America will continue to bleed jobs

[FightingForFreedom]

Wages will not equalize between U.S. and foreign countries for a very long time, if ever. The problem is supply differences. The 100 million or so American workers are vastly outnumbered by the potential number of Chinese, Indian, and other developing nation's manufacturing and knowledge workers. The standard of living differential is also too great. The balancing act for U.S. and multi-national businesses that are outsourcing our jobs is to make sure they don't kill the golden goose (the American consumer) before they've generated an even bigger goose to take to slaughter in China, India, and other targeted markets. Remember, producing cheaply means nothing if there's nobody to buy the products. And no one has been as well-trained as the American consumer to buy, buy, buy, no matter how much in debt one becomes! As a software engineer, I've seen this problem coming for at least 5 years now, but it was well masked by the artificial high-tech bubble through March 2000. I'm not sure that there is an answer at this point -- the genie is out of the bag, so to speak. Once one company in an industry has convinced the govt to open a market in one undesirable country or other, all other companies with which it competes are forced to do the same. Bottling up the genie is notoriously difficult.

[applemac_g4]

"What do the protectionists have in mind?"

How about something very simple to start with. We are a nation that has a multi trillion dollar trade deficit on our hands. So, start out with a very simple step: impose a 10% import tarriff on all goods manufactured overseas (Canada gets a free pass) when they come into the United States. Reduce federal income tax rates 10% in each and every bracket.

Such a policy would cause an economic revival in the United States unlike anything we've ever seen by transferring the burden of funding our government away from our citizens while simultaneously giving them all significantly more disposable income.

[NP-INCOMPLETE]

So I guess the response is the wholesale prevention of the rest of the planet from industrialization? People everywhere wants to have a better living for themselves, that is the point of a capitalistic system. Its great when we are exploiting our advantages (E.G after WWII when the entire planet's industrial infrastructure was in shambles), but its not so great when others have a competitive advantage, in this case, lowered cost of production. So I guess America should have full access to European and Asian markets right after WWII, but the rest of the World should be restricted to the American Market now?

[Dialup Llama]

"People still do support a family on McDonalds wages. They may have to work a second job and have the spouse work as well, but they do survive to work another day. When I go to a fast food joint, I don't get the impression that the employees don't want to be there or have major attitude problems."

You are nuts. Have you made a household budget? Do you live with your parents still? Are you in high school? This post is exhibit A, in "Why FR is not really worth reading anymore."

FYI I have been in a few fast food places and there are MAJOR attitude problems there which is why people are avoiding them and they are losing money.

[EVO X]

Touching Future....

Sorry to be so blunt.

[Dialup Llama]

>Provided I were given the choice, yes I would, which is exactly what I'm saying. I'm better off buying goods I actually want at lower prices as opposed to higher ones.

The goods you are buying are not the same. I have been having trouble buying good clothes and shoes. Most casual clothes are made very cheaply- Abercombie & Fitch style yet cost nearly the same as real clothes. I still have a pair of black dress shoes that I bought for $80 abt 20 years ago. Recently I bought some shoes that I felt were of equivalent quality. They were made in Holland and cost $200. Yes you can buy leather shoes for $80 still but they are unwearable. Some people can't tell differences in quality. But for those who know, what is being made in China is not the same as your typical US made shoe of 20 years ago.

[tinamina]

The true cost of obtaining cheap labor overseas and leaving Americans jobless (which of course is now all Bush's fault in the media) will be shown when the people cannot pay the high mortgages they contracted for in the good times, the whole economy will crash then, and America will be in deep trouble. Our position as the superpower of the world is in deep jeopardy. We won't even be able to buy Chinese shoes.

[Dialup Llama]

This article is evidence that we are in a deflationary process even as most commentators think we are turning the corner. (BTW during the Great Depression, no one said, "Hey we're in the Great Depression." They wrote articles on how things were going to pick up next year etc...)

[FITZ]

Only a free market can do that, not tariffs, quotas, gov't job programs, tax-credits, or well intentioned and naive politicians.

Then why is it taking very costly government programs to support the "NAFTA displaced workers"? You know they keep extending that original 18 months they were provided free education, computers, living expenses, etc? Who is paying for them? What's the point of having cheaper prices if we have to have higher taxes to support all the welfare and unemployed?

