knzn: The Blinder Approach

knzn has questions for Alan Blinder:

The Blinder Approach, by knzn: OK, Alan Blinder, there’s something here I don’t understand. I get the point that things may get tough for a lot of American workers over the next 30 years. I get the point that this makes the case for providing better social insurance stronger than it used to be. I get the point that it makes the case for encouraging more research and development stronger than it used to be. I get the point that it makes the general case for facilitating more and better education and training stronger than it used to be. But here’s what I don’t get:

…we need to rethink our education system so that it turns out more people who are trained for the jobs that will remain in the United States. … many electronic service jobs will move offshore, whereas personal service jobs will not. Here are a few examples. Tax accounting is easily offshorable; onsite auditing is not. Computer programming is offshorable; computer repair is not. Architects could be endangered, but builders aren't. Were it not for stiff regulations, radiology would be offshorable; but pediatrics and geriatrics aren't. Lawyers who write contracts can do so at a distance and deliver them electronically; litigators who argue cases in court cannot.

So apparently we want to train people for onsite auditing, computer repair, building, pediatrics, geriatrics, litigation, and similar occupations. But why? Don’t we already have enough – or at least almost enough – auditors, computer repair people, builders, pediatricians, geriatricians, and litigators? Is there any reason to expect that offshoring will increase demand for those occupations? What model do you have in mind wherein foreign competition increases the demand for non-tradable services?

In my crass Mundell-Fleming conception, here’s what happens when offshoring occurs. Suppose a lot of people from India learn to do American tax accounting, computer programming, architecture, and so on, undercutting American service producers. A bunch of American accountants, programmers, architects, and such will lose their jobs. The Fed will notice the slack labor markets and cut interest rates. As a result, the dollar will depreciate, causing an increase in demand for some other American products. Which products, exactly, we don’t know, but they have to be products that are exportable – not auditing, computer repair, and building, and pediatrics. There will be excess demand for certain kinds of workers, but not, ultimately, for the categories of workers whose jobs can’t move offshore.

I grant you that we do not live in a small country with perfectly substitutable assets, so things won’t happen exactly the way I suggested. There will be a temporary demand for certain non-tradable services – specifically the ones that are interest-rate sensitive, like building. That, in fact, is already happening, or perhaps has just finished happening. But today I think one might be rather glad to have passed up the opportunity to train for a job in the construction industry. In the longer run, surely we cannot expect that foreigners will be willing to finance ever higher amounts of non-tradable services for Americans. Perhaps we can maintain a large trade deficit, but surely we can’t keep running ever larger trade deficits, to create ever greater demand for domestic non-tradable services.

So do we need to rethink our educational system? Perhaps, but as to how, exactly, I have no idea. I don’t understand why we would want to restructure it to turn out more people trained for non-tradable service jobs.

Comments

[reason]

knzn...
100% agree.

But why has this currency adjustment been so ineffective so far? The US Dollar has fallen mightily against the Euro, but it seems 40 (or is it 50)% is not enough. (I know the problem is all the other currencies).

Ther are other possible complications as well. It may be for instance, that the demand for computer experts will rise not fall, because outsourcing will cause the cost of software to fall so that more work here will receive computer support (or will receive customized software rather than general purpose software). And who will co-ordinate with end-users to ensure that the software is what is required?

[luci]

We'll be effectively richer, from the cheaper goods and services, so consumption will go up. And corporate profits will be up from lower costs, and they'll pay us more. (Just kidding there!).

But demand will go up from domestic consumption and investment increases. We'll all be service workers and entertainers in the future. Prostitution will be a real growth industry.

[Outside the Box]

Theoretically, the gov should train people for jobs where the US will have a comparative world advantage for the next several decades. Unfortunately, there is no evidence that politicians have any talent in centrally planning the economy in this manner, so politicians will not likely be able to figure out which US industries will be able to compete on the world market in the future.

The equation is not as simple as English cloth factories versus Portuguese vineyards, as in the Ricardo example.

If the free market is the most efficient way to run an economy, perhaps letting the free market run education would be the best way to teach children the skills demanded by industries where America will have a comparative advantage.

[reason]

OTB...
Huh?
The free market will supply what people think will be the required skills for the next decade, but that is no more likely to be right than anybody else's guess. People mostly just extrapolate. I suspect for instance in Europe where I live there will shortly be shortages of teachers and tradesmen, which are exactly where there was the worst oversupply last decade (and so there is a demographic hole - lots will soon start retiring). But the educational resources to fill that hole, have been moved elsewhere.

We saw the cleverness of the market in the dot com bubble.

The real answer is we need to train people constantly, and especially on the job, but because we have also made a fetish of "flexibility" (i.e. loose connections) this is not happening. We need to re-examine our institutions I think for a world in which knowledge is valuable, but the knowledge which is valuable comes only with work experience. Credentialism has to go, real livetime education needs to be enabled.

[Lafayette]

knzn: So apparently we want to train people for onsite auditing, computer repair, building, pediatrics, geriatrics, litigation, and similar occupations. But why? Don’t we already have enough – or at least almost enough – auditors, computer repair people, builders, pediatricians, geriatricians, and litigators?

Why harp about the examples? Look at the base notion: Service sector jobs are more difficult to dislocate, though not impossible. So, consider seriously the large range of such jobs and start training American citizens in them - instead perhaps of importing foreigners because they involve menial tasks.

And, aren't we missing an important category of jobs that are not exportable - tradesmen/tradeswomen. That is, plumbers, electricians, beauticians, physiotherapists, mechanics, bakers, etc., etc., etc.?

Also, let's not forget the fact that a great much of exported unskilled labor manufacturing can be recuperated by highly automated processes, if the IRS will allow aggressive tax amortization of them. This will not create jobs for unskilled labor, but for skilled automated production technicians. But, enough said on that.

And, what about craft work? Why import embroidered lace work from the Philippines? We can't find nimble fingers in America? And, if we can't, don't we have a mentality problem rather than an unemployment problem?

For a country that produces MBAs like hotcakes, all these professions perhaps seem trivial ... well, they ain't anymore.

And, as many have said already on this forum - with the singular exception of Bill Gates - if America needs all those computer programmers making a slave wage, but whose recruiters are making slaver wages, why cannot America train its own programmers for the same pay?

Gates, better than anyone, knows that where's there's the will there's a way. IT is one of the industries that has invested most in keeping its skills up to par in a highly competitive environment. The nation can make the same effort. Only the will is lacking.

