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It’s Good to send jobs to India

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With the recent unemployment numbers in, with roughly 120,000 new jobs last month, and the unemployment down to 5.6% it’s time to discuss an unpopular argument. That sending tech jobs overseas is actually good.

To understand this argument you have to concede three points.

1. The United States is the driving force for economics in the world. We have one of the highest standards of living, and produce most of what the world uses.

2. The United States is the primary engine for technological innovation for the world.

3. We have the hardest working and best trained workforce in the world.

A common double standard by economic liberals is that that we should not send jobs overseas, but on the same hand, it’s unfortunate that we as Americans have the lion’s share of jobs, money, and prosperity in the world. We should share the wealth so to speak. Well, we do. And we should.

Jobs like computer programming and tech support, which cost a lot to do here, are sent to places like India where labor is cheaper. That frees up capital for investments in new technology and industries here. In turn the economies of second and third world countries benefit from support jobs. They have more money to spend on products and services our streamlined industries have to offer.

We all benefit. They have more money, prosperity, and wealth. And we have more money for new technologies, which in turn, will create more jobs here, It’s a continually rising cycle.

The arguments going on against job exportation now also went on in the 1980’s when steel and auto jobs left the United States for places like Japan. It would be feared we would lose our place as economic leader. People feared Japan taking over the world. (so to speak) But for every job we lost to that exportation of jobs, more were gained in new fields like high technology, financial, communication, and service industries.

Economies continually cycle upward and change. One hundred years ago many people were coal miners, steel workers, and railroad engineers. Today those jobs have been replaced by jobs in new sectors unheard of then. The exportation of jobs then lead to investments in the future. The future we live now.

We all benefit in the long run when jobs are exported. The economies of second and third world countries rise. Their spending power is increased and they are more likely to purchase goods and services offered by, and produced, by American companies.

We have a stronger, more efficient workforce which is able to invest in capital, new technology, and research. Our standard of living rises with the tides of others.

We will also be seen as a force of good in the World. The prosperity of our economy drives the growth of others. The whole world benefits.

And that is good.

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About Tom Bux

  • “We all benefit” – well, society as a whole benefits, sure, but the people who lose their jobs don’t.

    Take the popular example of buggy whip manufacturers. Sure, we are all better off now that their jobs are gone. But those guys weren’t too happy about it.

    Churn sucks. The benefits of churn rock. Too bad we can’t have one without the other.

  • Thirty years ago I believed it, too. Then, you could say “That frees up capital for investments in new technology and industries here.” and it was true.

    That’s not happening today.

    The problem is that most capital investments are being made in China (manufacturing), Ireland and Singapore (pharmaceuticals) and other offshore locations. There are exceptions, and this country isn’t about to imminently implode, but the big growth is offshore.

    On the job front, high paying jobs are being exported and lower paying jobs are being created. In a recent study, it was found that nationally, the average salary of the new jobs was 21% lower than the jobs that were lost.

    I did a piece on this as The Myth of Job Recovery with more details.

    It’s not the pretty picture you paint.

  • Tom

    These arguments were made in teh 1980s when steel jobs and auto jobs left.

    But we are better now. I am sick of the doom and gloom economists of the Democrats.

    Jobs are being created, industries are producing more, and we are experience growth not experienced since the 1982-3 Reagan tax cuts.

  • Jobs are being created, industries are producing more, and we are experience growth not experienced since the 1982-3 Reagan tax cuts.

    i see you been to ReligionOfCapitalism meetings.

    do you have to repeat that refrain before or after you kneel?

  • Jobs are being created, industries are producing more

    In China, in India, in Ireland, in …

    Note that this has gotten serious enough to be recognized as a problem at Davos, as noted in this piece from the Wall Street Journal:

    Migration of Skilled Jobs Abroad Unsettles Global-Economy Fans

    DAVOS, Switzerland — Many of the business, government and academic leaders who came here for the annual meeting of the World Economic Forum, traditionally a gathering of advocates of globalization, have voiced doubts over … whether the increasingly global economy will produce as many high-wage jobs in rich countries as once was expected.

    … the rising number of skilled, white-collar jobs migrating from rich nations to developing countries is raising fears that, in fact, well-paid workers in developed countries will have trouble finding equally well-paid computer, design and medical jobs at home. Many of the true believers in globalization at the Davos forum, which ended Sunday, worry that outsourcing also could erode political support for free trade internationally. [Waking up at last?]

    The old rules don’t apply because the profits are being exported as well.

