Where Did All The Jobs Go?

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

Employment declines in


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

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

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

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

, 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

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
Press), 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
so derided by economists, is right in his
understanding that free trade produces winners and

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.


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