We can discuss this till the cows come home. One fact will remain ineluctable far into the future: Sooner or later, America needs to get its labor force skills/talents up to par in order to create durable employment (that is not at the whimsy of a CEO who's looking only at his/her bottom line).

If this could only be put on the national agenda for debate in the upcoming presidential elections ...

[Lafayette]

otb: there is no evidence that politicians have any talent in centrally planning the economy in this manner

Not in America, perhaps. Believe me, it is not Mission Impossible.

Nonetheless, presume we want "private enterprise" to do the job. All the government need do is sub-contract the training programs.

What is essential, nonetheless, is (1) to prioritize the skills within which the nation needs to train people (2) employ a mechanism for doing it effectively and (3) assure continuous quality control of the training.

By (2) above is meant incentives to attract people to be trained in key skills. This could be done by offering stipends during the training/educational period. Or, for the unemployed, topping up the welfare money for those who undertake training (and complete it) in a given skill.

US industry is so fixated on pushing down production costs, that it does not think of the cost of NOT TRAINING people to enhance skills (because they are not accounted on corporate books). That cost is not only welfare following unemployment, but social justice for a people who remain unemployable anywhere with the inevitable consequence of delinquency and crime. The cost of the latter has been well established. Consider this

"the Bureau of Justice Statistics estimates over $1.14 billion in annual losses to victims of violent crime, and another $15 billion to victims of property crime. The Federal Trade Commission estimates that losses from identity theft alone total $5 billion a year."

Crime may not pay, but it ain't cheap either.

[Outside the Box]

"All the government need do is sub-contract the training programs."

This still results in the politicians determining curriculum, along with the excess burden that occurs when the customer is not the one who pays for a service.

"...especially on the job..."

Yes. The market would certainly make use of this approach when appropriate. Much learning takes place on the job now. Apprentice craftsmen learn their trade from journeymen, physicians learn much of their craft by practicing under the watchful eye of veteran doctors. It is an efficient way to learn many trades.

[spencer]

If this analysis of the market correcting imbalances is correct why has the market allowed the US to run large trade deficits for 30 years? If it has not corrected over the last 30 years why should we assume it will correct over the next 20 years?

[Outside the Box]

The market is not allowed to determine relative currency valuations. Tax rates and gov regulations vary wildly between countries, preventing workers in high tax/regulation countries from competing in labor intensive industries. Several other reasons that boil down to uneven politics preventing nations from most efficiently utilizing their comparative advantages.

[real person from the real world]

Knzn has spelled out the biggest problem we face. No one really knows how outsourcing will pan out for all jobs that can be outsourced. The only limit is the number of people in some catagory that are available in a given country at the cheapest rate. Eventually we will have a world economy but until then, how do so many of us survive, without building barriers and killing one another?

We need entry level jobs in the US. The Indians and others vet their exported techies thru both domestic and foreign companies. If those companies can put up with entry level trainees, why can't the US? Because they have to cut costs, cut costs, cut costs. BUT, do we as consumers get much benefit on these costs? very little where it really counts, and as far as I can see, the greatest amount goes to the few CEOs and other execs at the very top, with their rockstar pay.

Instead take a look at how we hire in this country, besides lack of entry level jobs:

American companies continually insist they cannot find qualified Americans or that they have to have people that can "hit the ground running" so they hire the imported techies who were vetted by their own domestic and foreign companies, which means few good entry level jobs for our native born IT grads. Those that survive have to be pretty aggressive, they end up with a string of the smallest employers and have the most varied work life, feast or famine. Great money when they can get it, so they defend grasping Republican policies.

Now-a-days you have to litterally customize your resume to each job, a very tiring prospect. Many people end up in crap service jobs or especially in sales after failing time after time to get something better. No one wants to look at the individual, his adaptability or flexibility, and loyalty to a company is a long lost virtue.

Then, there is the resume black hole.... often some Internet portal.... you send your resume in, and never hear anything. Or you go to some place you seemed to be on track to get in, you take some psych test they bought from some company, and suddenly you hear nothing. You may go thru a barage of questions, or odd scenarios, looking for certain types of answers. The big excuse is litigation. What litigation? for age and race discrimination? These do exist and are wrong, they are just much more covert and difficult to prove. Take a psch test at an employer, how do you know why you never heard back?

Other problems: In IT you may have a Geek IT Director who has his second-in-command mow thru 40 guys, for what should be a management positon, Microsoft Subject Text in hand, trying to find another geek (management skills be dammed!). Or the jobs that are such a laudry list of skills, you cannot find a person, within the price range listed. Or the combination of skills (probably to save money by some non-tech management), are unlikely. There are the gambling casino type pay rates. "Well, last time I got $65/hr" but this only pays $40/hr (maybe because a vendor wants his cut), so I'll take it as I am between projects (but if something comes along that pays better, they give notice and the employer has an unfinished project).

Then there are the often unenlightened HR people who play games. They don't want to see a resume that shows a progression to management, they want someone who has gone nowhere for the last 10 years, or, some non-technical HR person sees a consultant who has worked on a lot of short term projects, and arbitrarily label the resume you worked hard to find, as a "job hopper," OR, the guy who did not want to relocate when his big tech employer uprooted and went somewhere else, and then took a sales job, or something else below his previous status, and so now he is suspect and you have to camouflage the gab, OR just unreasonable games that you suspect (but of course, cannot prove), are because your employer is foreign and there is a certain backlash.

Is this REALLY a good way to keep IT labor costs down? And people are continually being weeded out by inermediaries, while we import more people.

For many jobs, people at the bottom end of the jobs ladder, are forced to go thru a battery of tests and questions, while a CEO may be hired based on a few conversations with management and these new networks like LinkedIn.

No one seems to look at the individual's ability to learn, be creative or adapt, because it is too expensive to hire and train. We talk a lot about humanistic values and ethics, but the competitive environment is so stressed out, the concern for keeping costs down so pressing, that these values are only given lip-service, while the illegal discriminatory practices go underground. Meanwhile, costs are ENGINEERED, often based on marketing and other considerations, not the underlying economics.

[ken melvin]

There ain't ever again going to be enough jobs; unless we cut hours and redefine what constitutes work.

[Barry]

Think of IT when you hear employers say that there aren't enough qualified workers. What they really mean is that they can't get the person with exactly the right skills and experience (i.e., employer doesn't train) right now, for a short time period, for a very low wage.

