- The outsourcing of jobs and the importation of foreigners
on work visas are emptying the pipeline of qualified Americans and destroying
US technical occupations.
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- Libertarians and free trade economists don't realize
it, but they are pulling Marx out of his grave.
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- Free traders are resurrecting class war, not because
they are Marxists but because they confuse free trade with global labor
arbitrage. Free traders turn cold shoulders to US job losses from offshore
outsourcing, because they mistake the losses for the beneficial workings
of comparative advantage. Committed to a 200 year old theory that they
no longer understand, free traders are cheering on the destruction of middle
class jobs and the dismantling of the ladders of upward mobility that make
large income disparities politically acceptable.
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- The destruction of the stabilizing middle class is occurring
simultaneously with an extraordinary increase in income inequalities. Not
so long ago CEOs were paid 20 times more than the average employee; now
some are paid hundreds of times more. The "gilded age" is returning
while the value of a college degree is declining.
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- According to the Bureau of Labor Statistics' 10-year
jobs forecast, the majority of US jobs that will be created in the coming
decade will be in domestic services that do not require a college education.
This is a strange job outlook for a high tech economy allegedly benefiting
from free trade. Domestic services are nontradable. The US economy has
not created a net new job in tradable goods and services in the 21st century.
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- Free trade economists have forgotten that not all trade
reflects the beneficial workings of comparative advantage. For comparative
advantage to function, a country's capital must stay at home and be allocated
to activities in which the country has comparative advantage. The other
necessary condition is that countries have different internal cost ratios
of producing different goods.
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- When the principle of comparative advantage was discovered,
capital was mainly kept at home under the watchful eye of the owners and
protected by the country's laws. Tradable commodities were primarily products
influenced by climate and geography, guaranteeing that the cost of a yard
of wool in terms of a bottle of wine would vary among countries.
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- Today capital is more mobile than tradable goods. Modern
production functions are based on acquired knowledge and produce identical
results regardless of location. When a US corporation closes a factory
in Ohio and relocates its production for US markets to China, the loss
of US jobs is not the result of a Chinese firm gaining a comparative advantage
over the Ohio one. It is the result of US capital seeking absolute advantage
in lower cost Chinese labor.
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- Free trade economists have completely forgotten that
the flow of resources to where they have absolute advantage does not result
in mutual benefit. The country that receives the resources gains and the
other country loses.
-
- When capital and technology flow from the US to China
and India, the productivity of labor in China and India rises. In the US
it falls.
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- Outsourcing is eliminating entire American occupations
in engineering and information technology. As there are fewer jobs for
graduates, engineering enrollments in the US are declining. Libertarians
and free traders are so emotionally enamored of the market that they have
forgotten that markets can as easily work against a country as for it.
In the US, markets are working to reduce the supply of American engineers
as US corporations lay off their American employees and replace them with
cheaper Chinese and Indians.
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- Product development, or research and development, follows
manufacturing. As US manufacturing moves offshore, so does R&D.
- Innovation follows R&D, with the consequence that
US science is also in relative decline. In brief, the US is developing
the labor force characteristics of a third world country in which jobs
are available only in lower productivity, lower paid "hands on"
domestic services.
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- For engineering and IT jobs that remain in the US, fewer
are filled by Americans. US firms have learned that they can pay foreigners
on H-1B and L-1 work visas lower salaries, force their American employees
to train their foreign replacements, and then discharge their American
workers. Consequently, there is double-digit unemployment among American
software engineers, IT professionals and computer programmers.
-
- As Lou Dobbs exposed recently on CNN, the US Department
of Labor is currently reserving some 52,000 high tech job openings in US
firms for H-1B visa holders. "Bodyshops" use the visas to bring
in foreigners who take Americans' jobs by undercutting their pay.
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- American firms advertise openings for H-1B visa holders
only. No Americans need apply. Gene Koprowski in TechNewsWorld (August
20) reports that "in excess of 600,000 new visas have been granted
during the last five years. Thirty-nine percent of H-1B visas were for
workers in computer-related occupations."
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- In other words, 600,000 Americans lost the occupations
in which they have invested their human capital. You can be assured that
these 600,000 did not move up to better jobs.
-
- As bad as it is for the individuals, it is even more
costly for the country. The outsourcing of jobs and the importation of
foreigners on work visas are emptying the pipeline of qualified Americans
and destroying US technical occupations. It is paradoxical to hear the
very executives who replaced their US employees with foreigners now complain
about the declining interest of Americans in science and engineering. Last
July Bill Gates expressed his worries about the precipitous decline in
the number of students entering computer science. Why is Bill surprised
when he helped to lead the offshore outsourcing movement?
