Careless journalists and commentators are hyping the 274,000 new April payroll jobs as evidence of the health of the US economy. An examination of the details of the new jobs puts a different view on the matter.
April’s job growth is consistent with the depressing pattern of US employment growth in the 21st century: The outsourced US economy can create jobs only in domestic nontradable services.
Of the 274,000 April jobs, 256,000 were in the private or nongovernment sector, and 211,000 of these were in the service sector as follows: 58,000 in leisure and hospitality (primarily restaurants and bars), 47,000 in construction, 29,200 in wholesale and retail trade, 28,000 in health care and social assistance, 17,300 in administrative and support services (primarily temps), 11,700 in transportation and warehousing, 8,800 in real estate. A few scattered jobs in other service categories completes the picture.
Americans regard themselves as “the world’s only superpower,” but the pattern of American job growth in the 21st century is that of a third world economy. The US economy has ceased to create jobs in high tech sectors and in export and import-competitive sectors. Offshore outsourcing of manufacturing and of engineering and professional services is dismantling the ladders of upward mobility that made the American Dream possible.
Not only is the US economy creating third world jobs, according to analysis by Edwin S. Rubenstein (vdare.com, April 2, 2005), it is creating the jobs for Hispanic immigrants. Rubinstein examined job growth by ethnicity and found that Hispanics (13 percent of the work force) are gaining 60 percent of the new service jobs.
Rubinstein’s findings are consistent with the racial composition one observes on construction sites, in fast food restaurants, in waste services and among hospital orderlies.
Until recent years American jobs had nothing to fear from
low-wage foreign labor. Americans’ high pay reflected their high productivity from working with the most capital and best technology.
The collapse of world socialism and the rise of the high speed Internet forced Americans to compete head to head in the same global labor market with low wage foreign labor working with identical capital and technology. When US and European corporations move their manufacturing, research and development offshore or contract with offshore producers to supply the products and services that they market, the jobs and associated incomes are also transferred abroad.
Americans and Europeans cannot compete in labor markets with Chinese, Indians, and Eastern Europeans, because the cost of living in North America and Europe is so much higher. In addition, there is a vast excess supply of labor in China and India that overhangs the labor markets there and keeps wages low.
The claim by outsourcing’s proponents that outsourcing creates new and better jobs for Americans is pure fantasy. This claim can find no support in job and income data. Moreover, the same incentive to outsource that is sending so many jobs abroad applies equally to any new replacement jobs.
The only American jobs that are safe are in domestic nontradable services that cannot be outsourced, and even in these domestic services, such as school teachers and nurses, foreign workers are being imported via work visa programs.
Outsourcing’s proponents claim that it benefits corporations and their shareholders. This is true only in the short run. The substitution of foreign labor for American labor allows executives to reduce costs and increase profits, thus producing large bonuses for themselves and capital gains for shareholders. The long run effect, however, is to destroy the US consumer market and to reduce US corporations to a brand name with a sales force selling foreign made products to Americans employed in third world jobs.
Offshore outsourcing is a new phenomenon that has received little attention from economists, who mistakenly view offshore outsourcing as just another manifestation of the beneficial workings of free trade and comparative advantage. In fact, offshore outsourcing is the flow of resources to absolute advantage. Economists have known for two centuries that absolute advantage does not produce mutual gains. Unlike the operation of comparative advantage, absolute advantage produces winners and losers.
China and India are winning. America is losing. It is as simple as that.
PAUL CRAIG ROBERTS was Assistant Secretary of the Treasury in the Reagan administration. He was Associate Editor of the Wall Street Journal editorial page and Contributing Editor of National Review. He is coauthor of The Tyranny of Good Intentions.He can be reached at: email@example.com