[knzn]

Lafayette, the examples are just examples. My point is that the difficult-to-dislocate jobs in general are not the ones for which we will need to train people. Except in a few well-recognized specific areas (e.g. nursing), we generally have had plenty of workers available in the past for non-tradable service jobs. Why should we expect that to be different in the future? The workers we will need to train are for the tradables of the future – jobs that are theoretically easy to dislocate but that, for some reason, will be done relatively more efficiently in the US than abroad. We can only guess what those will be, but the point is, we will need something to trade for all of the outsourced services from abroad, and, by definition, we cannot trade nontradable services.

[wood turtle]

Well, we could all be massage therapists and massage each other.

Or we could go back to pre WW1 where most of labor was in service to the rich.

[robertdfeinman]

Some random remarks:

Education (especially higher education) used to be about training a person to be able to function in their society. That is they learned the fundamentals, but also learned how to learn. This way they could adapt throughout their lives as the world changed.

Training people for a specific trade is the opposite. It only works well in societies like Germany where the apprentice and certificate systems keep the number of people entering a field artificially low and thus ensure a stable career.

Outsourcing - two examples:
X-rays are now electronically shipped to India where they are viewed by radiologists who send back their reports. A few years ago this would have been considered a non-exportable job because of the need to examine the physical x-ray films quickly. Technology changed this.

Currently Scottish shrimp are being shipped to Asia where they are cleaned and then shipped back to England for retail sale. So much for jobs that must be done locally...

As to personal services this is also changing, we are seeing an increasing amount of health tourism where people go to India and China for treatment. The costs (and availability of transplants) are low enough that the transport expense is not a deterrent.

I suppose we won't ever get to the point where it is cheaper to fly to China for a haircut, but do we want a nation of barbers?

[ken melvin]

Leland didn't hire Chinese to build his railroad because of a shortage of workers; he hired them because they were cheaper and this would make him rich.

[calmo]

See, knzn is not in denial:We can only guess [desperately, hopelessly...stupidly] what those will be, but the point is, we will need something to trade for all of the outsourced services from abroad, and, by definition, [for us stupids] we cannot trade nontradable services.

You would think that building a house could not be outsourced...until you visited an actual work site and saw how this could be done by an "insourced" labor force (estimated quarter of those estimated 12M Mexicans) ...who know how to trade their "material movin" skills and displace tradesmen to other jobs (soon to be recognized as pencil-pushin 'careers' and defended as such by employers and structures that, unlike Walls, are not semi-permeable).
The other 3/4s of this "insourcing" is also reported to be in the "non-tradable service" sector: cleanin your house, your future house (old folks homes), your carrots (agricultural labor).
Your career is an endangered species from people who are hungry enough to risk their current low paying job for something more remunerative, more exploitive of the resources around them...like their employers they are trying to emulate.
And so, many plug education...and they mean training...to emulate the AMA.

[jm]

Although I agree overall with knzn's argument, there are a few flaws. While in some sense it may be true that, "In the longer run, surely we cannot expect that foreigners will be willing to finance ever higher amounts of non-tradable services for Americans," this will be true only in the very, very long run.

What the Asian elites are doing through exchange rate manipulations amounts, in essence, to vendor financing frauds like those perpetrated by Nortel and Lucent in the telecoms bubble. The limits on how long the rulers of a sovereign nation can continue to perpetrate a financial fraud are different from those on how long a private business can -- especially in a nation such as China where there are no democratic checks and balances.

The only reason a dollar can buy 7.7 yuan worth of Chinese goods is that the Chinese government stands ready to pay that much for however many dollars its exporters bring in.

When they started this, they mounted a tiger -- they can't ever allow the yuan-dollar rate to fall to any level that would reflect the currencies' true relative value. If they did, their export-based boom would collapse. Although that would be a good thing in the long term, as the boom is leading to obscene misallocation of resources, it would lead to a lot of very rich and powerful Chinese becoming unrich and unpowerful in quite short order.

Someday that will probably happen anyway, with the elite escaping to Vancouver. But it's probably many years down the road. The final reckoning will probably not come until the inflation and financial madness due to continual printing of yuan to pay out 7.7 yuan per dollar runs the Chinese economy right off the rails.

Consider that the stock bubbles in Japan and the US took about five years to play out, and that China's is now only at about the 18-month point, and probably has about 3-1/2 more years to go. It's going to make Japan's bubble look like a tiny bit of froth.

[Outside the Box]

rprw There ain't ever again going to be enough jobs;unless we cut hours and redefine what constitutes work.

Work is always redefined, and products constantly change. A couple of centuries ago, a significant percentage of the population was engaged in agriculture. Now there are few jobs in agriculture, but most people are still employed at something. As technological change continues to speed up, jobs will change along with the technology. There would be no real future job stability, even if nations stopped trading completely. The future will bring jobs for people making products not yet dreamed of, and robots will make much of what people currently make.

Since job change is inevitable anyway, pursuing policies that make change less painful is the way to go. In addition, removing the political distortions that prevent true free trade would eliminate needless pain, and increase the total quantity of goods made world wide.

[reason]

otb...
In addition, removing the political distortions that prevent true free trade would eliminate needless pain, and increase the total quantity of goods made world wide.

Why do you think the distortions are just "political", and if even if you are right why do you think something can be done about it?

I'm also very suspicious when someone starts using words like ... true free trade ... sounds like platonic idealism to me. Like "real" men, or "real" conservative it is just a way a defining away that part of some group object that you don't like.

I do believe there are serious problems with the international financial system that require thoughtful institutional reform (in particular the need to penalise countries that artificially suppress their exchange rates). But your view that all would be well if only we were more pure, sounds both impractical and an act of faith untroubled by evidence. I personally have seen enough of "faith based" rule for the moment.

[cm]

Barry: From my vantage point, it is not even a question of "very low wages" (with the caveat that "market pay" for a given job description is such a wide range that it's difficult to tell a low-baller from a place that generally pays less).

The other factors you listed, overdescribing jobs and overly selective filtering of candidates/resumes (combined with shying away from public ads and trying referral-only) are restrictive enough.

At the end of the day, many such positions stay unfilled for extended periods, sometimes a whole year. The only conclusion I can draw from that is that they are to an extent "optional", i.e. not critical to existing business. The companies in question may not be able to expand, or possibly even maintain, business as some projects remain forever on the backburner, but then that's their choice. To some extent, of course, some existing staff pay with their quality of life.

