WHERE DID ALL THE JOBS GO?

Chronicles [Extra] ^ | February 24, 2004 | Paul Craig Roberts

[A. Pole]

Since January 2001, a three-year period during which the economy has experienced one year of recession and two years of recovery, the U.S. economy has lost 2.6 percent of its private-sector jobs. These losses are not evenly distributed. Construction employment has declined by only 0.1 percent, and employment in oil and gas extraction by 0.7 percent.

Employment declines in manufacturing and knowledge jobs, however, have been dramatic.

Tables prepared by Charles McMillion of MBG Information Services from government data show employment in primary metals down 24 percent; machinery 21.6 percent; computer and peripheral equipment 28 percent; communications equipment 38.8 percent; semiconductors and electronic components 37 percent; electrical equipment and appliances 22.8 percent; textile mills 34.1 percent; apparel 37.3 percent; chemicals 8.3 percent; plastics and rubber products 13.8 percent; Internet publishing and broadcast 40 percent; telecommunications 19.4 percent; ISPs, search portals, data processing 22.6 percent; securities, commodity, investments 6.8 percent; computer systems design and related 17 percent.

Where has employment grown? Private service sector jobs have declined by 0.1 percent. Growth in state education jobs and local government jobs has boosted overall service employment by 0.6 percent.

During the past 12 months, the second year of economic recovery, the U.S. economy eked out 57,000 net new jobs in nontradable low-pay services, leaving the economy millions of jobs short of normal performance.

This is not a picture of an economy that is doing well. Low income jobs in nontradable services are the only sources of employment, while high value-added jobs that pay good incomes continue to disappear.

This job record is not one of a powerful U.S. economy dominating world markets and building consumer incomes for sustained recovery. It is not a record that promises jobs for university graduates. It is not a record that promises a future.

Economists have apologies, but no real explanations, for the loss of jobs in tradable goods and services. They are careful not to blame outsourcing of manufacturing and service jobs, which they claim creates as many new jobs as it loses.

Outsourcing platforms, especially the knowledge jobs platforms in India, are commissioning U.S. think tanks and consultants to do "independent" studies that prove "outsourcing is good for the U.S." Certainly, the people who are benefiting from outsourcing want us to think it is good for us.

For years as U.S. multinationals moved manufacturing offshore, Americans were told that their future was in "knowledge jobs." Today, knowledge jobs are being moved offshore more rapidly than manufacturing jobs were.

What are the unemployed computer engineers and information technology workers supposed to retrain for? What high value-added job can't be outsourced? Only those in the nontradable sector, such as dentists and surgeons. If everyone becomes a dentist or a surgeon, those incomes will be driven down.

Many young engineering graduates have discovered that they invested in acquiring skills for which there are no jobs and are headed to law schools in an effort to retrieve their future. I know young software engineers who are substitute teachers in middle schools, and others who are trying to organize rock bands to play the club and bar circuits.

They have no idea what to retrain for, and neither do the economists who tell them retraining is the answer.

What is happening is easy to discern from the daily announcements of the multinationals themselves. Cheap foreign labor is being substituted for U.S. labor over a wide range of goods and services produced for U.S. markets. Americans are losing the incomes associated with the production of the goods and services that they consume. Because of extraordinary differences in domestic prices and living standards, foreign labor can offer its services to U.S. capital and technology for far lower wages than can Americans. Capitalists maximize profits, not employment in their home countries.

This is a new development. Until the collapse of world socialism and the rise of the Internet, first world capital stayed in the first world, and offshore production was not the motive of foreign investment. As offshore production takes hold and spreads, the United States will lose more high value-added jobs.

A rise in Asian currency values could dampen and eventually end the exodus of jobs from America. The question is: How long does the exodus last before there is a new equilibrium?