[NukeMan]

And then we have this table of median family income (that is median, not mean, which means that half are above the number, and half below), in real dollars, and that is with the CPI overstating what is the real inflation rate. Do facts matter at all anymore?

Thanks for posting this; it is informative. I did notice that it was computed in constant (2001) dollars which helps for a meaningful comparison. I do have some questions though: (1) In 1967 did most households have one wage-earner, progressing to multiple wage earners in later years? (2) How many hours are worked in a typical year by each wage earner?

I don't know the answers beforehand, only pointing out that it is plausible that the rise in household income is simply due to more people working more hours, not due to productivity gains per se. On the other hand, most any product you might name (autos, computers, health care) has vastly increased in quality during that same period, making a meaningful comparison difficult.

[Happy2BMe]

bOOKMARKED FOR AWE

[eno_]

Then why is it taking very costly government programs to support the "NAFTA displaced workers"?

Because we don't have the guts to tell former Lucent unionized factory workers that making telephone switches based on 25 year old designs at $30/hr. only works in cloud-cookoo land?

[Dialup Llama]

>Your analysis regarding the 40k wage earner ignores this fact: That when a 3k foreign worker is paid that 3k, national wealth is diminished by 3k

I think alot of these relative wage analyses are faulty. They compare the Silicon Valley programmer with what the Indian programmer is paid. This is not the best basis of comparison.

Compare a programmer in the US Midwest (much cheaper) with what the Indian service bureau charges (not what the programmer is paid). I bet the advantage is near 2:1 or 4:1, not 10:1. Also take into account that remote programming IS more costly and frequently has quality control problems.

If the Philipine or India programmer increases their wages at all (which they will... They will get parity with European programmers soon I'm sure), the cost advantage will not persist.

[EVO X]

Where have you been? Ask anyone working in IT or networking where the jobs are going. First it was just berry-picking and hotel room cleaning, then it was construction and blue-collar labor. Now the foreigners don't even have to break into our country to take our jobs away.

I am a fellow victim. I got downsized in electronics the last go around. I am now in IT. There is plenty of work out there to do. I answered an add in the paper last fall after particpating in another doom and gloom HIB FR post. I got an interview on the first ad I saw and probably would have been offered the job if I had really wanted it, but it would have lateral job transfer. The search commitee did say competition for postition was extremely competitive.

[dpwiener]

I have been having trouble buying good clothes and shoes. Most casual clothes are made very cheaply- Abercombie & Fitch style yet cost nearly the same as real clothes. I still have a pair of black dress shoes that I bought for $80 abt 20 years ago. Recently I bought some shoes that I felt were of equivalent quality. They were made in Holland and cost $200. Yes you can buy leather shoes for $80 still but they are unwearable. Some people can't tell differences in quality. But for those who know, what is being made in China is not the same as your typical US made shoe of 20 years ago.

That's what a free market and consumer choice is all about. Especially with the Internet, we have an entire world of options at our fingertips.

I used to buy $250 handmade shoes from Russell Mocassin Company in Wisconsin, shipped to California. They were excellent shoes, but I'd wear down the heels and soles after 6-12 months and have to pay $20 each time to get them repaired locally. Now I buy $20 shoes from Payless Shoe Store. They look fine and fit fine. Even though they completely wear out after 6-12 months, I just buy a new pair of shoes; it's cheaper and easier. I have no idea where in the world the Payless shoes are manufactured, and I could care less. I'm the consumer, and it's up to shoe manufacturers to meet my specific needs in order to earn my money, or I'll simply find a different producer.

[EVO X]

You are nuts. Have you made a household budget? Do you live with your parents still? Are you in high school? This post is exhibit A, in "Why FR is not really worth reading anymore."

No, No, No, and No.

FYI I have been in a few fast food places and there are MAJOR attitude problems there which is why people are avoiding them and they are losing money.

I avoid ones that provide lack of service and a clean environment, but the whole industry isn't plagued with bad service and bad attitudes. Burger King and McDonalds have some tired worn out stores.

[dpwiener]

This is not your grandfather's China. This is a China hell-bent on becoming the premier economic force in the world. I wouldn't bet against them over a 5 decade timeline.

Two or three decades ago people were saying exactly the same thing about Japan. They were writing books about how Japan would soon overtake the U.S. and become the economic superpower of the 21st century. They were saying that the U.S. had no chance to keep up unless we changed our business and social culture to match "Japan Incorporated".