[from Old Europe]

When people cannot follow industries across country borders, they need to learn something else. But the problem is : who pays.

When your industry disappears to a foreign country, you need to re-educate for instance from a trained car mechanic to become a stereolithographic operator. Drastic.

A young person goes to school for years. This is partly paid for by the state - directly & partially as a cheap student loan. His parents pay a part, and the kid may get a part time job to afford some luxuries. Education takes between one and two decades. Of course an adult doesn't need the full stretch for a major re-education, but we are not talking days. It will be months and years.

When a middle aged worker needs re-education, he faces large problems. He is already paying to put his kids through college. He has a mortgage. And no way is he going to move back into the apartment above his parent's garage. Put yourself in his shoes and try walking into a bank to ask for a loan equivalent to two year's wages while you are unemployed.

So when an industry leaves a country, middle aged workers end up being close to unemployable for the rest of their lives. They have no money left for re-education after six months searching for a new job in their disappearing industry. No bank is going to lend money on the scale necessary. So they survive as unskilled labor. This leaves Europe with persistent high unemployment. On the other hand, other companies cannot find qualified personnel.

This continues until there are enough unemployed to push the state into paying for re-education or a more comfortable state pension or unemployment benefit. Recently in Europe they have even succeeded in pushing companies into paying up big time. Close the factory, pay a worker with 25 years employment $200 000. Two, five zeroes.

American always mutter about European social benefits, high unemployment, high cost of labor, ... You might find out in the next twenty years why and how we made those choices.

[from Old Europe]

calmo

Immigrant workers working on a American building site are not an outsourcing problem. They should be paid according to American laws. If the building company pays below minimum wage, it is breaking the law. Shut it down. If you consider the minimum wage too low, raise it.

[zorro]

Old Europe,

Thanks for the non-US-centric perspective. Point-of-views from Asia, Latin America, Eastern Europe would surely enrich this debate. Anyway, what do you think about Sakorzy's victory in France? Are we going to see drastic changes or upheavals?

[Barry]

Old Europe, those laws are not enforced for a reason - people with money and power wish a more relaxed enforcement.

[Lafayette]

zorro: Are we going to see drastic changes or upheavals?

They are unlikely to be drastic. But, the French, being reactionary by nature, particularly the unions, will be out on the streets. Just last night, amidst the celebrations in downtown Paris, in the rest of France leftist hooligans burnt over 700 cars fighting the police throughout the night. These delinquents did not vote for Sarkozy.

He'll rush through the most difficult legislation immediately. The French right to strike is written into their constitution. Which means the transport unions can gridlock France overnight. He'll soften that exaggerated power by forcing them, whilst striking, to provide a minimum service so that people can get to their jobs.

But, there's not much that he can do about the job dislocations. He has promised very much the same suggestions made in this forum - more, better education to upgrade their skills. That particular solution is obvious to everyone. But, without bringing down social charges that add 100% to wages, there is nothing else that can be done.

This election was earthshaking, but for reasons you wont read about in the newspapers outside of France. A rupture with the past has been made and both the French right and the left will be realigned. The left will forcibly move rightward towards the center, that is, a more European Social Democrat standard - leaving the extremist left wing to its own devices. Parts of the right, not with Sarkozy, will move leftward towards the more centrist Social Democrats. This will make France a three-party political system, as in the UK and often in Germany.

The French far left is in tatters. It had to happen. This country was in the pits with its irrealist notions of excessive job protection - for instance, implementing measures that resulted in precisely the opposite (such as torpedoing productivity with the 35-hour work week).

The Germans have increased the time to retirement, meaning people have to work longer to earn it. The French will likely do the same. There will also be the softening of labor laws that are ridiculously restrictive, punishing companies that lay off people. Which is the foremost reason for which companies are not creating jobs in France, but dislocating them abroad.

Economics is like baking a cake. The European left knows how to cut the cake to share it, but not how to bake it. Americans know how to bake the cake, but not how to share it. Maybe both will get it right one day?

One can only hope.

[Icarus]

This fear of off-shoring is simply the response of lazy americans, who now sense the impending competition from smarter, harder-working, and more skilled white collar workers. I've read through these posts, especially concentrating on the ones in IT (as I work in this field), and the gloom and sense of unfairness they suggest is ridiculous.

Anyone smart, with IT skills, can get gainful employment, today, tomorrow, and even yesterday. I hire contract labor all the time, and even H1 workers' contract rates go from $80-$130/hour, depending on the skillset.

The key transformation which has to happen is that people take responsibility for their own education, and continuing education. Society does not owe anyone a job, even someone with a master's degree (trust me, I know, as I have one in the humanities). Society simply owes its citizens the right to pursue a job, in a state of fair competition. (ie, no discrimination based on protected categories).

Americans must learn to study, first of all. We need to teach kids to put down their video game controllers, or their junk food infested with the starch/sugar of their liking, and their skateboards and tatoo pens, and get their collective ass behind an algebra textbook, or work of literature. Of course, this would take parental discipline, which, is the root issue.
To actually get cadres of competitive, educated workers, the country needs to re-orient its values, and harness a sincere effort into the next generation. This tranformation cannot be done through the government...it is a matter for private citizens, or the market.

The problem I sense in these comments, is that there is no practical conception of american failure, and yet, this is the stark reality. We will always have an elite crust of citizens who are global leaders in thought, in product development, and in awareness. Our top 5% will compete well with any group in the world (possibly compete dominantly), and another 20% or so will compete moderately well. The rest is roulette.

Many americans will not, and can not compete in the post-globalized labor markets, and, this is a good thing. It is beneficial to the rest of us to remove legions of quasi-productive, moderately educated, and metaphorically obese workers from the production process.
It's called efficiency.
And, the almightly Consumer will benefit. If anyone doubts that, take a look at the cost of products over the past 50 years...the cost of televisions, electronics, textiles, etc, etc. It moves further and further down, to the point where kids play video games in western ghettos. (ironically, further exacerbating the problem of laziness and lack of skill development).

The only promise western capitalism makes is the opportunity to consume, and the opportunity to offer labor in a competitive market. It offers no guarantee of reward, or right to reward, for anyone, including citizen and illegal immigrant. To many, labelled "right wing", this is true meritocracy. But, meritocracy enables failures, and this is a social problem we're not equipped to discuss, or plan for.

says...

