Washington - US Jobs Moving Offshore at Record Pace
Washington - Jobs are fleeing the US for lower-cost countries at an alarmingly higher rate.
Information technology, finance, back-office staffing, call-center and manufacturing firms are setting up shop abroad amidst a record trade deficit, soaring unemployment—and a protectionist movement at home led by New York Democratic Senator Charles Schumer, The Post has learned.
The US shed some 5.38 million manufacturing jobs alone between 2000 and 2009—2.4 million attributed directly to our trade deficit with China—Commerce Department data shows. New York state has been hard hit, losing 272,000 jobs in the same period.
The job-loss forecasts are frightful: Over 1 million back-office jobs will be lost to offshoring—jobs created by US firms abroad instead of here at home—between 2000 and 2015, according to The Hackett Group, a global strategic advisory firm. About 100,000 back-office jobs move out of the US each year, double the 2004-2005 level, the company says.
“The situation is very serious and I think it is going to get worse,” said Robert Scott, senior international economist at the Economic Policy Institute (EPI) in Washington, DC, referring to the record US trade deficit. In May, according to the Commerce Department, America’s trade deficit expanded by $42.3 billion, its highest level in 18 months. The monthly trade deficit with China soared by $3 billion, to $22 billion. America businesses shipped $152.3 billion of goods and services overseas in May—an increase of just over 2 percent from April—but then imported $194.5 billion, a jump of 2.9 percent.
Scott said the consensus among economists is for the deficit to keep growing through 2012.
With the official national unemployment rate at 9.6 percent—and heightened economic anxiety among voters—a protectionist political mood is building. NeoIT Advisory says the political mood today regarding the loss of US jobs to overseas locations is the most heightened since 1999.
Indeed, Sen. Schumer is proposing a $0.25 excise tax on any customer service call originating in the United States that is then handed off to an agent working out of a foreign call center. The company that transferred the call gets whacked with the fee.
His plan is contained in a bill he plans to introduce in Washington in the coming weeks, which would require companies to disclose to customers that their incoming or outgoing calls were being transferred abroad. It’s not Schumer’s first attempt to stem the flow of outsourced American jobs—but experts say this could be his best shot at succeeding.
“If we want to put a stop to the outsourcing of American jobs, than we need to provide incentives for American companies to keep American jobs here,” said Schumer. “This bill will not only serve to maintain call center jobs currently in the United States, but also provide a reason for companies that have already outsourced jobs to bring them back.”
The National Association of Call Centers, a non-profit that tracks the industry, wishes Schumer luck. But Paul Stockford, the group’s research director, noted that the challenge is striking the right balance between customer satisfaction and the big savings on operating costs, which run as much as four times lower for US companies operating in countries like India, China and Mexico.
That’s not much consolation to US workers who’ve lost out in the near-decade-long erosion of manufacturing, labor leaders say. “Look at the profile of what the US imports and exports, and I think you could be crazy not to be alarmed,” said AFL-CIO Chief of Staff Thea Lee. “Our profile looks a lot like a Third World country, especially our ridiculously imbalanced trade relationship and deficit with China.”
As the US imports high-tech gear and computers from China, Thea noted our top exports to China include “waste products like pulp, chopped-up paper, the parts of animals that nobody wants to eat here and waste metal.”
Schumer, meanwhile, says his bill “will go a long way toward keeping American jobs right here at home.”
Pro: Allows firms to stay afloat
Jagdish N. Bhagwati, the André Meyer senior fellow in international economics at the Council on Foreign Relations says many economists argue that offshoring of jobs is a form of free trade, which increases wealth in the global economy.
Employing off-shore workers at lower cost allows US companies to be more efficient and productive, permitting them to create the same amount of goods with fewer resources.
In turn, this lowers the price of the goods for consumers in the United States, strengthening US companies’ balance sheets and freeing workers for other tasks.
The cost savings also allows struggling companies to stay afloat and perhaps expand in a highly competitive global market, says the author of the recently published “In Defense of Globalization.”
“Outsourcing is not destroying American jobs,” he said. “These jobs are going anyway, because otherwise the goods would be too expensive to produce” and the companies that make them would no longer be competitive, he says.
Con: The haves and have-nots
Andy Grove, ex-CEO of chip giant Intel, is worried that the Silicon Valley innovation engine that people have come to rely on to offset the offshoring of other jobs is no longer there.
Grove noted that there are fewer manufacturing jobs in the US computer biz now than when the first PC was assembled in 1975.
Grove pointed to Foxconn, an offshoring tech giant in China, which employs 250,000 people producing Apple products. Apple has about 25,000 employees here—that’s roughly a 10-to-1 ratio of Chinese working on iMacs, iPods and iPhones.
“You could say, as many do, that shipping jobs overseas is no big deal because the high-value work—and much of the profits—remain in the US,” Grove said this month in a speech.
“That may well be so. But what kind of a society are we going to have if it consists of highly paid people doing high-value-added work—and masses of unemployed?” he asked.
“Should we wait and not act on the basis of early indicators? I think that would be a tragic mistake because the only chance we have to reverse the deterioration is if we act early and decisively,” Grove added.
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