Job Drought Continues
In March the
US economy created a paltry 111,000 private sector
jobs, half the expected amount. Following a
well-established pattern, US job growth was concentrated
in domestic services:
construction, administrative and waste services, and
health care and social assistance.
In the 21st century the US economy
has ceased to create jobs in knowledge industries or
information technology (IT). It has been a long time
since any jobs were created in export and
The Bureau of Labor Statistics
forecasts no change in the new pattern of US payroll job
growth. Outsourcing and offshore production have reduced
the need for American engineers, scientists, designers,
accountants, stock analysts, and other professional
skills. A college degree is no longer a ticket to
upward mobility for Americans.
Nandan Nilekani is CEO of Infosys,
an Indian software development firm. In an interview
with New Scientist (Feb
19, 2005), he noted that outsourcing is causing
American students to "stop studying technical
subjects. They are already becoming wary of gong into a
field which will be `Bangalored` tomorrow."
India`s Silicon Valley. A 21st century creation of
outsourcing, Bangalore is a new R&D home for
Hewlett-Packard, GE, Google, Çisco, Intel, Sun
Microsystems, Motorola, and Microsoft. The New
reports: "The concentration of high-tech
companies in the city is unparalleled almost anywhere in
the world. At last count, Bangalore had more than
150,000 software engineers."
American software engineers go begging for
employment, with several hundred thousand unemployed. I
know engineers in their thirties with excellent
experience who have been out of work since their jobs
were outsourced four or five years ago. One is moving to
Thailand to take a job in an outsourcing operation at
$875 a month.
A country that permits its
manufacturing and its technical and scientific
professions to wither away is a country on a path to the
Third World. The mark of a Third World country is a
labor force employed in domestic services.
Many Americans and almost every
economist and policymaker do not see the peril. They
confuse outsourcing with free trade, and they have been
taught that free trade is always beneficial.
labor arbitrage. Cheaper foreign labor is being
substituted for more expensive First World labor. Higher
productivity no longer protects the wages and salaries
of First World employees from cheap foreign labor.
Political change in Asia has made it easy to move First
World capital and technology to cheap labor, and the
Internet has made it easy to move cheap labor to First
World capital and technology. When working with First
World capital and technology, foreign labor is just as
productive—and a lot cheaper.
This is a new development. It is
not a development covered by the
case for free trade.
Outsourcing`s apologists claim that
it will create new jobs for Americans, but there is no
sign of these jobs in the payroll jobs data. Moreover,
it doesn`t require much thought to see that the same
incentive to outsource would apply to any such new jobs.
By definition, outsourcing is the substitution of
foreign labor for domestic labor. It is impossible for a
process that replaces domestic employees with foreigners
to create jobs for domestic labor.
Now biotech and pharmaceutical jobs
and innovation itself are being moved offshore. The
Boston Globe reports that Indian chemists with Ph.D.
degrees work for one-fifth the pay of US chemists. [Be
careful not to call it outsourcing, By Scott
Kirsner, March 21, 2005]
American chemists cannot give up
80% of their pay to meet the competition and still pay
their bills. Rising interest rates will make it
difficult enough for Americans to make their mortgage
payments, and the dollar`s declining exchange value will
raise the prices of the goods and services that have
been moved offshore.
Americans are unaware of the
difficult adjustments that are coming their way. By the
time Americans catch on to outsourcing, its proponents
will have changed its name to "strategic sourcing"
Corporations, economists, and
politiciana have written off
American labor. No end of the job drought is in
Craig Roberts, a former Reagan Administration official,
is the author of
The Supply-Side Revolution and, with Lawrence M.
The Tyranny of Good Intentions : How Prosecutors and
Bureaucrats Are Trampling the Constitution in the Name
for Peter Brimelow`s
Forbes Magazine interview with Roberts about the
recent epidemic of prosecutorial misconduct.