"When your industry disappears to a foreign country, you need to re-educate for instance from a trained car mechanic to become a stereolithographic operator. Drastic."

I assure you, it's the stereolith guy whose job is now in China or Taiwan that needs to learn auto repair.

[Lafayette]

icarus: Of course, this would take parental discipline

That is precisely the problem. Children are having children. How can you expect them to each their young what they themselves have never learned? Three generations and you have the blind leading the blind.

There are few things more precious to a people than its cultural heritage. Once you lose it, then it becomes very difficult to bring it back.

The sense of duty, hard work, the value of honest achievement, the respect for your neighbor ... all these values I learned whilst growing up in America - they've been compromised by a mindset fixated on flashy money, TV celebrities, fast sex and mountains of cheap carbohydrate intake.

Nostalgia ain't what it used to be.

says...

"This fear of off-shoring is simply the response of lazy americans, who now sense the impending competition from smarter, harder-working, and more skilled white collar workers."

I'm thrilled that someone finally "gets it" on Free Trade and Globalization, and is not afraid to admit it.

Rising costs can only be mitigated with free trade---need a surgery? get it done in the far east. Medicare problem solved, all paid in cash, no insurance middleman, former auto workers will eventually realize that they may have a healthy kidney or liver and can sell it or parts of it to those who benefit the most from Free Trade. It's all win-win!!!

Hooray!

Remember, everyday when you wake up and look in the mirror ask yourself: what is my competitive advantage in this world? If it's having a good healthy kidney for sale, well, it is what it is and just think of how far the money you earn off that kidney will go at Wal*Mart!!! That is... if the melamine doesn't kill the kidneys first.

[dissent]

This fear of off-shoring is simply the response of lazy americans, who now sense the impending competition from smarter, harder-working, and more skilled white collar workers.

It's well known that Americans work more hours, take less vacation, and are in the top ranks of productivity relative to workers in the developed world.

So, Icarus, may I take your point to be an insidious style of argument, in which American workers are to be compared to workers in the developing world, not the developed world?

That changes the calculus. Would you like to argue that American wages should drop to Chinese levels? Should we live in dorms all year and work 6 days a week, 11 hours a day? Should we abolish the FDA and unions? Get rid of Social Security?

Let us know what you are basing your argument on.

I personally find disgusting the assertion that the American middle class should be rendered powerless and destitute to suit some fantasy of ... what?

Perhaps you think we should exchange our democracy for a Chinese style dictatorship. Would that relieve your appetite for moralism? Obviously, to squash the middle class like a bug would take some extraordinary political powers. How do you suggest we get there? A military coup? Please, Icarus, be completely frank here.

[Lord]

There will come a time for tradeables, but that time is in the distant future. Certainly little reason to educate people for now. China and India are just first in a long line of emerging nations that will follow on similar paths.

[Outside the Box]

Why do you think the distortions are just "political", and if even if you are right why do you think something can be done about it?

There are other factors, such as local cultural norms that affect receptivity to foreign products. However, the political distortions are the factors with the greatest impact.

Can something be done about political distortions? Valid question. Currently, many politicians see free trade as a means to reduce the resources of people who vote for the enemy, and increase the resources of people who vote for them. For example, the Republicans tend to make union dominated industries compete, while granting licenses to industries that contribute heavily to Republican politicians. These licenses grant immunity from both foreign and domestic competition. This makes people forced to compete scream about the unfairness involved, and demand similar protection. Changing political distortions will be very challenging, if it can be done at all.

As a start, carefully explaining to the public and politicians how distorted trade affects different groups will help them to at least make an informed decision. People should also be told that how non trade policies (such as constant inflation) prevent large groups (such as pensioned retirees) from deriving any benefit at all from trade. The public cannot make informed decisions until they clearly understand the issues involved.

Will the public demand that politicians make everyone compete equally, and that pensions be trade adjusted upward? I don't know.

[calmo]

Thanks for joining us Old Europe (would that be as in Eastern Europe or like me aging disgracefully?)
As pointed out only some laws are obeyed here in the Great Democracy.
Laffy, do you read the French newspapers or like the rest of us? (Ok, could be worse: we could be wondering about the Ball with the Queen) [see, the brave and beautiful asses are not always philosophers as per 'eightnine 6742...hike'.] The election was won on the false pretenses of an economy that was in tatters, according to this report:
http://www.huffingtonpost.com/mark-weisbrot/economic-misinformation-p_b_47265.html

[Icarus]

Calmo:
"It's well known that Americans work more hours, take less vacation, and are in the top ranks of productivity relative to workers in the developed world."

Well, that phrase obscures more than it enlighten...

Americans work more hours, but consume vastly more than any healthy being should (in food, in leisure, in commodities, etc). Americans are in the top ranks in productivity, but, that has much to do with the continuing embrace of the emmigration of the scientific elite around the world (the US is still one of the ideal places to live, if one can earn).

The issue isn't the concept of the "American". The issue is that a large caste of "American Workers" have been, or are being rendered obsolete, much like the buggy whips and carriages the model T ford destroyed. This is the sad fact, and one which may have myriad consequences (such as crime, emmigration out of the US by many, and 3rd world style enclaves within 1st world cities).
There is also another existential factor. There is no concept of the "American" really. People in california care little about their puported brethren in Detroit, and vice versa. Flint, Dayton, Gary, and other cities of the once flourshing industrial economy are basically dead, or dying. Instead of spending time and energy trying to keep a quasi-corpse alive, we should embrace the creative destruction of our ever expanding technological capitalism.
"America" has one major advantage, moving forward, regarding the dialectic of capital and labor. (Lee Kwan Yew made this point in an interesting interview) America is the one modern economy which will sacrifice, fully, a labor force in the name of continued efficiency. Of course the short term peril is high for the "victims" of creative destruction, and narratives abound illustrating their losses.

But, the lesson is not to move back to the days of Roosevelt, or increase the scope of the welfare state (France, for example, spends over half their GDP on government services, and it has lead to further unemployment, racial division, and poor growth within the nation).
Citizens of the US nation must embrace the individualism which buttresses the standard of living they enjoy. People have to take ownership of their material futures, without relying on the hand of government, and acquire skills which will keep them gainfully employed in a labor market, and yet have the versatility to adjust their skills if off-shoring is impending.

