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.
I appreciate your comments, but I must respond with this.
We are experiencing an $800 billion dollar per year trade deficit. You and others have attempted to state that this doesn't indicate a loss of manufacturing jobs. Okay, if that's what you want to believe, I can't change your mind.
It's inconcievable to me that folks can think that with all the manufacturing we've moved off shore, it hasn't impacted our manufacturing base. Alas, that's what the arguement has devolved to.
It's also rather interesting to consider that the $800 billion trade deficit would actually be larger if it weren't for the fact that our exports of parts to be assembled in China actually offset an even larger trade imbalance.
We aren't just losing the effects of $800 billion dollars on our economy each year, we are also losing the multiplier effect which would be five to ten times that figure.
Thousands of communities are being deprived of hundreds of millions of dollars worth of increased monetary activity.
Oh well, at least the Chinese and other nation's citizen's lives are being improved.
From a statistical standpoint, employment in the U.S. is broken down according to the North American Industrial Classification System (NAICS) category of the employer, not the job. So all employees of General Motors, for example, were classified as "manufacturing" employees even if they had absolutely nothing to do with the production of automobiles or any associated components.
This means that an accountant who worked for General Motors was considered a "manufacturing" employee, but if he were laid off by GM and hired by an accounting firm he was considered a "professional service" employee -- even if he spent 100% of his time at the accounting firm doing accounting work for GM.
The biggest influence in the so-called "loss of manufacturing jobs" over the years has not been outsourcing, automation, or anything of that sort . . . it has simply been the re-classification of employees into their proper job classifications as these major manufacturers have shed a lot of their back-office functions and hired outside firms to do that work.
What has happened on the national level is that individual states don't have the same competitive advantage over other states that they once had. Back in the post-WW2 period manufacturing jobs moved from older U.S. cities (primarily in the Northeast) to other parts of the U.S. (mainly the Midwest and South) to take advantage of lower labor costs, lower utility costs, etc. Now that we have insisted on "nationalizing" more and more laws and regulations that affect these factors (i.e., employers have to pay SS and Medicare payroll taxes regardless of where they do business, they have to comply with OSHA regulations no matter where they do business, they have to buy electricity from utilities governed by FERC, etc.), these places don't have the same cost advantage over the major U.S. consumer markets that they once had.
I don't have a problem with businesses that relocate out of my state. If my state is going to be stupid enough to over-regulate, it's going to lose business. It should.
This is very good.
You've just mentioned one reason why I don't get intimidated by statistics. Heaven only knows what some of these numbers actually represent.
People on workfair working part time and making minimum wage are considered to be employed. People who are attending training courses paid for by the government are sometimes considered to be employed.
There are times when numbers can be compelling, but the days where they could be considered to be above manipulation are over IMO.
The underlying motivation for outsourcing and illegal immigration is that, for various reasons, it has become too expensive to hire Americans for a lot of jobs. Insurance and other benefits, taxes at all levels, and less obvious things like liability overhead on businesses, make American workers extraordinarily expensive to "own."
What needs to happen is that the cost of American labor has got to be reduced, and eventually will be reduced, one way or another. IMO, the reluctance of Americans (broadly defined, including workers, politicians, welfare recipients, lawyers, plaintiffs, etc.) to do this voluntarily will probably lead to an unpleasant sort of economic breakage.
And thus the problem, you honestly don't know.
Take care.
D1
Um, I work for a hospital. Not only did I get TWO raises last year, for a total of 7%, but the hospital is expanding like crazy. This is in Phoenix where we have a glut of hospitals anyway.
sure you can, but why would you? I can see if you can't find qualified engineers here, which has sometimes been the case, but when you have one, and they know your facilities in their sleep, and are good at what they do, why would you? Certanly not for the few dollars you'd save. Not a pharmaceutical company. They have no need to cut their costs trimming salaries.
That isn't true....
Check out the actual nature of our trade 'relationship' here:
Yvonne Smith, the communications director at the Port of Long Beach, literally sees the imbalance in U.S.-China trade. She reports that through Long Beach alone, the U.S. is importing $36 billion in goods yearly from China and exporting just $3 billion. By her account, the mix of products is very unfavorable to the U.S."We export cotton, we import clothing," Smith reports. "We export hides, we bring in shoes. We export scrap metal. We bring back machinery. We're exporting waste paper, we bring back cardboard boxes with products inside them."
Overall, the U.S. trade deficit with China reached a record $124 billion dollars in 2003 and the figure is headed even higher this year. Today, U.S. imports from China outpace U.S. exports to China by more than five to one, and the deficit shows no signs of abating.
These deficits are much larger than the trade deficits that the United States experienced in the 1980s and 1990s with Asian trading partners such as Japan. Put in historical perspective, America's current trade deficit with China is roughly double what it was at its height with Japan in the mid-1980s, when trade frictions between the U.S. and Japan led Sen. Lloyd Bentsen (D-Texas) to famously declare on the floor of the U.S. Senate: "We're in a trade war, and we're losing it."
This was written 3 years ago...and the trade deficit with China is another 40% larger still today...
Industrial production in the US is higher now than it has ever been. and Guess what, next month it will be higher still
We are losing core industries, critical to the foundations of the industrial pyramid. Senator Voinovich's hearings were dispositive on this.
Yes! Life was good for the American worker before those greedy unions came along and ruined everything.
Because the purchase of a "high-tech product" is only occasional for me and not a daily expense, I would rather have my high-tech job, thank you.
I start a new IT job at 80K on monday.
..and apparently eating out more often and hanging out in bars according to PCR.
Well, yes they are, and here's how its done.
...suppose GDP of Mogambo Land last year was 100 widgets produced, and sold at a buck apiece. Total Mogambo Land GDP=$100.
Now this year, the economy consisted of 90 widgets produced, yet sold at $1.20 each. Nominal GDP would show an increase to $108, which sounds good to those who do not have Mogambo-Sharpened Economic Senses (MSES), and those who do laugh as one, "Hahaha!"
Normally (back when the government was not filled with loathsome liars and cheats because the newspapers didn't let them get away with it), total revenues ($108) would be properly discounted by the inflation in prices (20%), which is the loss of purchasing power of the dollar, and thus the real, inflation-adjusted change in prices (20%) exactly matched inflation. So real GDP= 90, which is 90 widgets produced and sold for one dollar's worth of buying power each, so GDP is actually down by 10% (only 90 widgets produced)!
http://news.goldseek.com/RichardDaughty/1146063840.php
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