The old protectionist dodge
If you have shopped for a toy lately, you will have noticed how inexpensive many have become. On average, in the past six years, toy prices have fallen by about 25 percent. That is typical of what's been happening over a vast range of goods and services that we import. Lower prices and high quality, of course, are what American consumers expect. They're not thinking about paying a higher price in order to keep jobs in America, and this gives retailers little leeway in product sourcing, whether the products are made in China or South Carolina.
Now outsourcing is talked about as a national disaster, but we forget that it brings lower prices, which beget lower inflation, which begets an increase in the real purchasing power of people with relatively stagnant wages. It also begets lower interest rates, which beget higher investment and economic growth and lower mortgage rates. And according to a McKinsey Global Institute study, for every dollar a U.S. company spends on outsourcing, our economy gains $1.14.
Two-way street. The media, and vulnerable workers, naturally focus on jobs lost to overseas, but even the job shift hasn't been one way. Four and a half million Americans work for European companies here; a million-plus work in companies involved in global trade. And foreign companies are continuing to invest in America, despite our higher wages. Look at the auto sector, with plants like Mercedes-Benz, Honda, BMW, and Toyota. And check out foreign investment in our financial services, pharmaceutical, chemical, and energy companies. They're all growing. And this is on top of the $600 billion invested annually here to support our trade deficit. It brings to mind Oscar Levant's saying, "People always talk to me about my drinking; they never ask me about my thirst."
There is understandable anxiety that we no longer have a lock on the high-tech, white-collar jobs that were supposed to be the next employer for those who lost manufacturing work. Everybody is aware of a new, global, highly skilled labor force that earns as little as a tenth as much as we pay here. And everybody's nervous--even those earning $75,000 and up. No wonder high-tech workers live increasingly under the shadow of this competition.
The fuss over outsourcing must not be allowed to obscure the real reason for our disappointing job and wage numbers. It's productivity. Increase in output per worker has, until recently, exceeded growth in the gross domestic product. This means fewer jobs, including 800,000 management and executive positions in the past four years--jobs that would not be outsourced to Bangladesh. Why? Companies will simply not hire new staff until they have confidence that sales will increase faster than gains in productivity.
We have seen this movie before. Productivity has brought about huge job losses in manufacturing, not just in America but worldwide, where 22 million manufacturing jobs vanished between 1995 and 2002. In the 1990s, we began outsourcing memory chips, laptops, and other high-tech equipment manufacturing to China and Taiwan. The fear then was that this might lead to the loss of our technological edge. But U.S. semiconductor makers shifted into high-value microprocessors and sparked a productivity boom. All sorts of businesses found new ways to apply this technology, resulting in multibillion-dollar new Internet markets and thousands of new jobs. The same thing is likely to happen again.
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