  • Economists writing to the Wall Street Journal this morning put a far different interpretation on the job numbers than you do (they appear to never have heard of Pollyanna):

    It’s Better Than 1,000, But Still ‘Disappointing’

    Economists got burned last month when the December payroll gain missed their forecast by a whopping 149,000 jobs. So, logically, they were bracing for anything this time. But the 112,000 jobs created in January (see article), while an improvement from December’s minuscule 1,000-job gain, still evoked the word “disappointing” from more than one economist. Here’s what economists had to say about the January report:

    ” Although payrolls have now increased for five consecutive months, the total increase is only 366,000 or a very anemic 73,000 per month. This is the weakest job-creation rate relative to economic growth on record.”
    — Steven Wood, chief economist, Insight Economics

    ” The number was very disappointing … We’re not getting the jobs to replace the stimulus [in the economy], which will fade once the first quarter passes.”
    — Dominic Konstam, head of interest-rate strategy, Credit Suisse First Boston

    ” The level of job creation is well under expectations and certainly disappointing for the 26th month of an alleged economic recovery.”
    — William Sullivan, market economist, Morgan Stanley

    ” Payroll growth in January was concentrated in the retail sector … and these moves probably represented the effect of less-than-normal preholiday hiring followed by consequent less-than-normal postholiday job cuts.”
    — Joshua Shapiro, chief U.S. economist, MFR Inc.

    ” Employers are working their workers longer hours instead of hiring more bodies. … This economy under normal circumstances should be generating 200,000 to 300,000 a month” in new jobs.
    — Ken Mayland, president, ClearView Economics

  • Did you people not read what Phillip wrote? The churn sucks. The churn is historically a short-term cycle of pain where people lose their jobs. Re-allocation of labor is the next step and despite the gloomy outlook, savvy people are not going to take jobs bartending at Applebee’s. It takes some time. All your knee-jerk statistics as it is happening don’t mean a whole lot. Like someone else said, there will be new things that didn’t exist before.

  • i read what phillip wrote, but i’m not buying it.

    i’ve read similar articles and they are cheerfully lacking in specifics.

    sure, something new will come along…that’s easy to say in hindsight about things like the loss of manufacturing jobs. though in that particular case the thing that came along was service-oriented jobs…which are also going away.

    the current phenomenon is a fundamental shift that’s going to have nasty consequences as the middle class first shrinks and then disappears.

  • All your knee-jerk statistics as it happens don’t mean a lot

    Actually they’re not mine, they’re not knee-jerk and they do matter.

    The stats are from the Bureau of Labor Statistics.

    The evaluations of their meaning are from economists and business, government and academic leaders at the World Economic Forum.

    I’ll take their expert knowledge over someone’s unfounded jerk-water beliefs.

  • Eric Olsen

    As has been said, we have gone over this numerous times: no, this time isn’t different, this time – like every other time – involved REAL PAIN for REAL PEOPLE and this isn’t funny or to be minimized. We have all either suffered directly, indirectly or know someone who has.

    BUT that does not change the big picture – that the better off the rest of the world is, the better off we are in the long run on many levels NOT JUST ECONOMIC. Do you think we would have seen the political changes we have seen in Mexico with a non-PRI president for the first time in modern Mexican history without the benefits NAFTA has brought? The answer is no.

    And new jobs are being created all the time, even if people have to create them themselves. This is capitalism – this is the way it works – this is why we have unemployment insurance – this is why we need to have training readily and cheaply available to those who lose their jobs, or who are in professions in jeopardy.

  • yep, better get some training ready for all of the software developers (and their managers) cuz’ they’re gonna need it.

    sorry, i’m just a knee-jerk liberal who doesn’t have a much faith in capitalism in the long run.

  • As has been said, we have gone over this numerous times: no, this time isn’t different

    No, this time is different.

    In the “good old days” up to about, say, thirty years ago, export profits were largely reinvested in the exporting country. Today, the opposite holds in a lot of areas, and Ricardo’s theory goes up in smoke.

    Exporting jobs is far different from exporting goods. When you made a profit on wine or wheat (Ricardo’s examples), it made sense to reinvest more in your vineyards and wheatfields.

    When you make a profit on exporting jobs, companies are finding that it makes sense to reinvest in more exported jobs, and there’s the rub.

    As the feedback from Davos indicates, “business, government and academic leaders … voiced doubts over … whether the increasingly global economy will produce as many high-wage jobs in rich countries as once was expected.”

    They’re recognizing that we are in the middle of a sea-change in the structure of international trade and need new concepts to work with (sorry, Ricardo).

    The rest of the world needs to catch on, too.

  • Well, that’s understandable because it has failed so badly so far.

  • And the proof is in the few crappy jobs being substituted for the better jobs being exported.

  • Dude, SHORT TERM vs. LONG TERM! These are the substitutions in the short-term.

    Another thing. Doesn’t it seem a little hypocritical to be the biggest supporter of capitalism and free trade as Americans and then start crying for protectionism when our favorite philosophy starts benefitting, (gasp) people outside the borders of this country? It sure seems that way to me.

    Nobody is stopping you from innovating except your stubborn longing for a job that has now been commoditized. Face it. It isn’t value-add anymore. Just like factories and farming before it. Nothing new here. Now it’s your turn to adapt and react. Not by putting up bigger walls, but by taking advantage of the greater efficiency that can be gained by programming commoditization.