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- Obviously, it is a vicious cycle. As Americans are discouraged
from the occupations, the corporations lobby for more work visas, which
discourages more Americans.
-
- Seeking to protect their careers from being outsourced,
Americans are turning to domestic services, such as nursing and teaching.
However, H-1B visas threaten these occupations, too. Hospitals struggling
with costs and school systems struggling with budgets are importing lower
cost foreigners to teach American kids and care for American patients.
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- In Nevada the Clark County School District has imported
teachers from the Philippines. Arizona has imported teachers from New Delhi,
India. The New York Department of Education has brought teachers in from
Jamaica. Cleveland, Ohio, has imported teachers from India. It goes on
and on.
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- Joe Guzzardi has a good article posted on vdare.com about
the use of foreign teachers in US schools. This practice raises many questions:
Does the money saved on teachers' salaries go to administrators as bonuses
for cost-cutting? How can foreigners from outside our culture enculturate
American students? What happens to enrollments in US education and nursing
curriculums as imported foreigners fill available positions? What happens
to the laid off US engineers and technical people who are displaced again,
this time from teaching math and science in our schools?
-
- The pressure on school budgets comes from the lost middle
class jobs. As manufacturing and now white collar work move out of US communities,
tax revenues become more scarce. Administrators seek foreign employees
who will work for less.
-
- Eventually, all Americans will be working for less except
the fat cats at the top, who will earn large bonuses by substituting foreigners
for Americans.
-
- What occupations will be left to native citizens? This
question comes to me from many frustrated parents who are trying to give
their children some career counseling. It is possible for Americans still
to earn good incomes from being dentists and lawyers (if they are in the
top 20% of their class). Next one thinks of skilled trades such as electrician,
plumber and auto mechanic. However, Mexican immigrants are crowding Americans
out of the construction trades and may soon dominate other trades as well.
-
- Opportunity for native born Americans is collapsing.
The loss of opportunity is showing up in declining median household income
and rising poverty rate. On September 1, Edwin Rubenstein reported (vdare.com)
that according to the Census Bureau's August 30 report, "median household
income declined for an unprecedented fifth straight year in 2004."
The main reason for declining household income, says the Economic Policy
Institute, is "ongoing weakness in the job market."
-
- HIgher paying jobs are being lost to outsourcing and
to work visas. Lower paying jobs are being lost to Mexicans. With real
income falling for five years (despite an economic recovery), the US poverty
rate has climbed from 11.3% in 2000 to 12.7% in 2004, adding 5.4 million
more persons to the poverty roll.
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- Yet, nothink free trade economists and libertarians--like
LBJ who promised us light at the end of the tunnel in Vietnam and Bush
who promises light at the end of the tunnel in Iraq--still promise that
outsourcing and H-1B visas mean increased wealth for Americans.
-
- Economic science no longer exists in America. Its place
has been taken by emotional commitments to dogmas. Americans and their
hopes are daily paying the price for this great failure of economic thinking.
-
- The August payroll jobs report from the Bureau of Labor
Statistics repeats the consistent pattern of 21st century America--no net
job creation in high productivity sectors. The only jobs created are in
nontradable lower paid domestic services.
-
- Of the 154,000 private nonfarm jobs created in August,
25,000 are in construction and are filled primarily by legal and illegal
Mexican immigrants; 20,000 are in wholesale and retail trade; 16,000 in
administrative and waste services; 43,000 in education and health services;
34,000 in leisure and hospitality (primarily waitresses and bartenders).
Manufacturing lost another 14,000 jobs.
-
- Brand name companies that once were symbols of US manufacturing
are today assemblers of foreign made parts. An industry of assemblers has
no need for engineers or scientists. The dismantling of the US economy
cannot be corrected by education and job retraining. The US is on its way
to becoming a third world country.
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- It is detrimental to the future of freedom that at this
time, when our civil liberties are under attack by the Bush administration
and diminishing economic opportunity is breathing new life into class war,
libertarians and market economists are demonstrating more commitment to
ideology than to the welfare of fellow citizens. By associating freedom
and market solutions with policies that are eroding Americans' prospects,
freedom's defenders are unwittingly stabbing freedom in the back.
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- _____
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- Paul Craig Roberts has held a number of academic appointments
and has contributed to numerous scholarly publications. He served as Assistant
Secretary of the Treasury in the Reagan administration. His graduate economics
education was at the University of Virginia, the University of California
at Berkeley, and Oxford University. He is coauthor of The Tyranny of Good
Intentions. He can be reached at: paulcraigroberts@yahoo.com
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- http://www.opednews.com/articles/opedne_
paul_cra_050905_the_vicious_downward.htm
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