It is easy and partially true to blame the 3.6 million jobs lost -over the last thirteen month- on recession. Globalization is another popular target, and once again a usual suspect.
However, beyond the current focus –stimulus package- to mitigate the immediate pain, we need to ask several basic questions. Is it possible to maintain American standard of living, while losing jobs or creating the wrong ones?
Why America is losing jobs even during economic expansions like the one we had in the nineties?
The American economy lost manufacturing jobs throughout the nineties, and exported high paying jobs -information technology- at alarming rates, during this decade.
The answer is simple, global competition forces corporations to hire inexpensive help. At this point, simplicity cease to exist and questions become loaded.
Can we stop globalization? If not, is it inevitable that all boats –economies- float at the same sea level? Would jobs continue to disappear in America until wages become as low as in other developing nations?
It is not YES or NO answer.
Globalization is a recently coined term, but not a new concept. It is the grand child of international trade, which existed and flourished for thousands of years. The American government and corporations can’t stop globalization, unless willingly we reject capitalism and become another North Korea, or Cuba. It is also naive to imagine the possibility of imposing the same environmental and labor standards across the globe in hopes of raising labor cost.
Therefore, globalization is irreversible progression of capitalism. It is born from advances in communication, mass production, competition, and the endless need to grow demand. These factors created major shifts in all aspects of the market including jobs.
Job market shifts –on large scale- started in the early eighties, and accelerated over the last twenty years. It consisted of two vastly different waves; each has a unique anatomy and required different handling.
The first wave created millions of low skill opportunities abroad, where the level of living and the labor cost is much cheaper than the one in America. This wave produced major job losses in certain industries such as textile, steel and many others.
The victims of this wave were low skilled American labors, who had to go through retraining programs to find new opportunities in alternative industries such as information technology, health care, and many others. The transformation maintained a low unemployment rates, produced higher paying jobs, while shipping abroad the less lucrative ones. The huge pool of low skilled labor abroad sustained the initial low cost, while improved living conditions and opened new markets in poor countries.
During this period, the new industries especially information technology continued to expand and fill badly needed positions domestically, and in some cases through importing unavailable high skilled engineers and programmers. The imported professionals earned as much as their American counterparts, contributed to their companies’ success, and represented additional spending power. Therefore, the first wave of Job shifts worked flawlessly for the mega American corporations and work force.
The second wave started in the late nineties. America, and the rest of the industrialized nations suddenly discovered that year two-thousand was upon us; and the computer programs we all depend on could soon stop functioning.
The panic created millions of high paying jobs in every industry. There were two subsequent revelations. The domestic workforce was not enough to meet the spike in demand. The network communication -fiber optic channels- advances, and a reliable internet, presented a cheap infrastructure capable of sustaining remote work force.
These conditions helped executives realize that engineers could be in India, Russia, or Poland, and provide billions of lines of code around the clock. The business model born overnight to meet temporary demand changed the world. The year 2000 computer bug (Y2K), gave birth to a new era.
The morning after, the industry had less job opportunities, a reliable infrastructure, and a tested international workforce at much lower cost per unit. The new environment meant in many cases that the foreign workers kept their jobs abroad, while their more expensive counterparts in America lost theirs.
Over the last ten years, the limited pool of foreign engineers and programmers raised the cost of their services gradually, which in turn narrowed the price point gap.
Today, most IT executives agree that after taking in consideration the overhead of conducting business overseas, a qualified American engineer cost only twenty to twenty-five percent more than his foreign counterpart. The additional cost associated with hiring American professional is not in pay, but fringe benefits. The most expensive component of this benefit is health care.
It is sad that our policy of employment based healthcare, and the runaway cost of providing basic health services is a major obstacle to job creation in this country.
It is time to stop blaming globalization, socialists, American workers, and corporations. It is time to provide serious alternative to the broken healthcare system. It is time to free the capitalism in America from unfair disadvantage. Do conservative ideologues understand?