Wake up call

When I woke up this morning, grabbed a cup of coffee to steady myself, and flipped on the computer, what should greet me as the first news item but: “Tech Firms Defend Moving Jobs Overseas.”

This thing is heating up as a political issue and the everybody is getting their licks in. Companies wanting to fend-off protectionist moves are saying legislation about trade is not the solution.

The companies said such policies would do little to resolve long-standing problems more broadly affecting America’s global competitiveness, such as low-scoring schools and inadequate research spending. Erecting barriers, they said, “could lead to retaliation from our trading partners and even an all-out trade war.”

Personally I think this view is pretty correct. But there’s more.

“There is no job that is America’s God-given right anymore,” Carly Fiorina, chief executive for Hewlett-Packard Co., said Wednesday. “We have to compete for jobs.”

Intel chief executive Craig Barrett said the United States “now has to compete for every job going forward. That has not been on the table before. It had been assumed we had a lock on white-collar jobs and high-tech jobs. That is no longer the case.”

Well said, Karly, Craig.

On the other hand:

Marcus Courtney of Seattle, dismissed the latest report. “This is not a recipe for job creation in this country,” said Courtney, president of the Washington Alliance of Technology Workers. “This is a recipe for corporate greed. They’re lining up at the public trough to slash their labor costs.”

I would have more sympathy for Marcus if I had seen high-tech workers saying this sort of thing when blue-collar jobs were going overseas. Most of these characters weren’t complaining when that “corporate greed” was fattening their stock option packages.

The debate is getting hot and rightly so. I think Americans are vaguely beginning to realize there may be some other reasons to feel insecure besides terrorists. Long neglected issues like mediocre math and science education are finally beginning to show their consequences, and the implications are big.

But someone else had this to say:

“The problem is not a lack of highly educated workers,” said Scott Kirwin, founder of the Information Technology Professionals Association of America.

Hey, that sounds good Scott. Then he concludes:

“The problem is a lack of highly educated workers willing to work for the minimum wage or lower in the U.S. Costs are driving outsourcing, not the quality of American schools.”

Uh-oh! We’re not dumb; we just can’t afford to live in America anymore! Name your poison.

That reminds me, lest anyone thinks this is just about IT, I forgot to mention a remark you might have picked up in the Schumer article or broadcast from yesterday: the number of radiologists in the US is expected to decline in the next few years because digitized images can be read by Asian radiologists. Indeed, it seems to me a whole lot of medicine can be done from thousands of miles away. If the experiment of monitoring 20,000 VA patients by telemetry works, you can expect to see a whole lot more remote work.

Heck, I belong to Kaiser Permanente—they are moving their back office work to India—and I haven’t seen a America-born doc in 10 years. Why not have a cheap technician poke and prod me and attach the appropriate monitoring devices. My “personal physician” could be anywhere. Expect to see a lot of this by managed care organizations. How else is the cost of delivering health care in the US going to be handled?

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  1. The debate while complex has simplified into a one issue emotional argument, which can be summed up in the phrase ‘we are losing American jobs’. Demagoguery abounds simple solutions are proposed and billed as only alternatives. We need to look at the problem at several levels. The issue affects different demographics in different ways.

    As economic activity has become more complex the need for smart well-educated people has become the paramount business consideration and driver. Technology allows these key people to live and work anywhere, they don’t need to move or get visas. High intelligence exists in every country but in each it represents only a small percentage of the total population. No country can significantly change the number of its citizens that rank in the top 5% on basic intelligence. By definition 95% will not be in the top 5%. At best a country can provide exceptional education and give a few more of its citizens a leg up on the bright citizens of countries that don’t. Survival in global business mandates that if a corporation needs PhD’s in a certain field they are required to find and employ them wherever they are, it would be management folly to reduce standards and risk the business. If countries try to mandate such actions economic disaster will soon follow. Everyone needs to understand the painful reality that no country has a lock on the smart educated people and thus no country has an unassailable claim on a particular set of high-level jobs. We always knew that globalization would break trade barriers now we are discovering it also breaks borders. We may also find that for those with high intelligence and education loyalty to a profession or industry will replace allegiance to geographic locations.
    The critical economic and social issues for nations will be not what happens to the privileged but what happens to the majority. How productive and secure the majority are, is and will always be the critical political question. Productivity and security have always depended on training, education, health care, justice and the other things that the American public have always valued.

    What are the options for the majority? The US in world terms has a history of being a high cost manufacturer primarily because of high wage costs. Manufacturing jobs have been going off shore to lower wage centers for years. Some are just not coming back because Americans will not pay the extra costs for commodity products like shoes and shirts. High value product manufacturing is different; think of cars and airplanes that are world use products. Our wage costs have been historically high but we have spent the last 18 months devaluing the dollar. In dollar terms European workers are now far better paid then Americans in similar jobs. It has made us far more competitive. It is now cheaper for a European car manufacturer to build product in the relatively low wage US then at home. Indeed off shoring to the US has become a European manufacturing strategy. Since the dollar spent in the US has not inflated the relative wage decline has gone largely unnoticed by American workers. The new imported manufacturing jobs appear to us to be as high wage as ever. Even the stock market responds as American companies with international sales convert higher value foreign currencies to lower value dollars their profits in dollar rise. Sales maybe the same but the currency conversion gives them a higher dollar value and higher reported earning drive stock prices up. Of course the costs of a foreign vacation or a luxury Swiss watch have gotten expensive but for most Americans those items are not a high priority. The devaluation solution is at best a short-term fix that can end in a serious downward spiral. Manufacturing of high value products is skilled work but with proper education and training countries with even lower costs can catch and out compete us. It has clearly happened before. There were good reasons to devalue the dollar but it is like a special sale. In an integrated world economy you can only do it rarely with out becoming a low value market with high inflation. Education is the key to breaking the cycle. We cannot continue to rank among the lowest in the industrial world on 8th grade math and science scores and keep our middle class competitive.
    The other threat to the majority comes from waves of low cost immigrant workers who drive wages lower because they will work for less. Sure there are jobs Americans don’t want but the big reason is the pay scale. Adding an increasing number of guest workers, who will work at low wages, will only magnify the pressure to reposition lower level jobs to even lower wages. The demographics of the US will require an influx of foreign workers, who are fairly paid, if we are to keep the economy functional and productive but to avoid disaster we need to be selective and recruit for the skills needed. We have to fill positions where there will be shortages. We know we will need nurses we should recruit them, it will do no good to import gardeners. If Americans don’t take the employment issues caused by the global economy seriously and come to rational practical solutions that address every level of the work force, we will come up with an emotional one size fits all reaction, likely it will be painful and growing anger.

  2. I think you’re right, Mike. What I’m hopeful about is that the debate seems to be spreading and broadening in it’s scope. That is, 6 months ago it was just about IT workers; now it’s beginning to be a more general debate about competitivenss. That’s encouraging. There’s plenty of time for this to become a real hot topic for the election, as it should. However, during an election year you tend to get short-term, short-sighted demands for action that promise to protect the homefolks, but they do little to solve the real problems.