  • nothing is stopping me from innovating?

    oh forget it, it’s not worth it.

    you’ll have to excuse me while i:

    -tell the kid he can’t go to college next year
    -sell my house
    -move to oklahoma to get a cheap apartment and associated job at walmart

    and for the record, i was never arguing for protectionist measures. it just pisses me off tremendously when i see things like those lovely “Pictures Of You” ads from HP…ah yes, we’re here to make product to make your life better….and all the while they’re having their engineers train their offshore replacements.

  • Hey craig… I need retraining. I need to go back to school. School is going to cost me $47,000 however. So I know you are going to be the first to give it to me so that I can go ahead with my “innovating”, right?

  • “Dude”? Cool!

    But the situation is different long-term now.

    The genie is out of the bottle, and it’s a different world. Ricardo’s time has passed (although it wasn’t really ever quite here).

  • So, because of your short-term pain we should abandon free trade and capitalism. If that is your stance then at least we know where we disagree.

  • I personally don’t have any short-term pain, but do have a vigilant eye, and share my observations.

    Speaking of personal, why do you appear to be taking this so personally? You seem to be emotionally-vested in what I see as an impersonal issue.

    It’s certainly an issue where an impersonal, rational approach would bear more fruit.

  • And oh, yeah:

    So … we should abandon free trade and capitalism. If that is your stance then at least we know where we disagree.

    I know where we disagree, but that’s your straw man, not mine, so feel free to beat it severely about the head and shoulders.

  • I have no personal attachment to this. I just can’t stand the same people who hate the way the world looks at the US hoping that we do something to protect jobs unfairly in terms of free trade. Either we believe in it or we don’t. We can’t have it only when it benefits us and then change it around when India starts to benefit. It’s ridiculous and I wish people could see that this is potentially more harmful for US Public Relations world-wide than any “unjustified” military action in Iraq. Nobody, ultimately cares about Iraq, but if we mess with their ability to develop economically… watch out.

  • I don’t really have a problem with free-trade and captialism, but when are you going to start practising it?

    The major problem is this whole global whatever is that it is just a game of three-card monte. It isn’t productive, it isn’t beneficial, it isn’t growth, it is just a con.

    As long as business is focussed on only next quarter growth, it is only going to provide bad news everybody!

  • Eric Olsen

    Jim, your last line is absolutely right: short-sightedness is the biggest problem with the world economy and is at least part of why jobs are being lost here.
    But Craig is right also, as I have agreed repeatedly. Perhaps something as mudane as a change in accounting rules, which I believe is already underway in wake of Enron, etc, is part of the answer. How do you make companies look long- or even medium-range?

  • How to fix corporate corruption? Have Martha Stewart whip Ken Lay’s naked body with barbed wire while setting fire to Donald Trump’s head. On Survivor Island!

    And free liscenses to hunt and kill corporate heads. Make them prey.

  • I just can’t stand the same people who hate the way the world looks at the US hoping that we do something to protect jobs unfairly in terms of free trade. Either we believe in it or we don’t.

    The answer to your question is, if practice is any indicator: “We don’t – never have and never will.” There is no example of free trade and never will be, in spite of what the multinationals (and tame politicians) would have you believe.

    Even the relatively “loose trade” we had has been transmogrified radically in the last few decades.

    The ability to transfer capital internationally relatively easily is an important part of the structural changes that have occurred in international trade over the last thirty years or so. The International Monetary Fund and the World Bank have made it possible to move capital in the blink of an eye. This is a significant difference that was not encompassed in the earlier free trade theories, and is a major reason the “good things will come of it for everyone” is no longer true.

    The likelihood that after they send American jobs overseas multinational corporations will create jobs that are as good in the US is no longer a given, no matter how long you wait. Even if a new industry like, say nanotechnology, develops, what’s the motivation for keeping the jobs in America? The Chinese and Indians are easily as smart as we are, so if they’re willing to work for less, why wouldn’t a corporation move the work there? It only makes business sense.

    Today, the only real reason many multinationals have for keeping their headquarters in the US is because of access to the US stock market and favorable tax treatment of their profits. Some companie have exported almost everything else, right down to their human resources departments, to India and other points offshore. You’ll find an example of this in the Wired magazine you referred me to earlier, page 102:

    As cohead of outsourcing strategy at Bain & Company, Gottfredson tells the tale of a recent client, a CEO who was brought back from retirement to save the struggling West Coast hardware firm he started many years ago. A pillar of the community for having created thousands of local jobs, the CEO originally resisted outsourcing. But as his stock price and market share plummeted, he became desperate, and agreed to take a meeting with Gottfredson.

    Gottfredson’s team paraded out a variety of charts and graphs that all boiled down two simple options: a) become competitive again by sending jobs someplace they could be done better and cheaper, or b) face a slow death. The CEO ordered a complete efficiency audit, at the end of which Gottfredson recommended outsourcing all call centers, manufacturing, HR, IT, and back-office operations.

    Exasperated, the CEO relented and has since trimmed $130 million from his expenses.