Case in point: Radiologists. This profession will change dramatically in the next 5-10 years. Long gone will be the days of $400k salaries for this profession, as we perfect the off-shore model here, and then reduce the cost of such an important medical service. Many practitioners of radiology will lose their livelihood, but, the loss is minimal for the society at large. Those radiologists will either have to retrain, retire, or whine and complain. Those are the only choices.
But...they should sense this impending change sooner than later, and make the requisite preparations, and not wait until after the sudden transformation, and complain to a government agency. They must be the risk averse actor, and embrace the market effects.
Radiology is a high end profession, but, the same strategy applies to lower paid workers.

And, if lower paid workers would heed such strategic advice, and think in terms of risk aversion, many indices of continuing poverty and helplessness would decline. For example, is it wrong for the rest of society to look askance at low wage earners with multiple children? Such a risky endeavor. Child rearing is expensive, and hurts the versatility of any worker. Waiting a few extra years to have children would be a wise move, and should be encouraged. Then, there is more time for retraining, or relocation, etc. The bottom line is that no one else will care for any family, and that family has to employ the best strategy possible in the American economy.

The so called "American Worker" who is in jeapordy is the low skilled, well payed (in global standards) "middle class", and yes, they are going to virtually dissapear (and re-appear in new form).
Chinese wages won't appear, as the non-tradeable service economy will require a person be paid subsistance wages, minimally, but that notion of subsistance will change dramatically. No longer will a high school dropout have some imaginary right to a wage which allows them to raise 2 children (or more), and own a home. It simply won't be the norm.

Unless a person can offer labor of value, now on the international market, yes, their labor will be valued at subsistance levels in the economy they reside in.
Their choices are to either live within those means, attempt a criminal life, emmigrate, or re-train and re-skill.
I, for one, think the later is the most judicious, but, it requires planning and preparation.

The social welfare you speak of is on life support as it is. Instead of depending on it more, people need to devise strategies which don't require it. Those welfare programs were born at a unique time, when the power of labor was quite high, and the demand for labor was greater than the supply (within america). And, even some of the great society largresse no longer seem valid today (thank god clinton and the republican congress altered welfare). In a transnational economy, labor and capital compete, and the comfortable setting of the 1950s (as long as you were white and christian) is non-existant.

As for the issue of children having children, and the impossibility of inculcating a culture of restraint, the ethic of work, and the value of intellectual investment, I agree. This is the sad tragedy of our days. We basically need to get into the school system, and convince young children to stop looking at their teenage parents, and 30 year old grandparents as models, and teach them that the path to success is to not mimic their elders. Reverse role-model mapping. And, abortions need to be free (I'd even pay people to have them, if they can't afford the rearing of that child). This, of course signifies a very intrusive state, which is problematic on many fronts.
But, the alternative is scary too. I lament that we've arrived here. I usually glamorize the power of cultures to adapt and persevere, but, sometimes it seems impossible. We've only had the modern bureaucratic educational system for around 50 years now, and yet, some cultures require such formal, standardized education, in order to change. I would like to believe that leaders within communities could impart the requisite knowlegde, but, maybe that's too hopeful. In some cultures it works...but, sadly, in some, it hasn't.
And in those scenarios, perhaps a more intrusive state is necessary. It would also have to be a more brutal one.

[Outside the Box]

L...social justice for a people who remain unemployable anywhere with the inevitable consequence of delinquency and crime...

There was relatively little crime during the Great Depression, so there is no direct correlation between poverty and crime. High violent/property crime is concentrated in inner cities, so what the crime statistics are really telling us is that raising children in many inner city public schools is highly correlated with subsequent crime.

There are many fine suburban public schools, but a significant number of inner city public schools are simply not healthy places to raise children. The violent criminal types prey upon the other children, many of whom then adopt some of the predator characteristics in self defense.

Public schools are not currently evaluated based upon the subsequent performance of their students with regard to how they treat other people. If we are going to raise the nation's children in the public school system, we should do it properly. If the public school system cannot teach children to treat others with respect, it should be replaced with private schools/parental supervision.

[Icarus]

Sorry Calmo, I meand "Dissent" in my last post.

[Lafayette]

otb: so there is no direct correlation between poverty and crime.

Some might not agree:

Hsieh, C. and M.D. Pugh, 1993, "Poverty, income inequality, and violent crime: a meta-analysis of recent aggregate data studies", Criminal Justice Review, 18(2): 182-202.

This paper reports on 34 aggregate data studies that almost all find a positive correlation between violent crime on one hand and poverty and income inequality on the other.

[real person from the real world]

Icarius, you talk with the arrogance of a Social Darwinist who has won big time, from the globalization game. I hope some day you get cut down to size. I work for a SMALL foreign IT entrepreneur, and am paid just over minimum wage. I have a masters and almost completed work towads a second masters, and I nearly ruined my health by getting a degree in application programming, but now I am a flunkie doing crap work.

The layers and games that go on in IT are ridiculous beyond belief. Few are really winners, even those like you, who think they are winners. Most h1b visa guys see half those big rate.... the multi-layers, and their employers bleed it off. If you don't know about that, you are really ignorant. All-in-all, There are at least enough losers to balance against the winners. It's just the losers get screwed even more with no benefits.

[Outside the Box]

The fact that there is a correlation today, but not in the past, suggests another factor at work. Consider also that many regions of the world considered dirt poor by US standards have very low crime rates. Something other than mere poverty is the cause:

Today you can travel to countless countries around the globe which have massive differentials between the rich and the poor and yet suffer relatively low levels of crime compared to the affluent Western cities such as London, Amsterdam, Miami or Toronto. Take Bombay for instance, where the poor live in what many would consider dismal conditions, sometimes sleeping on the street or in the most makeshift of hovels; living by begging or bare sustenance activity. Within this milieu the wealthy of Bombay are very rich with housing prices reputedly the highest in the world. Yet you can leave your bicycle unlocked anywhere in Bombay with minimal fear of theft, and you can walk through this diverse city at day or night feeling safer than you would in the urban jungles of most developed countries. This is the case not only in Bombay, but in numerous third world cities around the world...

Chaos Works

[reason]

Outside the box...
Interesting anecdote, but also confusing because having read Rudyard Kipling's Kim, you cannot generalise that to India, at least not to all time periods. Yes there is something more, the word that describes it is "alienation" the lack of a sense of belonging to a society. What the solution is, is unfortunately not something I know.

[Lafayette]

otb: Consider also that many regions of the world considered dirt poor by US standards have very low crime rates.

