President Obama is slamming Mitt Romney for
heading companies that were "pioneers in outsourcing U.S. jobs," while
Romney is accusing Obama of being "the real outsourcer-in-chief."
These are the dog days of summer and the silly season of presidential campaigns. But can we get real, please?
The American economy has moved way beyond outsourcing abroad or even
"in-sourcing." Most big companies headquartered in America don't send
jobs overseas and don't bring jobs here from abroad.
That's because most are no longer really "American" companies.
They've become global networks that design, make, buy, and sell things
wherever around the world it's most profitable for them to do so.
As an Apple executive told the New York Times,
"we don't have an obligation to solve America's problems. Our only
obligation is making the best product possible." He might have added
"and showing profits big enough to continually increase our share
Forget the debate over outsourcing. The real question is how to make
Americans so competitive that all global companies -- whether or not
headquartered in the United States -- will create good jobs in America.
Apple employs 43,000 people in the United States but contracts with
over 700,000 workers overseas. It assembles iPhones in China both
because wages are low there and because Apple's Chinese contractors can
quickly mobilize workers from company dorms at almost any hour of the
day or night.
But low wages aren't the major force driving Apple or any other
American-based corporate network abroad. The components Apple's Chinese
contractors assemble come from many places around the world with wages
as high if not higher than in the United States.
More than a third of what you pay for an iPhone
ends up in Japan, because that's where some of its most advanced
components are made. Seventeen percent goes to Germany, whose precision
manufacturers pay wages higher than those paid to American manufacturing
workers, on average, because German workers are more highly skilled.
Thirteen percent comes from South Korea, whose median wage isn't far
from our own.
Workers in the United States get only about 6 percent of what you pay
for an iPhone. It goes to American designers, lawyers, and financiers,
as well as Apple's top executives.
American-based companies are also doing more of their research and
development abroad. The share of R&D spending going to the foreign
subsidiaries of American-based companies rose from 9 percent in 1989 to
almost 16 percent in 2009, according to the National Science Foundation.
What's going on? Put simply, America isn't educating enough of our
people well enough to get American-based companies to do more of their
high-value added work here.
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Our K-12 school system isn't nearly up to what it should be. American
students continue to do poorly in math and science relative to students
in other advanced countries. Japan, Germany, South Korea, Canada,
Australia, Ireland, Sweden, and France all top us.
American universities continue to rank high but many are being
starved of government funds and are having trouble keeping up. More and
more young Americans and their families can't afford a college
education. China, by contrast, is investing like mad in world-class
universities and research centers.
Transportation and communication systems abroad are also becoming
better and more reliable. In case you hadn't noticed, American roads are
congested, our bridges are in disrepair, and our ports are becoming