What is the future of work? Which party will prevail in not only lowering our unhealthy unemployment rate but ensuring that job growth will continue based on genuine prosperity and not the “bubble economics” such as the housing and Internet bubble enabled by Bill Clinton? Let’s call it “Bubba economics.”
As I said in a previous post, the major driver of our economic doldrums is the rise of China and India during the past decade. What’s more, while economists can claim that the issue is China’s undervalued currency, it’s the slave wages that make outsourcing to China appealing. Let’s face it, American businesses didn’t relocate to southern states because they have a different currency but because they are “right to work” states.
President Obama’s announcement on Monday that the administration would take action against China for illegal subsidies of auto parts sheds a light on the enormous role China is playing in our economic doldrums.
But I’d contend that it’s cheap labor, not subsidies, that’s the problem. The reason why the last decade was the first since the Great Depression in which there was no net job creation in the U.S. is that the 500 million people in advanced economy labor pools, whose average daily wage is $135, can’t compete with the 1.1 billion people who make $12 a day in developing economies such as China, and the 1.3 billion people in rural economies where the daily wage is only $1 to $2 a day.
We didn’t used to outsource, at least not to this degree. In 1955 GM was the largest company, with more than 475,000 employees and only around 75,000 employed by overseas contractors. Today Apple is the biggest company, employing fewer than 50,000 employees here and more than 700,000 abroad.
The standard Republican response to economic doldrums — claiming that tax cuts will incentivize companies to “re-shore” jobs–is absurd. As even the conservative Wall Street Journal admitted, most major U.S. companies pay zero taxes.
While Huffington Post’s “What is Working” campaign has provided vital input on how we’ve got to train more Americans for highly skilled jobs — especially at community colleges — unfortunately the fastest growing jobs don’t require a college degree.
As economist Jeff Faux of the Economic Policy Institute has observed, “the Bureau of Labor Statistics projects that by 2014 the number of occupations filled by people with college degrees will rise by merely one percentage point — from 28 percent to 29 percent.”
What’s more, the BLS says that of the ten occupational groups that will add the most jobs between 2010 and 2020, five don’t even require a high-school diploma.
Those who think we can jump-start the economy by encouraging high tech start-ups need a reality check, given that too many of these start-ups wind up outsourcing much of their work. Wonder why California, our most entrepreneurial state, has one of the highest unemployment rates in the country — 11.5 percent as of March of this year compared to the U.S. rate of 8.3 percent?
In fact, four of the five Congressional districts in the U.S. with the highest proportional decline in jobs are in the tech-heavy San Francisco Bay area — oh, and the fifth is Austin, which is also a high tech area.
Says Intel founder Andy Grove, only about 166,000 people in the U.S. work in the computer manufacturing industry, a lower figure than when the first PC was assembled in 1975. “Meanwhile, a very effective computer manufacturing industry has emerged in Asia, employing about 1.5 million workers,” says Grove. Unlike Apple, GE and HP, “[Intel is] making three-quarters of those chips in the United States, even though three quarters of its microprocessor chips are sold elsewhere. Intel employs 44,000 people in the U.S., more than half its overall workforce of 84,000,” according to Robert D. Hof of Stanford Business Magazine online.
Grove knows first hand the price you pay if you don’t make the stuff you invented:
When Intel’s business consisted of making memory chips, we hesitated to add manufacturing capacity, not being all that sure about the market demand in years to come. Our Japanese competitors didn’t hesitate: They built the plants. Asian countries seem to understand that job creation must be the Number One objective of state economic policy.
Grove’s approach to re-source and re-shore jobs to the U.S.A?
Levy an extra tax on the product of offshored labor. Deposit it in the coffers of what we might call the Scaling Bank of the U.S. and make these sums available to companies that will scale their American operations. If the result is a trade war, treat it like other wars — fight to win. If what I’m saying sounds protectionist so be it.
Grove offers Germany, which produces more high-end goods than China — from autos to renewable energy — as a role model. For one thing, management and labor have a more cooperative relationship, emphasizing on-the-job training and avoiding layoffs by substituting wage freezes or temporary shorter work weeks.
As I pointed out in a previous post, a little-discussed feature of the European Union is that it’s a partnership between large employers and their workers, not just between countries. Works councils, which are mandatory at most companies, not only enable workers to have veto power over job losses but give them the right to meet with management to discuss mergers and the introduction of new technologies, says Steven Hill in Europe’s Promise.
What’s more, some of the most effective economies are unionized AND European. Four of the 10 best economies are the Netherlands, Sweden, Finland and Switzerland. The European Trade Union Confederation consists of 81 unions with 60 million members compared to the AFL-CIO, which represents only 10 million workers., according to Europe’s Promise.
European countries also broker trade deals with other countries. As United Steelworkers President Leo Gerard put it, “If you look at the Scandinavian countries, if you look at Germany they’ve got strategies that include having a balanced trade agenda with China. If the Germans can have a balanced trade agenda why can’t we?”
It will take time and effort to change our labor and trade policies but Americans deserve to know what companies are outsourcing/offshoring their labor so they can choose to boycott them, as I’m doing with Apple products. Unfortunately, the GOP-dominated Congress very likely doesn’t want to offend major U.S. outsourcers, given that these companies are a major source of their campaign contributions — the Chamber of Commerce is the top spender, shelling out more than $885 million since 1998, according to CRP.
Earlier this year the House Republican majority voted down the Peters Outsourcing Accountability Amendment introduced by Rep. Gary Peters of Michigan, which would have required publicly held companies to reveal how many of their employees work overseas. I would urge you to contact your Congressperson (or Peters directly if you’re a New York resident) and urge him/her to ask Peters to re-introduce the bill. It’s a first step in keeping the vital subject of bringing jobs back home on the front burner, not to mention throwing the bums out who would dare impede an effort to bring them back.