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It's The Jobs, Stupid

by Randolph T. Holhut

Like their blue collar brethren, white collar workers see jobs go overseas
(AR) -- The recession is over.

So says the National Bureau of Economic Research, the official arbiter of U.S. business cycles. It announced on July 17 that the recession that began March 2001 ended eight months later in November 2001.

The 2001 recession was one of the briefest since World War II, but the bureau also found that it was followed by one of the weakest recoveries. In the months that followed the end of the 2001 recession, the supposedly recovering economy grew at half the rate of previous upturns.

That might explain why there now are 9.3 million Americans that are jobless and why the U.S. unemployment rate is currently at 6.4 percent -- the highest it has been in nearly a decade. In the 19 months since the end of the 2001 recession, more than 2 million jobs disappeared.

This year, President Bush has promised that his $330 billion "jobs and growth" tax cut plan will create 1.4 million new jobs by the end of next year.

The U.S. economy would have to generate an average of 300,000 new jobs a month from now until the end of 2004 to create 5.5 million new jobs -- that's the promised 1.4 million from the tax cuts and the 4.1 million that White House economists earlier this year predicted would be gained with or without the tax cuts.

Think it's going to happen? Probably not. When Bill Clinton was president, the U.S. economy gained an average of 239,000 jobs per month. Since Bush took office, jobs have disappeared at a rate of 69,000 a month.

It looks like almost a dead certainty that there will not be 5.5 million new jobs by December 2004. If you want some proof, check out the June 9 issue of Fortune. It details a dirty little secret in the American economy -- how white collar workers are seeing their jobs outsourced to foreign countries.

The U.S. manufacturing sector has been nearly wiped out by overseas competition. Now, it's the service sector's turn. Tasks such as financial analysis, software design, tax preparation are now being done in India and the Philippines. The quality of the work is good. The price is even better. Where, say, an American accountant's starting pay ranges from $40,000 to $50,000, an accountant in Bangalore gets less than half that.

Forester Research, a Massachusetts-based technology consultant, estimates that 3.3 million service jobs will move to countries such as Russia and China in addition to English-speaking countries such as India and the Philippines over the next 15 years. Information technology and financial services will be the two sectors that should see the most overseas outsourcing.

"The debate of at major financial services companies today is no longer whether to relocate some business functions but rather which ones and where," Andrea Brierce, managing director of the consulting firm A.T. Kearney, told Fortune. "Any function that does not require face-to-face contact is now perceived as a candidate for offshore relocation."

This is a frightening prospect for every person who thinks the U.S. economy can grow its way out of recession. Traditionally, white collar workers have gotten laid off when times are bad and get rehired when things pick up. Now, like their blue collar brethren, they're watching their jobs get shipped overseas and those jobs are likely not coming back.

It's equally frightening for people who still believe that a college degree or senior executive experience is protection against long-term unemployment. According to the Economic Policy Institute, 18.1 percent of the long-term unemployed in 2002 had college degrees and 20 percent were from the executive, professional and managerial category. This compares to 14 percent in 2000 for both segments.

The long-term trend of good, stable and well-paying jobs being replaced by not-so-good, unstable and lousy paying jobs is something that few folks are talking about. But it is a trend that all of the tax cuts in the world won't change.

The code phrase for this trend is "labor market flexibility." When you hear economists and business people say it, they mean a labor environment where -- if you are fortunate enough to have a job -- you are willing to work longer hours for lower pay and if you aren't, then your job will go someplace else where someone will do it for even less money.

In the rest of the world, they call this "The American Model." Countries that still insist on quaint ideas like socialized medicine, cradle-to-grave social welfare, unfettered access to higher education, protection of domestic industries and jobs that pay a living wage are doomed in a global economy where corporations want cheap labor, low taxes, no unions and no government regulations.

This is how the world's economy now works. Productive workers in the U.S. are discarded as companies search for cheap and compliant overseas labor. The average two wage-earner family in the U.S. is working about 300 hours more a year than 20 years ago, with little or no growth in real wages. And most of the jobs that have been created in the past decade are low-wage service jobs that are insufficient for raising a family.

The unrelenting demands of investors to show an ever-greater profit, the demand for cheap consumer goods and services that Americans feel is their birthright and a global economy that has become reliant on producing more stuff at less cost have all combined to siphon jobs out of the U.S.

The only winners in this race to the bottom are the corporations profiting from this global exploitation of workers.

When workers don't earn enough to buy the products they make and corporations hopscotch the globe searching for ever-cheaper labor, you have a recipe for an economic disaster. But neither the Republicans nor the Democrats want to talk about this.

Any serious discussion of the economy has to address the hemorrhage of U.S. jobs to other nations and the steady erosion of the standard of living of U.S. workers that has resulted. If not even white collar jobs are safe from overseas outsourcing, what does this mean for the American economy?

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Albion Monitor July 24, 2003 (

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