In an important new work in trade theory (Global Trade and Conflicting National Interests, MIT Press, 2000), Ralph E. Gomory and William J. Baumol show that it very much matters which industries and occupations countries retain. They explode the free trade assumption that free trade always produces mutual gains. Gomory and Baumol show that in many cases, perhaps a majority, gains for countries come at the expense of other countries. The authors explain why the "man in the street," so derided by economists, is right in his understanding that free trade produces winners and losers.

University of Maryland economist Herman Daly has been making this point for 15 years and Senator Charles Schumer and I more recently. Now, Gomory and Baumol have provided powerful demonstration that trade has winners and losers. Right now, the United States is losing.

[Eva]

From the WSJ:

If the Democrats really want to call free-traders immoral, perhaps we should look at the rights and wrongs of employment in America. A National Association of Manufacturers study two months ago found that the primary competitive challenge facing manufacturers was not competition from cheaper foreign workers, but the extra cost of doing business in the U.S.

The costs contributing to the loss of jobs were high corporate tax rates, mandated employee benefits, tort litigation, regulatory compliance and energy. In other words, the Democrats' agenda of higher taxes, more regulation and coddling the tort lobby makes them the biggest sinners of all.

[FITZ]

You can have prosperous, stable, ascending society with relatively high unemployment and you can have poor, troubled one with full employment.

There seems to be a very large number of "families" receiving food stamps, WIC, CHIP, housing assistance, Medicaid even though they are working. We should look at the total numbers receiving government handouts. Certainly in a good economy there should be almost no one on any welfare program.

[grellis]

I would only change one thing: they go to the office when they are actually sick. Otherwise, spot on.

My husband did that one time and a co-worker ended up taking him to the emergency room. After two hours of intense labor he gave birth to a not-so-healthy appendix.

When I was working I would go in sick on the off-chance that I might infect some of my more detestable co-workers.

[neutrino]

Thanks for the ping!

I disagree with the article on one tiny, almost insignificant point - doctors and dentists are NOT safe. Remotely operated medical robots are a reality. Here's a link

I think people fail to realize the very real threat to our nation from outsourcing. It's easy to say that it doesn't matter if some engineer can't find a job and waits tables instead - but where will our future technology come from? Certainly, it won't be given to us by China!

So we are disposing of our seed corn. And those who don't believe it should take a look at the faculty of large research universities - the faculty are imported because few American students make the cut to get their PhD in the hard sciences.

Others don't care about the downward shift in the wage structure - but how are we to service the present debt if incomes fall so steeply?

The loss of jobs needs to be stopped, and it needs to be done now.

[Mr. Buzzcut]

My husband did that one time and a co-worker ended up taking him to the emergency room. After two hours of intense labor he gave birth to a not-so-healthy appendix.

I should have qualified "sick" :)

When I was working I would go in sick on the off-chance that I might infect some of my more detestable co-workers.

You mean project managers? ;)

[grellis]

You mean project managers? ;)

No, I was one of a very few dames working in a retail stockroom. It was almost always my fellow ladies that I would try to be sneezing on or coughing at.

[lelio]

Others don't care about the downward shift in the wage structure - but how are we to service the present debt if incomes fall so steeply?

My nightmare scenerio is for Bush to get this quasi semi legal worker visa (aka "lower wages more!") passed and continues to push for "free trade" while high paying jobs get shipped out of the country. In 10-20 years we'll have millions of baby boomers that didn't save enough money pleading for government assistance and no one will be around making enough money to pay the social security taxes to support them.

My greatest fear from that is if the best and the brightest (and those that don't want to be around with the poop hits the fan) start to leave the country for greener pastures in China, Russia, and India where the economies are improving.

[neutrino]

I suspect you'll see both come to pass. When people start being really uncomfortable, they become willing to do almost anything to improve things - and that means voting for more goodies and higher taxes.

Higher taxes in England resulted in the very brain drain you refer to.

Conservatism is, I think, more apt to thrive in a land with a strong middle class than in one with a great many poor and angry people.

[ninenot]

Wrongo, Jorge.

