Post by unlawflcombatnt on Jan 23, 2006 21:31:31 GMT -6
Many still believe that outsourcing is not a major problem. It seems to have slipped some as a topic of discussion. Many claim that we have not lost "that many" jobs to outsourcing. Certainly a lot of workers that have lost jobs to outsourcing would disagree. Many further claim that it is due to the lack of skills of those workers. They might further claim that job retraining is the solution.
I think the outsourcing problem should again be pushed to the forefront of discussion. Many people may have forgotten that over 300,000 people who had high skilled, high tech jobs in California's Silicon Valley lost their jobs. Most of these jobs were due to outsourcing to foreign labor markets. These workers had all the "skills" necessary, but were unable to compete with foreign workers who will work for 1/5th as much. So those jobs were lost, along with the aggregate income that they provided. If those jobs paid an average of $60,000 per year, that's a loss of $18 billion of income. That's $18 billion/year less to purchase American goods. The spending that income financed, as well as the demand it created, cannot be replaced by 300,000 foreign workers making 1/5th as much. The increased corporate profits from the labor savings provide no benefit to our economy whatsoever. With loss of aggregate consumer income and spending power, and the resulting loss of consumer demand, investment demand is also decreased. There's no reason to invest more when consumer demand is less. It simply doesn't make any sense.
Profit increases from widespread reduction of labor costs (and labor income) do not help the economy. It hurts the economy. It reduces the very consumer spending and demand necessary to drive production. The short-term profit gains cannot be productively re-invested. When the demand for goods declines, so does the demand for further investment. That extra profit simply goes into increased CEO salaries & bonuses, stockholder dividends, stock market overvaluation, corporate bank accounts, advertising, Congressional lobbying, and Republican campaign contributions.
There is simply less to invest in as aggregate consumer income, and the production demand it creates, decline due to outsourcing. Again, it makes no sense to increase production capacity when the demand for production is declining.
Part of the reason outsourcing has not remained in the forefront is because it has not resulted in a noticeable decline in consumer spending. As a result, the lost labor income has gone unnoticed. There is a simple explanation for this. The decline in demand that *should* have been noticeable has been obscured by the housing bubble. From $200-$300 billion per year is extracted from homes in the form of home equity loans. Much of this goes towards consumer spending. This amounts to 1.7-2.5% of our $12 trillion GDP. Clear an extra $300 billion in consumer spending money could obscure much of the job loss from outsourcing. If the average American worker makes $35,000/year, it would take a job loss of 8.5 million jobs to cause a consumer income loss of $300 billion dollars. Clearly home equity borrowing alone can compensate for a large number of lost jobs, as well as the aggregate income loss that results. Thus consumer spending and demand can be maintained from this borrowed money. As a result, there has been no noticeable decline in consumer spending as a result of outsourcing. So the catastrophic problems it will ultimately create are going unnoticed.
We can't keep losing jobs and labor income. The housing bubble will eventually deflate. It will take much of the home equity-loan financed consumer spending with it. Jobs will also be lost in the real estate and home construction industries. When all of this happens, the outsourcing debacle will become more obvious. The income lost from outsourcing will become noticeable, because consumer spending will decline.
As such, the sooner the housing bubble bursts the better. Consumer spending will decline, and Corporate America will take a hit as a result. Corporate America will be forced to take notice. The sooner this happens, the sooner the magnitude of the problem will be seen. And the sooner *real* action will be taken to reduce outsourcing.
I think the outsourcing problem should again be pushed to the forefront of discussion. Many people may have forgotten that over 300,000 people who had high skilled, high tech jobs in California's Silicon Valley lost their jobs. Most of these jobs were due to outsourcing to foreign labor markets. These workers had all the "skills" necessary, but were unable to compete with foreign workers who will work for 1/5th as much. So those jobs were lost, along with the aggregate income that they provided. If those jobs paid an average of $60,000 per year, that's a loss of $18 billion of income. That's $18 billion/year less to purchase American goods. The spending that income financed, as well as the demand it created, cannot be replaced by 300,000 foreign workers making 1/5th as much. The increased corporate profits from the labor savings provide no benefit to our economy whatsoever. With loss of aggregate consumer income and spending power, and the resulting loss of consumer demand, investment demand is also decreased. There's no reason to invest more when consumer demand is less. It simply doesn't make any sense.
Profit increases from widespread reduction of labor costs (and labor income) do not help the economy. It hurts the economy. It reduces the very consumer spending and demand necessary to drive production. The short-term profit gains cannot be productively re-invested. When the demand for goods declines, so does the demand for further investment. That extra profit simply goes into increased CEO salaries & bonuses, stockholder dividends, stock market overvaluation, corporate bank accounts, advertising, Congressional lobbying, and Republican campaign contributions.
There is simply less to invest in as aggregate consumer income, and the production demand it creates, decline due to outsourcing. Again, it makes no sense to increase production capacity when the demand for production is declining.
Part of the reason outsourcing has not remained in the forefront is because it has not resulted in a noticeable decline in consumer spending. As a result, the lost labor income has gone unnoticed. There is a simple explanation for this. The decline in demand that *should* have been noticeable has been obscured by the housing bubble. From $200-$300 billion per year is extracted from homes in the form of home equity loans. Much of this goes towards consumer spending. This amounts to 1.7-2.5% of our $12 trillion GDP. Clear an extra $300 billion in consumer spending money could obscure much of the job loss from outsourcing. If the average American worker makes $35,000/year, it would take a job loss of 8.5 million jobs to cause a consumer income loss of $300 billion dollars. Clearly home equity borrowing alone can compensate for a large number of lost jobs, as well as the aggregate income loss that results. Thus consumer spending and demand can be maintained from this borrowed money. As a result, there has been no noticeable decline in consumer spending as a result of outsourcing. So the catastrophic problems it will ultimately create are going unnoticed.
We can't keep losing jobs and labor income. The housing bubble will eventually deflate. It will take much of the home equity-loan financed consumer spending with it. Jobs will also be lost in the real estate and home construction industries. When all of this happens, the outsourcing debacle will become more obvious. The income lost from outsourcing will become noticeable, because consumer spending will decline.
As such, the sooner the housing bubble bursts the better. Consumer spending will decline, and Corporate America will take a hit as a result. Corporate America will be forced to take notice. The sooner this happens, the sooner the magnitude of the problem will be seen. And the sooner *real* action will be taken to reduce outsourcing.