The Job Export Machine

In the past four decades, many millions of manufacturing jobs in this country have been shipped overseas or to South America. This transfer was supposed to be part of the “win-win” process of free trade. But 27 straight years of growing trade deficits with the rest of the world makes one wonder: who’s winning?

Conventional economists and their Republican and Democratic converts try to cushion this job export machine by saying that the large majority of jobs in this country are white collar not blue collar. The implication is that white collar jobs are not as easy to export.

Well, welcome to the computerization age. U.S. companies are rushing headlong to export computer programming work to countries like India and Malaysia and now China where English-language proficiency and cheap labor cut costs by more than two-thirds. Payroll processing, airline passenger billings, insurance computer applications, new software designs are only some of the labor that is done in foreign countries for U.S. companies.

Last week’s Computerworld magazine calls “Offshore’s Rise” relentless. By next year the article reports “Forty percent [of U.S. companies] will have completed some kind of pilot program or will be using nearshore or offshore services. IBM and Accenture Ltd were named as firms pushing what the research firm, IDC, says is the dominant trend in the Information Technology services industry. IDC adds that forty two percent of the application management contracts now contain some offshore component.

It is difficult to find any estimates regarding the total number of American jobs displaced in this sector. But Gartner Inc. uses the jargon “human resources outsourcing services” and puts a $46 billion price tag on them for this year.

Moreover U.S. firms are opening subsidiaries in countries like India to compete with Indian firms for outsourcing business. Accenture CEO Joe W. Forehand is reported by Computerworld as comparing the trend to the previous exodus from the U.S. of many manufacturing operations. “The way we look at it, the industrialization of IT [information technology] is a reality and we have to embrace that,” he said.

IT has been in a bit of a slump, not to mention the rest of the computer industry. So, when outsourcing is combined with massive layoffs in this country and the continuing inflow of lower wage computer technology workers under H-1B and L-1 work visas, it is not surprising to see the gloom besetting American technology workers.

Unlike H-1B visas which are supposed to receive prevailing wages (but often do not), the L-1 does not oblige employers to pay workers prevailing wages and there is no cap on the number of these visas that can be awarded foreign workers.

With over 500,000 workers in this country on “temporary” H-1B visas, supposedly meeting a domestic dearth of skills, the L-1 visa workers are supposed to be just transfers between subsidiaries and parent companies. In fact, reports the New York Times, “They are now routinely used by companies based in India and elsewhere to bring their workers into the United States and then contract them out to American companies — in many instances to be replacement for American workers.” The number of workers replaced is unknown, according to the Times.

All this upsets the Organization of the Rights of American Workers, a nonprofit group based in Meriden, Connecticut. Its president, John Bauman, believes that a recovery in this industry will not bring back the American jobs due to both outsourcing and these special visa programs so strongly desiredby Silicon Valley companies.

When these concerns are raised to international economists, one of their replies is “Don’t you know what an extraordinary job machine is the U.S. economy?” Well, it has lost 2.6 million jobs since February 2001. More important is that at least one third of our economy’s full time — nearly 50 million workers — do not earn a living wage! The federal minimum wage, adjusted for inflation since 1968 would be around $8 an hour. Instead, it has remained at $5.15 an hour, exerting a downward pull on lower income wages generally.

Someday the pollyanna belief that the U.S. economy always replaces the jobs it loses overseas with new jobs here, as we keep racing ahead of other countries with modern technology and new or redundant services, may run into a contrary riptide that no set of spurious statistics can obscure.