Well, of course. In areas of abject poverty, what is there to steal?

Your comparing apples and oranges.

[Outside the Box]

The point is that sometimes poverty stricken areas have high crime, and sometimes they don't. A cause/effect relationship between poverty and crime cannot be established from the available data. We need to look deeper.

Alienation is one factor. Another is that children who are taught to be honest tend to remain so when they become adults. For whatever reason, some children are not being taught to treat others with respect.

[Outside the Box]

First, murder rates in India bear no significant relation with urbanization or poverty.

Study by Delhi School of Economics Honorary Professor Jean Drèze

[Lafayette]

"otb: The point is that sometimes poverty stricken areas have high crime, and sometimes they don't."

It depends where, otb.

In rural communities of Africa or India, stealing is practically non-existent. These people live at a subsistence level. Get caught and you are ostracized from the community, which can mean almost certain death from hunger. In the cities of India/Africa, the problem is more acute.

Stealing, as we know it, is (also) both a criminal and social phenomenon, but of a higher order. When there is extreme income inequality, as in the US, it presents a shortcut for nitwits to "catch up" with the celebrities they see on TV. It is a consequence of perverse conspicuous consumption, a mental disorder that commonly afflicts archly consumer societies.

A nation cannot disconnect delinquency/crime from its social and economic context. The lowest rate of criminal recidivism is found in Finland. Let's go ask them why and how they have brought it down to such a low level in such an advanced country. Talking to Finns who have lived in the US, I find this explanation: For one thing, there is not the same emphasis on wealth accumulation as a common cultural virtue. There is not the same level of addlebrained adulation of the rich.

America made its "bed of crime" by means of its historical exaggeration of capital accumulation and resulting income inequity. It's been sleeping in that bed for quite some time.

NB: According to Janis Joplin, “Freedom is nothing left to lose”. I interpret that phrase to mean this: When you are at the bottom of the totem, all means to escape that imprisonment can seem “morally correct”. It is a response to what is felt as “victimization”. It can be, as well, a powerful motivation towards criminal activity.

[Lafayette]

otb: The point is that sometimes poverty stricken areas have high crime, and sometimes they don't.

It depends where, otb.

In rural communities of Africa or India, stealing is practically non-existent. These people live at a subsistence level. Get caught and you are ostracized from the community, which can mean almost certain death from hunger. In the cities of India/Africa, the problem is more acute.

Stealing, as we know it, is (also) both a criminal and social phenomenon, but of a higher order. When there is extreme income inequality, as in the US, it presents a shortcut for nitwits to "catch up" with the celebrities they see on TV. It is a consequence of perverse conspicuous consumption, a mental disorder that commonly afflicts archly consumer societies.

A nation cannot disconnect delinquency/crime from its social and economic context. The lowest rate of criminal recidivism is found in Finland. Let's go ask them why and how they have brought it down to such a low level in such an advanced country. Talking to Finns who have lived in the US, I find this explanation: For one thing, there is not the same emphasis on wealth accumulation as a common cultural virtue. There is not the same level of addlebrained adulation of the rich.

America made its "bed of crime" by means of its historical exaggeration of capital accumulation and resulting income inequity. It's been sleeping in that bed for quite some time.

NB: According to Janis Joplin, “Freedom is nothing left to lose”. I interpret that phrase to mean this: When you are at the bottom of the totem, all means to escape that imprisonment can seem “morally correct”. It is a response to what is felt as “victimization”. It can be, as well, a powerful motivation towards criminal activity.

[real person from the real world]

Layfette, your eloquence is greatly appreciated.

[Outside the Box]

To sum up, cultural factors may make poverty and crime correlate here, but not in some other countries or other times in our history. Its possible. I shall ponder your theory.

[knzn]

Somebody forgot a slash?

[Mark Thoma]

knzn - thanks for the heads up, I fixed the formatting error.

[Icarus]

Lafayette...

Criminal activity is low in Finland, and perhaps in many other relatively slowly changing societies, including the Indian village. This is the key issue with crime, and makes any comparison of such space (slowly changing) incongruous with societies with significant immigration and mobility (the western city).
In slowly changing societies, social networks are thick, and one's reputation is part of a long term strategy of social insurance (tacit and informal, I mean). People don't steal from others, unless there is a great prospect for anonymity, or hazy identification.

Capilalist modernity is the embrace, celebration, and rationalization of the 'individual'. This is a new character in our species being, the modern 'individual'. And this guy just doesnt give a shit about his/her (more often his) neighbors and fellow 'citizens'. In fact, you could make a perverse argument that the birth of the citizen coincides with the demise of informal social networks (this is a loose argument, as there are a myriad social networks which have embraced modernity, and ride its flow successfully...think Patels or the Harvard graduating classes...they both essentially form social networks which extend beyond the 'individual', a trade off of anonymity for some perceived social capital...a ritual existance).

Crime is the natural conclusion of hyper-individualism, in a world of semiotic relationships. Signs took over as an indice of material reality a generation or two ago, in capitalist modernity.

This is both shackling and liberating, if we think about it. It shackles people by bonding them into a culture of consumption, conspicuous and obnoxious to many, often ridden with debt, often depressed by their lack of further success at consumption. It liberates them by creating the illusion of grandeur, or success, by the next great act of consumption. Every 'individual' rejoices internally, even when burdened by the weight of an object's costs, at the experience of purchasing his/her greatest asset. Someone who has never had more than $50 in their pocket, can feel powerful with a $200 pair of shoes, even if it were stolen. If you think such a sense of false glory strange, keep in mind that it is essentially the same high that an insider trader would feel at his/her greatest trade. The euphoria of consumption continues indefinitely, tacitly binding the ghetto child to the corporate raider. In fact, perhaps in America, they actually understand each other better than they realize.

That embrace of consumption, the ethic of life it entails, and the tethering it effects via its debt ridden cycle, is part of the destination of the immigrant. Every immigrant coming to the US comes with this dark side of 'a better life' festering in his/her brain. That consumptive behaviour could be rationilized in many ways...'I want better schooling for my children'...'I want to create a nice home in a safe place, away from here'...'I want the best for my family'...yada yada yada. There is a semiotic to this socialized dream. How is one sure of their purported 'success'. Is earning more enough? Well, usually not. Earning is best experienced, unfortunately, through purchasing/consuming. And the immigrant is a great consumer, all one has to do is ask the US banks now jostling over them, or the small businesses catering to them, and even the designer insignia on their collective lapels.

