June 28, 2004

The Outsourcing Myth

I worked in International Shipping, Warehousing and Distribution from 1985 to 1996. I saw the rise of Globalism, the inception of NAFTA, and worked accounts that are now the power houses of consumerism, such as Walmart and Dayton Hudson (Target)and Payless shoes...and some that are extinct like Montgomery Ward, May Co. and Members Only Outer Wear...

Then as now I still believe that we gain more than we lose by being willing to give up some jobs to advance productivity and gain better ones...I do think that its sad that some things are not made here that once were. Take Converse sneakers...Up until a few years ago they were made here...However the "unibody" construction and the materials that they are made from are hazardous to mix and assemble. WE in the US want our sneakers to never wear out and to be super comfy with all that padding and support...So all the work is outsourced to Malaysia, and now China. No regulations on the use of toxic plastics (dont do a Richard Read and light your shoe on fire you will die of the toxic smoke.) People getting burned by the machinery that assembles them, Im sure happens everyday. the workmen's Comp People were having a field day in North Carolina, along with the EPA People, So off shore we go...

Im sure that this is true with a lot of factory jobs, however...Im not so sure I like my tax returns being processed in India and you all know of my Computer debacle with Dell Manila telling me to dump my hard drive to save it...Sounds like war doesn't it...Dell is moving some of its help desk operations back to the US, maybe we could have a branch here on the Big Island???

Trade is the life blood of these Islands, and we have been really hampered by the Jones Act that restricts vessels calling here, and by certain business interests that really are not key players any more... thanks to our Senator Inoyue, that law ans its restrictions has been lifted and we will have a foreign cruise line with ships flaged in the US under US laws creating 7000 to 10000 new jobs here in Hawaii. WE have to think out side the box and embrace new ideas and develope new types of jobs for our people, Its going to involve retraining and doing something weve perhaps not done before...

To those that are unemployed, my heart goes out to you... I know too well the pain of not having a job, and the struggle to make ends meet. But the scapegoat of"outsourcing" is not the reason you are unemployed for the most part, its changes in the economy and the job market and how we in the US are choosing to do business.

Here is an article on outsourcing
From World Trade Magazine...I wish I had had access to this publication way back when, it has a lot of good stuff in it...


Exporting Tech Jobs Doesn't Hurt U.S. Trade
Alan Reynolds


Those afflicted with an irrational phobia about international trade used to confine their raving to manufactured goods, not services. But the United States is now said to be exporting high-paying service jobs to India, particularly in information technology. Worrying about U.S. companies importing services from India is a classic example of the journalistic inclination to ignore the forest and focus on a few twigs. The United States is by far the world's biggest exporter of services, just as the United States is by far the leading exporter of goods.
The United States accounted for 18.1 percent of worldwide service exports in 2001, according to the WTO, up from 17 percent in 1990. India accounts for only 1.4 percent of world service exports. India is in 21st place among world exporters of services and in 30th place for goods. India is running a trade deficit of about $8 billion, and that country's imports rose 20 percent in 2003. China ranks fifth among world exporters of goods (although China accounts for 11 percent of U.S. imported goods), and it has a small and dwindling trade surplus. China's imports rose 40 percent in 2003.

The United States had a $64.8 billion trade surplus in services in 2002, despite economic stagnation in Europe and Japan. Services accounted for 30 percent of all U.S. exports and 43 percent ($3.1 billion) of U.S. exports to India.

Worrying about job changes among computer professionals is yet another example of the journalistic inclination to totally ignore any facts about the big picture and instead generalize from small and local anecdotes. The Bureau of Labor Statistics categorizes these allegedly vanishing jobs among "computer and mathematical science occupations"-i.e., computer programmers, software engineers, systems analysts, support specialists, network administrators, etc.

In 1999, there were 2,620,080 jobs in these computer-related professions at an average wage of $26.41. In 2002, there were 2,772,620 such jobs at $29.63 an hour ($61,630 a year). Figures on that specific job group are not available for 2003, but professional business service payrolls were up 2.3 percent by November, when compared with the year 2000, and jobs in information industries were up 4.9 percent.

The notion that service jobs are being lost to India is paradoxical because similar complaints about China or Japan invariably involved disparaging U.S. service jobs as "McJobs"-inferior to working with a sewing machine or wrench. In the case of India, however, even the most menial computer service chores-such as tech support and handling health insurance claims-are now being glorified as "high-wage" jobs. Past stories about "exporting jobs" also assumed those jobs had moved to countries with trade surpluses, such as Japan and Germany. But India has a sizable trade deficit, and it even had a deficit in services until 2002.

Trade phobia has lost any sense of direction. The United States is now said to lose jobs to countries with trade deficits as well as to countries with trade surpluses, and to lose jobs in services as well as manufacturing. Some even suggest the United States will lose most service jobs to India and most manufacturing jobs to China. But without jobs, how could Americans keep buying all those imports?

A New York Times report claimed India is attracting a lot of direct investment from multinational corporations. Yet Morgan Stanley reports: "Private corporate investment (in India) is estimated to have declined to 4.7 percent of GDP in 2003 from 9.6 percent in 1996."

The United States has always imported and exported services as well as goods. So what? Even if we ignore this country's huge and growing dominance of world service exports, it would still be delusional to speak of importing services as equivalent to exporting jobs. The notion that "exports create jobs" (every commerce secretary's favorite slogan) is neither more nor less true than the idea that imports create jobs. Work is involved in all creation and marketing of goods, services and financial assets. Work is also involved with the extra investment resulting from a net inflow of foreign capital, otherwise known as a "current account deficit." Growth of employment is related to growth of the economy, not to imports or exports or the gap between them.

If the United States was really losing more jobs than it was gaining, then employment would be falling. But employment is rising. There were 138.6 million civilians with jobs in November, up from 136.5 million a year earlier. The number of U.S. jobs doubled in fewer than 40 years. If the rapidly expanding number of jobs were inferior to the ones that preceded them, then incomes would be falling. But incomes, too, are rising.

The media blitz about imported goods or services resulting in the best jobs being relocated to some variable list of countries-first Japan and Germany, now India and China-has never been anything more than unadulterated hogwash.





Alan Reynolds is a senior fellow at the Cato Institute and has been a frequent contributor to such publications as the Wall Street Journal, the American Spectator, National Review, and the Harvard Business Review.

So the next time someone pounds you on the job thing...you have a bit of ammo...Information is the best preventative against the plague of ignorance...