Who can forget that infamous declaration by Greg Manikiw, Outsourcing is good for America, backed up by fictional economics from an an offshore outsourcing group. Despite the never ending alarming U.S. unemployment rate, the jobs crisis and the stagnant wages, it seems Obama is touting the same philosophy. Economists, on the other hand, refuse to dare challenge this corporate party line and mention the O word, outsourcing.
Where are the jobs? John Bougearel really nails it on fictional CBO and BLS future employment projections.
American policies must take steps to stop the bleeding of jobs overseas, Obama’s new Council on Jobs and Competitiveness should be enacting policies and proposing legislation that repatriates US jobs and disincentivizes further outsourcing of US jobs. These policies would of course be hugely unpopular with Corporate America, but that is the crossroads where we now stand.
Bougearel lists the never ending fiction BLS job growth projections and now similar delusional numbers by the CBO for 2011-2015.
The CBO is projecting 2.5 million jobs will be created annually from 2011 to 2015. From the CBO: “As the recovery continues, the economy will add roughly 2.5 million jobs per year over the 2011–2016 period.”
That is more than 200,000 jobs being created per month every month for the next 5 yrs. Moody’s economists actually estimate 270,000 jobs will be created per month on average in 2011. Yet peak annual job growth ranged from 154,000 to 178,000 during the housing boom era circa 2004-2006.
To make matters worse, we have the new buzz words, same as the old buzz words, innovation. Innovation is great, it's awesome, but the reality is companies these days manufacture in China. Apple, with their great, someone finally gets it, iP<insert buzz here> product line and corresponding services, manufactures in China. Literally, there are now 920,000 people employed in the Chinese factory which manufactures your cool little gadgets. That's almost a million manufacturing jobs. Apple has 46,600 employees globally, but like many corporations, finding out which country they are even located in is kept secret. Regardless, one can see the majority of jobs making the iP<insert x> are in China.
Compare China Foxconn manufacturing jobs to the below graph of total manufacturing jobs in the United States since 2000. Over 2 million manufacturing jobs have been lost since the official start of the Great Recession and since the 2000, the United States has lost 5.6 million jobs, or about 33% from year 2000.
Now, compare the loss of manufacturing jobs to the FIRE, or financial activities jobs and construction jobs. These two occupational sectors are directly related to the housing bubble and financial crisis. From the peak of the housing bubble, December 2006, FIRE has only lost 767,000 jobs or about 10% drop in jobs from it's peak.
Construction on the other hand has been decimated from the housing bubble and is down 2.1 million jobs from it's peak in July 2006 or 38%. Still, construction pales in comparison to the loss of American manufacturing jobs.
To sum, we have manufacturing jobs, which are only indirectly affected by the housing sector, being more decimated and consistently decimated than those occupational sectors direct affected by the housing bubble and the financial crisis.
From the industries at a glance we can also see massive labor arbitrage in the information sector. This category has I.T. and software programming jobs contained within. Further U.S. worker displacement is done through foreign guest worker Visas, which unfortunately as counted as employed in the below statistics. Next time you hear rhetoric about a worker shortage consider the below graph. From it's peak in March 2001, Information is down 1 million jobs, but estimates on the number of H-1B workers alone imply for Americans, it's more like 1.7 million job losses.
Indeed, earlier we reviewed a study by the Hackett group showing 2.8 million jobs lost in administration, HR, and finance. Computer Economics states
Outsourcing expenses as a percentage of total IT spending rose at the median from 3.8% in 2008 to 6.1% in 2009. From 2009 to 2010, median spending on outsourcing as a percentage of total IT spending rose again to 7.1%.
In GDP, Jobs and Outsourcing, we have a host of indicators showing some GDP should be attributed as offshore as well as productivity gains point to global labor arbitrage.
- Y is actual output and c is factors affecting unemployment
- ΔYis the change in actual output from one year to the next
- Δu is the change in actual unemployment from one year to the next
- k is the average annual growth rate of full-employment output
Current assumptions are we need 3% annualized GDP growth to maintain full employment. That's not reach full employment that is maintain. C in the above equation is claimed to be 2 or 3. This represents productivity factors, affecting job growth. It is in productivity where the refusal to examine offshore outsourcing really resides. Economists will blame technological advances, domestic labor arbitrage, even the lack of power of the U.S. workforce than say the O word.
Bernanke ran through the data in 2005 and claims a 2% decrease in GDP creates about a 1% increase in the unemployment rate. Yet, Robert Gordon and others have shown Okun broke about 1986 and while increases in productivity are known to be the culprits, few will dare say offshore outsourcing is the reason.
The paper suggests a set of complementary hypotheses to explain this change in behavior. The overall shift in structural responses after 1986 is linked to the increase in the inequality of the income distribution. The declining minimum wage, the decline of unionization, the increase of imported goods, and the increased immigration of unskilled labor have undermined the bargaining power of American workers. As a result, employers can reduce labor hours with impunity and without restraint in response to a decrease in the output gap, in contrast to the period before 1986 when their behavior was more constrained by the countervailing power of labor.
To wit, back to Bougearel's post noting there is nothing to substantiate claims of this magic job boom that is projected to happen. This government refuses, absolutely refuses to address global labor arbitrage. No surprise when one puts the head of globalization king G.E. CEO Immelt as the supposed jobs czar. We even have economists spinning their assumptions and even data trying to deny this is a problem, all the while corporate bias and lobbyists white papers are the ones being quoted. Yet the statistics show there is something really wrong as does the real economic theory.
Until global labor arbitrage is addressed, by the statistics and even obtaining accurate tallies of jobs created offshore....instead of the United States, and the effects thereof, expect more of the same, a permanent poverty class, record deficits due to not enough revenues from income, increasing income inequality, declining median wages and a whole lot of pain for most Americans.
Nope, outsourcing is not good for America and at this point is negatively impacting overall economic growth.