Down because your plant closed down and reopened in China? Angry because your tech job is now being handled in India? Don’t worry, let it go. Because it’s a good thing. The Administration says so. According to N. Gregory Mankiw, the chairman of President Bush’s Council of Economic Advisors, “[o]utsourcing is just a new way of doing international trade. More things are tradable than were tradable in the past. And that’s a good thing. ” (See Los Angeles Times article.) Tell that to those who are out of work with obsolete job skills and dim employment prospects, and “good thing” is unlikely to be the characterization you will hear.
It’s a tale of two economies at present. In one, things are looking up. On Monday, the President released his annual “Economic Report of the President,” which predicted 4% growth in the economy overall. As President Bush said in an attached statement, “As 2004 begins, America’s economy is strong and getting stronger.” (See USA Today article.) In the other view of the economy, things are not so rosy. It is replete with references to the “jobless recovery,” where the number of jobs created each month is not enough to accommodate monthly growth to the work force. When January’s job statistics were released last week, the number of jobs created, 112,000, was well below forecasts and below the 150,000 number necessary to maintain equilibrium. (See New York Times article.) In one economy, the unemployment statistics are showing improvement: last week’s statistics showed a drop in unemployment to its lowest level in two years. (See CNN/Money article.) In the other economy, the unemployment rate has been reduced to near meaninglessness, as it fails to reflect all the Americans who have simply given up looking for work or who have exhausted their unemployment benefits. (See New York Times commentary.)
For those mired in the “bad economy,” one of the growing targets of frustration and anger is the practice of “outsourcing,” where employers move jobs that were formerly based in the United States to foreign countries, especially China, India, and Central America, where labor costs are lower. While the phenomenon had mostly been limited to manufacturing jobs, an increasing number of white-collar jobs, such as customer service, accounting, medical diagnostics and billing, and computer programming and IT positions, which are also moving overseas as well. For those who have lost their jobs, the practice can be devastating, as reemployment is not simply a matter of going down the street and finding another job when the entire sector in which you were trained moves overseas. Here’s just one example of just how far the process has gone: remember Ross Perot’s criticism during his presidential campaign, denouncing the “giant sucking sound” of low-wage factories in Mexico attracting U.S. companies? Now Perot Systems, the healthcare services firm of which Perot still serves as chairman of the board, is now set to send call center and medical claims processing jobs to India. (See Washington Post article.)
But according to Mankiw, outsourcing is part of a natural economic evolution. Although outsourcing hurts some workers now, the benefits eventually will outweigh the costs as Americans are able to buy cheaper goods and services and as new jobs are created in growing sectors of the economy, the President’s economic report said. As illustrated by Mankiw, “Maybe we will outsource a few radiologists. What does that mean? Well, maybe the next generation of doctors will train fewer radiologists and will train more general practitioners or surgeons.” (See Los Angeles Times article.) Note the use of the words “next generation,” which hardly provides comfort to this generation of workers that the process will soon normalize to their benefit.
Mankiw and the president are already catching flak for their comments. Even one House Republican delivered harsh criticism of Mankiw’s comments: Rep. Donald Manzullo (R-Ill.) called for Mankiw’s resignation, and indicated that industrial state Republicans are furious. “I know the president cannot believe what this man has said. He ought to walk away, and return to his ivy-covered office at Harvard.” (See Washington Post article.) However, it may also be no coincidence that the words Mankiw used, “it’s a good thing,” is also closely associated with another person who is seen as being out of touch with the concerns of ordinary Americans (and who now may be paying the price): Martha Stewart, currently on trial in Manhattan for conspiracy and obstruction of justice. (See Business Week.) Time will tell whether both Stewart and Mankiw will ever clue in to their apparent obliviousness to the “little people” around them, but there are a lot of ordinary workers hoping it doesn’t wait for the “next generation” like having a job is apparently supposed to.