Well, Japan's government subsidies and directed investments and guaranteed life-time jobs and propped-up banking system and real estate bubble eventually took their toll. Our relatively-freer society, in which great failure as well as great success is possible, has left Japan in the dust. Japan is still a highly developed nation with good prospects ahead of it, but it's not about to overtake the U.S.

China is the same. It has made huge strides as its leaders have freed up its economy, but that's mostly because it started from disastrous communist-created level. It still has a long way to go, especially when it comes to individual freedom and initiative and a stable legal system that protects contracts and property rights and which financially rewards success.

If the U.S. continues to add regulations and governmental restrictions and taxes, and if we insulate ourselves from trade with the rest of the world, and if China ultimately turns into a free society, then perhaps it will become the premier economic force fity years from now.

But if we repeal taxes and rules and red tape, and tear down barriers to free trade, we'll just keep lengthening our lead. The entire world will be richer as a result, but we'll be richest of all.

I don't fear that kind of a future.

[Torie]

Your questions are all excellent and intelligent and pertinent, and thus you set me off on a hour research project to get the poop. Few posters generate such activity in me, so kudos.

It appears that between 1970 and 2000 the median per capita income of men was stagnant (again using that inflated CPI number), while for woman it close to doubled. So that suggests that woman have become more productive and are working longer. However, the percentage of over 20 adults working full time of the total work force only increased by from about 57% to 63%. So it appears that the main change on a median basis is that woman working full time are making a lot more for each hour that they work. That is hardly surprising. There are all those female lawyers and doctors out there now. It should also be noted that the average household size has decreased since 1970 from about 3 per household to 2.5. So there is more median household income to go around per person.

Overall, I suspect these factors are a wash, and families at the median correcting for woman working longer hours (I don't think men are), on a per household member basis are about 50% better off than they were 30 years ago, as I said before after reverting to a more accurate CPI figure as a deflator.

Of course, the big, big change is that the top third earners are massively better off. and the bottom third only marginally better off. That is why I insisted on using median numbers. Using mean numbers would give an excessively rosy picture as to the economic status over time of the average American.

I hope that helps.

[trueconservative]

I agree that today's consumer has significantly more possessions than 50-60 years ago. Some of that is due to the power of television advertising, convincing people to want well in excess of their needs. Some are purchases that have brought true utility to consumers.

However, there is a significant difference vs. 50-60 years ago. Almost no one bought on credit then, today the average consumer is deeply in debt and digging themselves deeper every day. In addition,many people are buying these goods with other people's money, coerced out by an income redistribution tax scheme. Today over 50% of people receive more in government benefits/subsidies/tax rebates of various sorts than they pay in taxes - believe it or not this is true. Part of this is clearly Marxism at work in our government. But pressure for this redistribution increases due to job exportation in so many categories of jobs. Those who still maintain good incomes because their jobs have not yet been exported are increasingly subsidizing those who do not.
Standards of living based on high debt and transfer payments from one income group to another, are not sustainable in the long term and looking at an income chart is overly simplistic because it does not reflect cost burdens such as taxes placed upon that income.

[Torie]

Since 1950 the total tax burden has increased from about 25% to 30%, and that increase is entirely driven by the states and localities. And that increase is mostly paid for by the top 20% of earners, who on and after tax basis are just exponentially richer than they were in 1950.

[trueconservative]

I think you are unrealistically optimistic to think we will reduce taxes and rules and red tape. These are growing exponentially, not declining. If you look at Thomas' Register list of all federal laws, Reagan cut it in half, the only time in history it has ever declined, and we are already well ahead of where he started cutting in terms of rules and regulations. The government is on a spending spree in many places, including assulting private property rights through its land buying schemes. The respect for private property of all kinds in our country is on the decine, rules, regulations and market distorting subsidies are on the rise.

We are increasingly a socialist, not a capitalist nation. In every respect, a large, overly invasive government is killing individual self-determination and self-reliance. A government-reliant population cries out for more subsidies and the downward cycle continues. To a large degree I agree with you, it isn't the success of other countries to fear, but the recipe for disaster we are writing at home. The antidote to that recipe is not merely free markets abroad, but a return to constitutional freedoms and individual self-responsibility at home.