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Interesting reading
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ret    Posted 02-16-2004 at 16:02:17       [Reply]  [No Email]
Outsourcing: Who's Safe Anymore?
The federal budget deficit will limit help to displaced workers

The American economic recovery is more than two years old. But jobs and worker incomes have yet to rebound. If this recovery had followed the typical pattern of past recoveries, by now the economy would have created more than 8 million additional private-sector payroll jobs. According to Stephen S. Roach of Morgan Stanley (MWD ), employment is even 2.4 million jobs lower than the level predicted by the economy's performance during the 1991-92 economic upturn, until now America's worst jobless recovery. And slack labor demand has depressed wage and salary growth. Since the beginning of the recovery two years ago, payouts are down 1% in real terms -- in a typical rebound, they would be up by nearly 8%. The difference translates into about $350 billion of missing income for America's workforce. What's going on? Advertisement

NO ONE KNOWS FOR SURE, but a growing number of observers point to American companies' outsourcing and offshoring strategies as the force altering the usual links between economic recovery and employment growth. Rough estimates suggest that the U.S. has lost 400,000 to 500,000 information-technology-processing jobs to outsourcing over the last few years. It's a small number in an economy that employs around 130 million workers, but outsourcing is moving quickly up the wage-skill chain from call-center employees to software engineers, medical specialists, lawyers, and financial analysts. Observers may disagree about outsourcing's role in the current cyclical recovery, but outsourcing will clearly be a powerful source of structural change in labor market dynamics over the next decade. Forrester Research Inc. (FORR ) estimates that about 3.3 million American jobs in business services alone will be shifted overseas during this period. The actual number of American jobs, including high-wage, high-skill jobs, in jeopardy is likely to be considerably higher.

According to standard economic theory, the outsourcing of services, like the outsourcing of manufactured goods, is good for the American economy. It'll enhance the productivity and competitiveness of U.S. companies and increase the demand for their other goods and services and for the U.S. workers who produce them. In addition, as foreign incomes grow, the demand for U.S. exports will expand, providing new domestic high-wage job opportunities. In a recent study, Catherine L. Mann of the Institute for International Economics analyzed the outsourcing of manufactured components by U.S. computer and telecommunications companies in the 1990s. She concludes that outsourcing reduced the prices of computers and communications equipment by 10% to 30%. This stimulated the IT investment boom and fueled the rapid expansion of IT jobs. She argues that the offshoring of IT services will have a similar effect, creating jobs for U.S. workers to design, tailor, and implement IT packages for a range of industries and companies.

Mann acknowledges that outsourcing is often painful for displaced workers. She urges that trade-adjustment assistance and wage-insurance programs currently offered by Washington to manufacturing workers who lose jobs to foreign competition be extended to white-collar workers displaced by outsourcing overseas. As outsourcing grows, so too will the importance of public policies in education and training, in health-care insurance and pension portability, and in unemployment-compensation programs that foster the skills and mobility of the U.S. workforce. Unfortunately, growing federal budget deficits will limit help to workers displaced by outsourcing.

So far the debate about the benefits and costs of outsourcing has focused on jobs, not wages. Yet the risks to the latter may be more important. Over the past 30 years, the wages of low-skilled American workers, those with a high school education or less, declined both in real terms and relative to the wages of skilled workers, especially those with a college education or higher. Technological change and outsourcing decreased the demand for low-skilled U.S. workers.

Now the outsourcing of high-skill jobs threatens to shift demand away from high-skilled workers to cheaper substitutes in Asia. Like the assembly line revolution that cut demand for skilled artisan workers during England's industrial revolution, the new wave of outsourcing may prove to be a technical change that curtails demand for many U.S. skilled workers. The outsourcing of high-skill American jobs may yield economic benefits for the nation. But there may be a sizeable number of losers as well.

Laura D'Andrea Tyson is dean of London Business School.


Burr    Posted 02-16-2004 at 18:25:41       [Reply]  [No Email]
Here's what Scrub's main man had to say about that very subject..

"Outsourcing is a growing phenomenon, but it's something that we should realize is probably a plus for the economy in the long run,'' Mankiw.

We Uhmurikins don't need high paying employment or medical bennies. We can get by with more tax cuts, higher national deficits, more kick backs to Halliburton/Cheney and we also request that folks not bellyache about our sweet heart--Uncle Dick Cheney being a close personal friend of Justice Scalia, and they can use our tax dollars to go duck hunting in Loozeeaner if they want to.

I just hope Al Sharpdude nor Jette Jatson ever start duck hunting with *his honor* Justice Scalia.

Yeah-yeah, I know what yer thinking... It's alright for a sitting judge to be personal pals with the folks he chose as Pres and Veep. I think so too. Just as long as I can get the drive thru winder spot at my McJob. I hate the deep frier.

bill b va    Posted 02-17-2004 at 02:11:56       [Reply]  [No Email]

well the crooked polititians could out law cooking at home because of the enviornment (especially cook outs) and look at the ham burger flipping jobs that would be created .

Butch    Posted 02-16-2004 at 20:08:51       [Reply]  [No Email]
Have to say I spent my tax break check without any notion that I cheated any of the nations poor but I actualy agree with the better part of that post Burr, something's wrong here! You realy should read more in depth articles concerning Cheneyburton. They have been trying to 'splain that them was accounting "errors", pure mistakes and they are sorry.:o) I figure that by the time they give any of it back they will have made a handsome sum in interest if nothing else. Your gonna have to fight me for the drive up window job though, hopefully we'll end up at different McD's

Burrhead    Posted 02-17-2004 at 09:53:56       [Reply]  [No Email]
The last track I had of it Cheneyburton Inc owes $27 mil for overcharges against meals and oil field maintenance work.

Dave Munson    Posted 02-16-2004 at 17:51:38       [Reply]  [No Email]
I read the other day that the average annual workers salary dropped from about 45k in 2001 to 35k last year.

Anyone have a good feel for results of wage deflation and what it signifies?

Dieselrider    Posted 02-16-2004 at 17:44:17       [Reply]  [No Email]
I wish they would outsource all the college professors and economist jobs to other countries for awhile.

Stan ETenn    Posted 02-16-2004 at 16:23:11       [Reply]  [No Email]
This reminds me of when my company started introducing computers into our workforce. We were told that computers would create jobs. Turns out they eliminated many more jobs than they created. But they were telling the truth. I think by the time this plan? begins to work I will be long gone. God save America!

deadcarp    Posted 02-16-2004 at 16:11:47       [Reply]  [No Email]
that's what worried me when washington started selling us out with this "global econoomy" crap. what that really means to workers is that instead of competing with the rest of the guys in the shop, now you'll be competing with any human anywhere who's capable of being trained to do it. and there are some desparate people out there on the globe. we're supposed to politely work for their wages? :)

Lazy Al    Posted 02-16-2004 at 16:45:17       [Reply]  [No Email]
Politely work for their wages which is like 80 bucks a month, Right ? How are you gonna maintain you standard of living on that wage?
Like Stan says God save America

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