Several items on our changing economy and global competitiveness
Here are a few stories I collected over the last few weeks dealing with globalization, outsourcing, and competing against foreign cheap labor.
First, from the New York Times (Eduardo Porter) (reprint of full article available here for $2.95): “In Florida Groves, Cheap Labor Means Machines”
The story reports on how Florida orange growers faced with increased foreign competition “turn to labor-saving technology as their best hope for survival.” Describes use of “canopy shakers,” that “can shake loose more oranges in 15 minutes than four pickers could in [a] full day.” Other agricultural sectors are similarly renewing efforts to enhance productivity with technology.
Again, improved productivity comes at a cost in jobs — replacing (mostly immigrant) labor with machines. But this is an important way for an important sector of the American economy to remain competitive. We always have led the world in application of technology to agriculture, and should continue to do so.
Next, from Business Week: “One Giant Global Labor Pool? Below the boiling political rhetoric, a real threat America’s workers face is the potential for U.S. wages to sink to overseas levels”
A number of economists are worried . . . not about how many jobs the U.S. will create [but] . . . on an aspect of international job competition that hasn’t yet gotten much notice: The conceivably widespread impact, at some point, on U.S. incomes and living standards. . . .
[T]he recent transfer to other countries of so-called knowledge work — jobs requiring lots of education and creative skills — could be a signal of what lies ahead. For a precedent, look at what globalization has done to the pay of less-skilled U.S. factory workers over the past three decades or so. As low-wage countries developed the ability to produce things such as apparel, electronics, and textiles, . . . [t]his has exerted downward pressure on U.S. factory wages that continues today. . . .
The ability of U.S. companies to find architects, engineers, programmers, and financial analysts in places like India for a fraction of what they cost at home almost certainly will create a dampening effect, sooner or later, on the pay of the 80% of U.S. employees who until now have been unaffected by such global job competition. . . .
As the world increasingly begins to look like one big labor pool, market forces should tend to move wages everywhere toward the same level for similar work, all else being equal. . . .
Problem is, all else isn’t necessarily equal: Wages tend to move toward equilibrium only after productivity is factored into the equation. . . . U.S. skill and technology have made many factories at home more productive than their foreign counterparts — one reason that all American factory jobs haven’t shifted abroad. . . .
The question that white collar offshoring raises is whether American professionals are more productive than their Chinese or Indian rivals. If the answer is no, the result could be sobering. Many of the highest-skilled jobs that are fleeing offshore seem to depend more on brainpower than on capital or technology — the last lines of defense in manufacturing. . . .
The full effects of white-collar outsourcing could take a number of years to develop — and the impact in America could be muted if overseas professionals demand compensation that starts to approach that in the U.S. Read more
Next, from Findlaw (Reuters): “Citigroup Exec Doesn’t Blame Outsourcing”
The lack of job creation in the United States was due more to strong productivity growth than outsourcing to Asia, Stanley Fischer, vice chairman of Citigroup and president of Citigroup International, said . . . .
“If you have growth of… around 4.5 percent and productivity growth around those rates, then you know what you don’t have and that is extra jobs,” he told a seminar at the Singapore Management University.
“So the joblessness of the U.S. recovery is the flipside of the superb productivity performance,” he said, but added that productivity would head back toward its long term rate of around three percent . . . .
“If you look at the role of outsourcing, you will see that the numbers don’t add up to give outsourcing the role that it is receiving politically.”. . . Read more
Finally, Reuters reports: Read more
Only 10 percent to 20 percent savings seemingly brings this within reach of retaining domestic competitiveness through a combination of modest wage cutting here, wage increases abroad, and/or improved productivity here. And remember, there are major benefits in the long run to spreading global wealth to places such as China and India.
