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Offshoring Is Only One Cause of High Unemployment

Who is the Blame for Lost Jobs?

by LEE SUSTAR

Is your job going to Guangdong or Bangalore–and is George W. Bush to blame? While corporate outsourcing and offshoring of jobs has already become a central question in the 2004 presidential elections, the debate has so far only scratched the surface of the real reasons for the worst job growth since the Great Depression of the 1930s.

An estimated 2.8 million factory jobs have been lost since Bush took office in 2001. While the unemployment rate is officially 5.6 percent, that’s only because long-term joblessness–the worst in 20 years–is so bad that people have either dropped out of the labor market or have never even entered it. Count those people, and the real jobless rate is 7.4 percent.

That’s why outsourcing–factory jobs moved to China or call center operations sent to India, for example–has emerged as such a hot issue. The Bush administration’s response has shown only contempt for working people. "Outsourcing is just a new way of doing international trade," said Gregory Mankiw, chair of the Council of Economic Advisers. "…More things are tradable than were tradable in the past, and that’s a good thing."

Tell that to the workers at the Maytag plant in Galesburg, Ill. Their factory is set to shut down while production moves to Reynosa, Mexico, where workers will be paid just $2 per hour, compared to an average hourly wage of $14.15 for the workers in Illinois.

As if Mankiw’s let-them-eat-cake remarks weren’t outrageous enough, it turned out that Bush’s first choice to be the White House "czar" for manufacturing, Anthony Raimondo, himself outsourced 75 jobs to China. To Democratic presidential candidate John Kerry, Raimondo is a "Benedict Arnold CEO"–a reference to the traitor in the Revolutionary War.

Kerry has taking a cue from Bill Clinton, who has a presidential candidate in 1992 liked to roll up his sleeves while speaking to union members and denounce George Bush Senior’s lousy record on jobs. Once in office, Clinton, of course, rammed the North American Free Trade Agreement (NAFTA) through Congress–and got Kerry’s vote in the Senate.

NAFTA led to the loss of 500,000 U.S. jobs between its launch in 1994 and 2002, according to the U.S. Department of Labor. A separate study by Robert Scott of the Economic Policy Institute (EPI) found that some 879,000 U.S. jobs disappeared as a result of NAFTA. While even this higher number is a tiny fraction of the total number of jobs in the U.S. economy, many of the manufacturing jobs lost were unionized and decently paid.

According to a U.S. government commission, trade is responsible for at least 15 percent to 25 percent of the growth in wage inequality. However, there’s more to this story, according to the EPI’s Scott. "When trying to identify the causes behind trends such as the disappearance of manufacturing jobs, the rise in income inequality, and the decline in wages in the United States, NAFTA and the growing trade deficits provide only part of the picture," he wrote.

"Other major contributors include deregulation and privatization, declining rates of unionization, sustained high levels of unemployment, and technological change." In other words, Corporate America has eliminated jobs and lowered wages even where trade isn’t decisive.

That’s why politicians like Kerry find that it’s safer to confine the debate to trade rather than challenge the Wal-Martization of America, created by the corporate backers upon which Kerry depends. After all, his campaign Web site, JohnKerry.com, posts an adoring article touting Kerry’s "healthy respect for market forces."

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TODAY, THOSE "market forces" are driving increasing numbers of white-collar jobs overseas. The media is rife with stories about "offshoring" of technology, financial and call center jobs to India, where a large pool of highly educated English speakers offer a low-wage labor pool for Corporate America.

The focus on India, however, is misplaced. According to a study by McKinsey Consulting, of $20 billion in outsourcing revenue from the U.S. in 2002, Ireland accounted for $8.3 billion; India for $7.7 billion; and Canada, $3.7 billion. In fact, Canada also was one of two industrial countries–Spain was the other–to have gained manufacturing jobs between 1995 and 2002, according to a recent study by Alliance Capital Management.

Overall, some 22 million factory jobs were eliminated worldwide over this period–an overall loss of 11 percent. Even China saw a 15 percent decline in factory jobs. The reason for much of this job loss is advances in productivity–especially in the U.S.

"With productivity growing at an annual rate of 3 percent to 3.5 percent rather than the expected 2 percent to 2.5 percent, the reason for the jobs shortfall becomes clear," Business Week concluded. "Companies are using information technology to cut costs–and that means that less labor is needed." Given the global gut in industries from airlines to autos to steel–the result of the boom years of the late 1990s–business is reluctant to invest and hire more workers.

If China and India are blamed for U.S. job losses, it’s in part because Washington wants to use the issue to get trade concessions from those countries. And, as with trade tensions in the past, racism plays a role. The supposed threat of two billion-plus Indians and Chinese stealing "American jobs" is seen as more politically effective than, say, blaming Canada.

These dynamics can be seen in the AFL-CIO’s formal complaint against China, which blames that country’s suppression of labor rights for low wages that have allegedly led to the loss of 727,000 manufacturing jobs in the U.S. While this approach seems to highlight the conditions of Chinese workers, it nevertheless effectively allies the AFL-CIO with the Republican China-bashers in Congress.

If U.S. unions want to challenge China’s labor practices, they should step up organizing at the 10 U.S. companies who are among China’s top 40 exporters. And if the China-bashing is destructive, so too is relying on employers in a "buy America" campaign. For example, steel tariffs enabled companies to raise prices, but job losses and concessions have continued.

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INTERNATIONAL SOLIDARITY is the only way workers can avoid being pitted against one another in trade wars between governments. The international labor opposition to the World Trade Organization and the Free Trade Area of the Americas show the potential for such a strategy.

If union leaders are serious about defending jobs, they have to break with the tradition of partnership with employers. For example, steelworkers could demand that the government to purchase steel for the reconstruction of run-down public schools and inner cities–or the nationalization of the steel industry.

Unions not only need to take a stand against concessions but demand that workers’ higher productivity be used to support shorter hours for full pay in order to increase the number of jobs. The bosses can certainly afford it–profits as a share of national income are at an all-time high.

Rising health care costs–cited by employers as a reason to hold down hiring–can be brought under control with a national health care insurance system. Workers in factories slated for closure could take inspiration from the sit-down strikes that built the unions in the 1930s, and occupy their plants to fight for their demands. Organized labor can demand a real jobs program of public works–not the Clinton "workfare" that forces welfare recipients to take jobs for sub-minimum wages, but long-term employment

All this will be dismissed as "unrealistic" by union officials–as if pinning labor’s hopes on a free-trader like Kerry is rational. It should be recalled that it was "unrealistic" to build unions during the mass unemployment of the 1930s as well. The fight for jobs will remain an issue beyond the 2004 elections. It’s time to develop a realistic strategy–one that centers on fighting back.

LEE SUSTAR is labor editor for Socialist Worker newspaper. He can be reached at: lsustar@ameritech.net