To reduce unemployment, stop offshoring

According the Dylan Ratigan show on MSNBC on October 8, 72% of all employers claim they cannot find qualified candidates to fill positions. This is the new mantra being furthered by businesses, Bill Clinton, Narayana Kocherlakota, a conservative regional Federal Reserve Bank President, The U.S. Chamber of Commerce, and numerous business friendly economic analysts. According to these sources, a major contributing factor to high unemployment is a mismatch between the skills required for available job openings and skills of unemployed workers. This is often referred to as “structural unemployment.”

Do these arguments have any validity? A lot of progressive analysts say no, that much of the blame for high unemployment rests squarely with employers and their labor practices.

Andrew Sum, Director of Labor Market Studies at Northeastern University has this to say:

If skill mismatches were a serious problem in U.S. labor markets, then one would expect to find that many job openings were remaining vacant for a fairly long period of time. However, data on the durations of existing job vacancies available from three states reveal that the overwhelming share of job vacancies is very short-term in duration. Between 80 and 90 percent of the job vacancies in these three states were open for two months or less, with the vast majority of them (70%) open for less than 30 days. There are very few job vacancies that were open for more than two months (15%).

In a great post on The Economic Populist, Robert Oak, challenges the corporate explanation for high unemployment. He says the reality is that job losses are across the board, not just in certain sectors. In other words, there isn’t really a “structural” change to the labor market and the types of jobs. There just aren’t any jobs.

He quotes Boston Federal Reserve President, Eric Rosengren, who says the problem is one of demand, not lack of skills.

In rather stark contrast, the most recent recession is far less a reflection of dislocation in a few industries but rather reflects a general decline in almost all industries. . . . To me, this does not suggest that the driver is structural change in the economy increasing job mismatches – although no doubt some of that exists – but instead I see here a widespread decline in demand across most industries.

In other words, we have sky-high unemployment rates across the board in a country full of highly skilled and educated people looking for work.

Oak points out that information and manufacturing started “to be decimated with the China trade agreement and advances in telecommunications. This is when the great offshore outsourcing of jobs started, in 2001.” He includes the graph below showing that the official unemployment rate for college graduates is over double what it was at the beginning of the decade.

According to Oak, 2.4 million jobs were lost to China from 2001-2008 alone and the tech people in Silicon valley, whose numbers dropped by 50%, were pushed entirely out of the field, their jobs offshore outsourced. And, he notes, the Economic Policy Institute (EPI) estimates half a million jobs will be lost to China in this year alone.

I’m including the following long quote from Oaks as he makes an important connection between outsourcing and current rates of unemployment. He points out that offshore outsourcing companies are seeing double digit growth:

India’s big three software outsourcing firms are set to regain double-digit growth rates during the second quarter, as customers in the US and Europe revive technology spending for addressing new markets and start offshoring their IT and back office projects to halve their costs.

Tata Consultancy Services, Infosys Technologies and Wipro, which count Citibank, Dow Chemicals, JP Morgan and BP Plc among their top customers, are expected to grow their quarter to September revenues by around 20% compared to the same period last year, at least five analysts tracking the sector told ET.

“We are getting ‘large deals, but maybe not as large as we would like. We are getting discretionary and transformation deals. In some sense, it’s business as usual in the short term but we have to wait and watch over medium to long term,” said S ‘Kris’ Gopalakrishnan, chief executive of Infosys.

He added that Infosys has started adding customers in US and Europe. “We traditionally define large deals as $100 million-plus for outsourcing deals and $50 million-plus for transformational deals—it’s lower than that at this point,” said Mr Gopalakrishnan.

Oak continues:

Public citizen gives us a new layoff tracker, showing job losses directly related to trade and offshore outsourcing.

The AFL-CIO has put together a new website and database, which allows you to see who is exporting jobs by zip code.

Those of us in STEM (science, technology, engineering, mathematics) know what skills shortage really means. It means enabling more outsourcing, more foreign guest workers and more immigration. The evidence is overwhelming these techniques labor arbitrage Americans and give a strong disincentive to even bother with difficult subject areas such as engineering. Why bother to bust your butt on difficult topics when your career won’t even start or be gone due to labor arbitrage and discrimination in 10 years?

There is no skills shortage, there never was a skill shortage. There is a shortage of good employers who do not discriminate, age discriminate, ship jobs to India, China, Brazil and treat their workers like cannon fodder. There also is a shortage of jobs, pure and simple. Put U.S. workers first. Demand these employers quit their inane, harsh, wage repressing, discriminatory labor practices. Put a few of these traitorous employers in jail and sue ’em. Deal with trade and offshore outsourcing; invest in America and Americans. Then and only then will we might actually get somewhere to putting people back to work.

Stop the bubble mentality and get America back to producing things again. Real goods, real services, not Dutch Tulip bulbs, financial fiction or quarterly cost reductions.

During WWII and throughout the history of the United States, employers trained their own workers. At the height of the depression, employers trained their workers. They even sent them to college. Nowadays large corporations want prefab workers for $10/hr that they can dispose of like a fast food wrapper. This mentality must change and it could by passing legislation as well as enforcing current labor law.

Government must force employers, particularly large, multinational corporations, to hire America. It is their patriotic duty as well as vital to our economic future for employers to provide jobs to all Americans.

I quoted much of Robert Oak’s article at length because he put his finger on the mysterious lack of jobs at a time when corporations are flush with cash and profits are up. The “skills deficit” argument is an excuse businesses use to not hire American workers. Instead, they outsource jobs to other countries and hire skilled foreign workers to come here because they will work for lower wages. Unemployment in the United States will only worsen if we continue to let American businesses ship good jobs overseas in pursuit of higher profits while they ignore their larger responsibilities to our nation.