Insight Magazine/Wash Times: "What may not be understood is that 2.5 million Americans have lost their jobs since 2001, and nearly 400,000 ran out of their federal unemployment benefits in January of this year alone. Indeed the U.S. Bureau of Labor Statistics reports that the average salary for U.S. workers has fallen from $44,570 to $35,410 since 2001, with nearly 5 million Americans working at part-time employment to make ends meet. " 2/21/04, K. P. O'Meara

[ninenot]

The WSJ's argument is sound: but the LARGEST SINGLE cost is the cost of labor.

Except in China, where it's either slaves or $0.27/hour and the PRC will steal everything you own, besides.

Here's a bargain: we'll substitute a tariff for ALL Corporate and Personal Income taxes...Deal??

[A. Pole]

In 10-20 years we'll have millions of baby boomers that didn't save enough money pleading for government assistance and no one will be around making enough money to pay the social security taxes to support them.

This can be worse - those baby boomers who DID save enough money, might see the value of their savings collapsing. Private savings as much as government capacity to give assistance depend on the productivity of the economy. When you account is wiped out, when you do not have good children, when government is bankrupt, you are a toast at old age.

[sixmil]

If everyone becomes a dentist or a surgeon, those incomes will be driven down.

Don't worry, the AMA will never let this happen.

[lelio]

Higher taxes in England resulted in the very brain drain you refer to.

Odd that you should bring that up -- I'm a product of that. My parents moved over here in the late 60's in the brain drain, along with thousands of other English engineers. Which is why you run into so many 60 year old ones here.

While the high taxes had a lot to do with it, I was under the impression that the socialist policies were more inclined for graft related work (ie Minister of Sillywalks) than trying to promote actual business. Well that and the US was the place to go back then.

I just hope I won't have to do the same.

[RaceBannon]

Capitalism ain't the problem.

If you have government sponsored purchasing of machines, and government sponsored operation of companies to cover losses, you have humans who are better educated than any generation and capable of following instructions...VIOLA! Any product can be made at a cheaper price when it is made by a slave!

That is NOT FREE TRADE!
That is NOT market competition!!
That is NOT capitalism!

These companies, in order to stay in business, moved to a socialist government run country that props up industry with government money, and that is not what Capitalist countries can compete with, especially when those socialist countries pay slave wages.

Plus, we are handing these economic competitors our technology which they did nothing to design, develop, or contribute to, and they are using it to take away our jobs and our job futures.

We are NOT competing against capitalist countries on the whole, we are competing against socialist/Fascist countries that use government funding to support, create, and provide for the companies that they take from us. These are NOT private individuals starting up machine shops in China, it is the Chinese government!

These are not companies spending their own money to develop and design and trouble shoot the machines to make the product, these are countries that have purchased the materials and machines to make all products from scratch, run them by slaves, LITERALLY, and then have the government supply all monies to keep them from going under.

Good God!! That is NOT free market,.
that is NOT capitalism,.
that is NOT free Trade, it is SOCIALISM!! It is a form of Fascism!! .
And we are not doing anything to stop it or defend our own countries ability to produce or provide for our own selves!! They are literally using slave labor to run the high tech machines and we cannot compete against that using our Free Market Capitalist ideals!

We cannot compete against this type of manufacturing. This is not a backward country trying to use a crude lathe to make cheaper table leg. This is an industrial giant using computer controlled machines where all a person has to know is what button to push and when thanks to developments in CNC technology. And they pay them in rice bowls, and when he makes a mistake they make a new part until they fill the quota for good parts because they can afford the training curve to run the machine right to eliminate errors.

Socialist Countries propping up their companies is NOT FREE TRADE; neither is American Companies moving off shore, providing the means and personnel to run these companies that formerly employed Americans Capitalism, either!

Not one of these countries developed these technologies themselves, not one of them spent the money to do the research and development to achieve the high quality that these products are now, and not one of these countries started these companies with an individual who is competing solely on Free Market Capitalist Ideals!!