Perhaps we should not look askance, or consider it "perverse", as Lafayette described it. It is, sadly, the 'common sense' of our times, and hence, there is little actually 'perverse' about it. People in capitalist modernity gauge the 'success' of their 'life' by indices of consumption. Even the grave is a piece of real estate, the last act of conspicuous consumption is the headstone, and if you follow this perverse argument, visiting someone's grave is akin to window shopping.
In many ways, this is a reason Cremation could only originate in a non-consumption oriented society, or, a pre-capitalist world. I imagine the act of ashes being tossed into a wind or water way to be an act of liberation, a final moment of exceeded beyond the body and habitable space, and embracing the beyond by losing one's metaphoric location, and locatability.

[Icarus]

"Real World" guy:

You're either lying, or slightly incompetent at managing your career. I'm sorry to be so harsh, and, I don't mean to sound cruel (I'm not, really). If you have a master's degree in an IT field, and are earning something close to minimum wage, without any H1b processesing going to hinder your wage earning capacity, then, something is quite wrong.

I work in this field, hire all the time, and review resumes, candidates, and rates (both onshore, and offshore). I've never heard of anyone earning something close to minimum wage. The lowest I've ever seen, and this was akin to bondage in this field, was in the $40/hour neighborhood. Not exactly poverty.

If you want career advice, just in case you decided to become an expert in some obsolete area within IT, and are hesitant to display some flexibility, let me pontificate please. Move into enterprise application services (SAP/Peoplesoft/Oracle). Get certified in some area you feel comfortable in. If you're a programmer, learn ABAP, if you're a DBA, learn Basis or Oracle. You can do this without another degree, and, if you're open to get your training in India (use that globalized information highway to your advantage, not lament its existance), you can do it for 25 cents on the dollar (a one month training course).
Then, float your resumes, and you'll get plenty of hits, and 'minimum wage' would jump to at least $65k. You could then progress rapidly, if you show some competence (not proficiency, just competence).

Now, like I said, unless you're lying, you should have known this if you work in IT. What's up?

[Doug K]

Icarus,
"H1 workers' contract rates go from $80-$130/hour"
That's what you pay to hire them, not what the H1-B workers get. As Lafayette observed, that money mostly goes to the recruiters who are making slaver wages, not the workers.
As a H1-B, I made about $36k/year. Once I had a green card, it went up to $85k.

Also, I'm astonished that you can claim with a straight face that anyone in IT can 'learn Oracle' and get hired. Companies have no interest in someone who's completed a course, they can hire that kind of DBA from India for under $20k. They want someone with five years' experience. 'Retraining' in IT is a sick joke.

[real person from the real world]

Icarus, my programming career never got off the ground: no entry level jobs (I only had an assoc, my MBA dates from the Regan recession after I got laid off from advertising and my elderly father got cancer). I have been working in staffing, not as a programmer. That was the job I found. My health was shot, and the jobs at the time were gone. I know of one PHD who was working at one of those "brewry" restaurants when he got canned. I work with layers, and I don't just see the people being hired, I see what they get while my boss and company get their cut, and the layers in some cases, get theirs. No doubt about it, these guys, even when they don't get the full amount being paid by a company to a staffing company for their work, still get paid well. If I were programming, I might be doing better, but I have been out of it too long, and I started too old. That was my problem, along with being the kid who quit a career to care give for an elderly parent. Also, I know a lot of guys who put one thing down on the field for pay on career builder, and actually have financial problems because the jobs are on and off, and more often, with small employers, they make a lot less. The real winners are all these employer/vender layers that bleed off the wages of the visa slaves, and underpay their hired "sales" help. The problem is NOT the visa guys, the poor slobs are bought and sold for far less what the US employers pay. The problem is that the hiring in this society is out of whack. Few entry level IT jobs, and in HR you have non-technical people making the decisions at some companies for IT people (a consultant labeled as a "job hopper" and other nonsense) or personality games (a geek CIO wants a geek manager so they mow thru 40 interviews with candidates qualified by resume, because they guy wants a geek buddy to talk geek with), or backlash games, because they know our company is owned by a foreigner.

[real person from the real world]

Short version of above: I tried to retrain, and fell thru the cracks. "Retraining" is just another way for Education, Inc. to make a fast buck.

[Icarus]

Doug K...

If you do stick to Enterprise Applications, whether on the functional or technical side, and have some training/background on SAP/Peoplesoft/or Oracle Applications, then, there is great opportunity, and I see it daily.
In fact, it's tough to find candidates.

I'm not sure what 'slaver' wages are, but, recruiters oscillate between feast and famine, depending on how they position themselves relative to their respective market(s).

$36K sounds awful, but, I'd be interested to know what area you worked in (it may have been a lower paying IT area). But, like I mentioned...enterprise applications, and those rates immediately increase.

"Real Person"...
I'm sorry if I offended you (I don't think I did, as you responded with great candor).
In a sense, the capitalist economy is quite cruel, and forces the rational actor into very strict behavior. I, for one, am in my 30s, not married, no children, and little in debt and expenses. I engineered my life that way, simply because I didn't want the burden of costs and family, until I was financially set.
Now, that's a choice I made...to not have children, to refrain from family burdens, etc. I also stayed in great health (no over eating, work out daily,etc).

Yes, life is a crap-shoot, and anyone can get entangled in very difficult webs, but, the "rational actor" in capitalist modernity has to develop a revenue stream, before incurring a cost structure (family, children, home mortgage, etc).
When people first commit to a cost structure by having children early (by 'early', I mean before a good salary is obtained), or, don't save appropriately, or, don't train themselves in a good profession (and good professions abound)...then, they live a tense, financially strapped, inflexible life.

There's nothing the govt can and should do in that case, in my opinion. They can't (or don't) come into people's homes, and tell them how/when to family plan (god, I wish they could). People have "freedom" to do that on their own. The dark side of freedom is the responsibity.

Real person, there are also many staffing companies not making a dime. This is the risk they take, but, on the whole, yes, they do take a lion's share of a billed rate. But, from a certain perspective, they earn it. They are agents, and if their work was unnecessary, or too costly, HR departments would employ analysts to do such procurement/search work, and bypass paying their rates, and only pay the contracted worker. This isn't happening in the market, which should alert us to their useful place in the economy. I think I'm right here...;)