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Outsourcing: A New Occupational Hazard
Who does Bill Gates think he is fooling? Microsoft's Chairman spent the last week of February on the college stump trying to talk up computer engineering. But nothing he can say can overcome the fact that students have been reading announcements from every American high tech company, including Microsoft itself, about thousands of engineering and research jobs being moved to Asia.
On February 16 the Associated Press reported that Siemens announced that the firm will move most of the 15,000 software programming jobs from its offices in the US and Western Europe to India, China, and Eastern Europe.
"Siemens has recognized that a huge amount of software development activity needs to be moved from high-cost countries to low-cost countries," explained a Siemens managing director. [Siemens Plans Huge Jobs Outsourcing]
According to official US statistics, at the end of February 2004 the US economy had 229,000 fewer jobs in computer systems design and related disciplines than in January 2001, a decline of 17.2 percent in three years. Architectural and engineering employment lost 33,000 jobs during the period, a decline of 2.6 percent (the data are from the BLS payroll surveys). With the economy shedding more knowledge jobs than it is creating, new graduates face poor prospects.
The typical economist is too much a True Believer to notice what is being done to Americans' occupations by outsourcing. High school and college students are much more astute. They are abandoning occupations that can be outsourced.
Nationally, enrollments in computer science and computer engineering are down 23 percent this year. At MIT, the premier engineering school, enrollment in electrical engineering and computer science has fallen 33 percent in two years. The New York Times (March 1) reported that even MIT's best graduates are abandoning their computer engineering profession for investment banking. Presidents and deans of engineering schools are expressing concerns that engineering education has no future in America.
It has been years since the US economy has created any net new jobs in export or import-competitive industries. Obviously, trade and our massive trade deficit are not the stimulus to our export sector that economists claim.
Overall, there has been no job growth in three years. The economy during this period has lost 2.97 million net private sector jobs. The few areas of job growth are concentrated in lowly paid nontradable services.
The BLS in its February 11 job projections for the next ten years emphasizes that seven of the ten occupations with the largest projected job growth are so menial that they can be learned with short-term on-the-job training. They are not high paying jobs and they do not produce any export earnings: nursing aides, orderlies and attendants, waiters and waitresses, janitors and cleaners, cashiers, food preparation and serving, including fast food, customer service representatives, retail salespersons. As Business Week notes, "most of the big growth areas will be low-skill and low-paying."
Economists and pundits who keep talking about the wonderful high tech economy that outsourcing is creating are talking about China, not the US. Writing in the Wall Street Journal online (Feb. 20), Steve Liesman, senior economics reporter for CNBC, points out that jobs in this "recovery" are as conspicuously absent as weapons of mass destruction in Iraq. Liesman pours cold water over the favorite "solution" offered by economists--education: "In Oct. 2001, this country passed an ignominious milestone: For the first time ever, the number of college-educated unemployed surpassed the number of unemployed who don't have high school diplomas."
When US firms produce offshore, the products are not potential American exports. Offshore production reduces the ability of the US to export, while turning what was formerly domestic production into imports. Offshore production thus delivers a double blow to the trade deficit.
Unable to pay for its imports with exports, the US is paying by giving up ownership of its assets. Foreigners are becoming the owners of our real estate, companies, and government and corporate bonds. When they acquire ownership, they also acquire the future income streams produced by these assets. As Warren Buffett recently made clear in Fortune magazine, our trade deficit is making us poorer.
What will balance our trade deficit is the collapse of the dollar. Economists like to emphasize that a decline in the exchange value of the dollar will make US exports cheaper, and more will be sold abroad. They don't like to emphasize that dollar decline pushes up the price of all imported goods, from energy to those "cheap foreign goods" in Wal-Mart. Americans lose both ways: first they lose good jobs in exchange for cheap foreign goods; then they lose the ability to pay for the foreign goods as the falling value of the dollar drives up the prices of the foreign goods. People trapped between falling incomes and rising prices are not people with a future.
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Paul Craig Roberts was Associate Editor of the WSJ editorial page, 1978-80, and columnist for "Political Economy." During 1981-82 he was Assistant Secretary of the Treasury for Economic Policy. He is the author of Supply-Side Revolution: An Insider's Account of Policymaking in Washington.