This isn't about whining, it is about giving away the company store to those who are trying to destroy us economically!! It is about giving away the means and technology to compete against ourselves!! That is not sane!!

We are not talking about an individual or group of individuals starting up their own little version of Microsoft in the open market, we are talking about Socialist Governments using Government funds to support all the waste and error that would bankrupt any other company by buying all the machinery from us, the instructions on how to use it coming from us, and then demanding that we use this new company to provide a product, thereby depriving an American competitor a chance to make the product at a cheaper price only they cant BECAUSE THESE FOREIGN COMPANIES ARE USING SLAVE LABOR!!

Capitalist companies cannot compete against that because we are liable for our losses in manufacturing through human error, we use our own money not the governments, and when we go under, it is our tough luck.

[Monty22]

Amusing how Exxonmobil, who is raking it in with the energy prices like never before, is offshoring a massive chunk of its IT (including me) off to Canada.

The system's broken, badly.

[Robert_Paulson2]

wrong.
in a good socialist economy, nobody would be exempt from receiving public assistance, as that makes everyone dependent on the ongoing, evergrowing socialist, "leave no child behind" government.

they want us ALL on the dole, as it makes it easier to keep track of us all and our resources, should they want or need to extract even more from us to support the massive state bureaurcracy or it's fully mutated, multi-tit pig.

a dependent citizen is an obedient one.

[GOP_1900AD]

This is the first non knee jerk response in the chain of them... kudos. I think that when the orthodoxy get snippy about critiques of open borders and globalist economics, they assume that the critique is a leftist one. Nothing could be further from the truth. My own critique of these issues is straight out of Edmund Burke. In order to move myself any further to the true Right [a distinction, Vs. say, the faux Jacobin "right" and the faux Fascist "right"] I'd have to get into a time machine and go out on my steed, sword in hand, wearing armor. ;)

[arasina]

Ding ding ding! A winner! Anti-capitalistic legislation is at the root of decline in higher paying jobs.

[Robert_Paulson2]

you see race, your problem is a misunderstanding of the NEW meaning of global capitalism.

you focus on words like FREE trade, MARKET capitalism etc.
as if FREE workers, with a similar MARKET place for their labor and services, were something to be desired?!?

I am surprised that you did not use the dreaded "fair and equal competition" in your spouting.

Free trade NOW means that the HAVES (us) according to our ability, must distribute our jobs to the "have not's" (third world slaves and child workers). It's only fair in a "we are the world sense." Is is fair for us to have so much when their corrupt governments make sure that they have "so little?"

"from each according to his means, to each accourding to his needs..." the watchword of worldwide globalistic movement and exporting of once great american jobs. JUST as long as they, the ELITES maintain their profits and supremacy at the slaves expense.

That's today's capitalism.

by the way, you are spot on... if you didn't catch my drift./

[GOP_1900AD]

The problem with late 20th century thinking (which is what has led us to this problem in the first place) is that it looks at the world from a purely economistic perpsective. Many who promote this view quote Adam Smith out of context. Adam Smith, I agree, described certain aspects of free trade. However, the qualifiers were many and he assumed that there would still be national sovereignty, will to power, and patriotism in the mix. As we know, all three of those are under assualt by the enemies of the West without, and the globalist utopians within. Most globalist utopians I know are actually quite apolitical and are most assuredly part of the so called "3rd way" movement. When we align ourselves with them, we are not taking a particularly conservative postion. I'll stick my neck out and make an explicit prediction. By the end of the 21st century, the latter day globalist utopians will be thoroughly discredited after a return to nationalism, loss of comprehensive strength of Western countries, and, overreliance on debt financing, set the stage for great war. Those who look solely at the economic dimension, and couch all geopolitical strategy based on the false assumption of a Western dominated economic globalism, miss key variables which determine overall success or value.