation adjusted numbers, to more than $52 trillion today. I agree with you that it's pretty incredible.
Measure it any way you want: Real per-capita assets, real per-capita GDP, real household net worth, real median household net worth, real per-capita wages, real per-capita consumption etc., and you'll come to the same conclusion. It doesn't matter how you choose to measure it, we're better off today than we've ever been and our economy remains the envy of the world. Why that news bums some folks out is the eternal mystery.
a new car in 1920 cost a few hundred dollars. Today they are $30-40k.
Are you saying that cars today aren't that much better than the ones in 1920? Don't they offer much more luxury, safety and convenience than in the past? Are you also trying to say that real wages haven't increased since 1920 or 1900? If so, once again, you've made assertions that cannot be supported by facts. What are you trying to say here? Do you even know?
This is essentially what you are doing by claiming the largest increase in household wealth 1980 to today vs 1776 to 1980
Real family wealth in this country has increased more than 200% since 1980 and you want to talk about the cost of a new car in 1920 or a bridge in 1900? By your assumptions we're a poorer nation today than we were in 1900. Are you really trying to claim that our standard of living is no better, or worse, than it was in 1900, 1920 or 1980? I hope not.
In the next twenty-five years, we may increase household wealth by a larger margin than we have from the nation's inception until today. Will that mean that actual wealthy grew in real dollars?
Yes, that's the thing about real measurements. Like I said, choose your metric. If you're honest and can do some basic math, the truth cannot be denied. Thanks for your worthless comments.
You're just a mountain of negative misinformation tonight, aren't you? Historically, the stock market has double in value about every seven years. Here is a chart that tracks how certain investments have appreciated in value over the past 200 years. Please look closely at which investment has done the best. Given your aversion to risk, where do you invest your money?
LOL, nice try.
Well Mase, you might find it unconvenient, but I know people whose retirements were serverly affected.
Look Mase, the nation grew in the 1980s also. It may not have grown at the rate it has since then, so it's unfair for me to dispute your extrapolation without more than a flippant response.
You can disagree with me all you want, but I do not subscribe to the theory that our present trade imbalance is good. Sooner or later I think it's going to cost us. When it does, I think we're in for serious trouble.
I think the economy would have grown just fine under the old policies and we would have been on a more solid footing.
I appreciate your numbers, but numbers are not the be all end all that some people make them out to be. Thanks for the comments.
Could you expand on this a little? This seems like an important point and I don't quite get the logic.
You're the exception to the rule.
Unemployment in the IT sector was still in double-digits as of last month.
Productivity has gone up. Our percentage of world production, however is going down.
'Til it's your job that gets outsourced, of course.
Then I'm sure you have an alternative and reliable source to show us what our real job growth is, given our $12 trillion economy is growing between 3-4% a year [] and can also show us what the real rate of inflation is and why the bond market is missing your higher figures. Then you could also explain how it is our real per-captia consumption has more than doubled in the past 30 years while our household net worth has more than doubled, since just 1994, if jobs, income and GDP are not growing, and we are losing all our purchasing power to inflation.
So U.S. companies moving production overseas is good, right? They become better competitors, and the profits come back here. Unless you believe something else . . . .
Inflation is stripping these people of purchasing power.
I make less (by almost half) than I did 20 years ago yet my lifestyle is better by tenfold.
If you are relying on wages to acheive the American Dream you are doing it wrong.
Simple formula everyone should learn: Learn to live on 90% of your income (or less) and invest the rest.
Wages are not the answer! What you do with your excess Wages is!
I guess Ross Perot was right.
You must be an English teacher.
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