The New Face of Class War
As Jobs Leave America's Shoress...
By Paul Craig Roberts
10/01/06 "Counterpunch" -- --
The attacks on middle-class jobs are lending new meaning
to the phrase "class war". The ladders of upward mobility are
being dismantled. America, the land of opportunity, is giving
way to ever deepening polarization between rich and poor.
assault on jobs predates the Bush regime. However, the loss of
middle-class jobs has become particularly intense in the 21st
century, and, like other pressing problems, has been ignored by
President Bush, who is focused on waging war in the Middle East
and building a police state at home. The lives and careers that
are being lost to the carnage of a gratuitous war in Iraq are
paralleled by the economic destruction of careers, families, and
communities in the U.S.A. Since the days of President Franklin
D. Roosevelt in the 1930s, the U.S. government has sought to
protect employment of its citizens. Bush has turned his back on
this responsibility. He has given his support to the offshoring
of American jobs that is eroding the living standards of
Americans. It is another example of his betrayal of the public
trade" and "globalization" are the guises behind which class war
is being conducted against the middle class by both political
parties. Patrick J. Buchanan, a three-time contender for the
presidential nomination, put it well when he wrote1 that NAFTA
and the various so-called trade agreements were never trade
deals. The agreements were enabling acts that enabled U.S.
corporations to dump their American workers, avoid Social
Security taxes, health care and pensions, and move their
factories offshore to locations where labor is cheap.
offshore outsourcing of American jobs has nothing to do with
free trade based on comparative advantage. Offshoring is labor
arbitrage. First world capital and technology are not seeking
comparative advantage at home in order to compete abroad. They
are seeking absolute advantage abroad in cheap labor.
developments made possible the supremacy of absolute over
comparative advantage: the high speed Internet and the collapse
of world socialism, which opened China's and India's vast
under-utilized labor resources to first world capital.
past, first world workers had nothing to fear from cheap labor
abroad. Americans worked with superior capital, technology and
business organization. This made Americans far more productive
than Indians and Chinese, and, as it was not possible for U.S.
firms to substitute cheaper foreign labor for U.S. labor,
American jobs and living standards were not threatened by low
wages abroad or by the products that these low wages produced.
of offshoring has made it possible for U.S. firms using first
world capital and technology to produce goods and services for
the U.S. market with foreign labor. The result is to separate
Americans' incomes from the production of the goods and services
that they consume. This new development, often called
"globalization," allows cheap foreign labor to work with the
same capital, technology and business know-how as U.S. workers.
The foreign workers are now as productive as Americans, with the
difference being that the large excess supply of labor that
overhangs labor markets in China and India keeps wages in these
countries low. Labor that is equally productive but paid a
fraction of the wage is a magnet for Western capital and
new development, offshoring is destroying entire industries,
occupations and communities in the United States. The
devastation of U.S. manufacturing employment was waved away with
promises that a "new economy" based on high-tech knowledge jobs
would take its place. Education and retraining were touted as
testimony before the U.S.-China Commission,2 I explained that
offshoring is the replacement of U.S. labor with foreign labor
in U.S. production functions over a wide range of tradable goods
and services. (Tradable goods and services are those that can be
exported or that are competitive with imports. Nontradable goods
and services are those that only have domestic markets and no
import competition. For example, barbers and dentists offer
nontradable services. Examples of nontradable goods are
perishable, locally produced fruits and vegetables and specially
fabricated parts of local machine shops.) As the production of
most tradable goods and services can be moved offshore, there
are no replacement occupations for which to train except in
domestic "hands on" services such as barbers, manicurists, and
hospital orderlies. No country benefits from trading its
professional jobs, such as engineering, for domestic service
Brookings Institution conference in Washington, D.C., in January
2004, I predicted that if the pace of jobs outsourcing and
occupational destruction continued, the U.S. would be a third
world country in 20 years. Despite my regular updates on the
poor performance of U.S. job growth in the 21st century,
economists have insisted that offshoring is a manifestation of
free trade and can only have positive benefits overall for
has contradicted the glib economists. The new high-tech
knowledge jobs are being outsourced abroad even faster than the
old manufacturing jobs. Establishment economists are beginning
to see the light. Writing in Foreign Affairs (March/April
2006), Princeton economist and former Federal Reserve vice
chairman Alan Blinder concludes that economists who insist that
offshore outsourcing is merely a routine extension of
international trade are overlooking a major transformation with
significant consequences. Blinder estimates that 42-56 million
American service sector jobs are susceptible to offshore
outsourcing.3 Whether all these jobs leave, U.S. salaries will
be forced down by the willingness of foreigners to do the work
engineers and information technology workers have been
especially hard hit. Jobs offshoring, which began with call
centers and back-office operations, is rapidly moving up the
value chain. Business Week's Michael Mandel4 compared
starting salaries in 2005 with those in 2001. He found a 12.7
per cent decline in computer science pay, a 12 per cent decline
in computer engineering pay, and a 10.2 per cent decline in
electrical engineering pay. Marketing salaries experienced a 6.5
per cent decline, and business administration salaries fell 5.7
per cent. Despite a make-work law for accountants known by the
names of its congressional sponsors, Sarbanes-Oxley, even
accounting majors, were offered 2.3 per cent less.
same sources as the Business Week article (salary data
from the National Association of Colleges and Employers and
Bureau of Labor Statistics data for inflation adjustment),
professor Norm Matloff at the University of California, Davis,
made the same comparison for master's degree graduates. He found
that between 2001 and 2005 starting pay for master's degrees in
computer science, computer engineering, and electrical
engineering fell 6.6 per cent, 13.7 per cent, and 9.4 per cent
February 22, 2006, CNNMoney.com staff writer Shaheen Pasha5
reported that America's large financial institutions are moving
"large portions of their investment banking operations abroad."
Offshoring is now killing American jobs in research and analytic
operations, foreign exchange trades, and highly complicated
credit derivatives contracts. Deal-making responsibility itself
may eventually move abroad. Deloitte Touche says that the
financial services industry will move 20 per cent of its total
costs base offshore by the end of 2010. As the costs are lower
in India, the move will represent more than 20 per cent of the
business. A job on Wall Street is a declining option for bright
young persons with high stress tolerance as America's last
remaining advantage is outsourced.
to Norm Augustine, former CEO of Lockheed Martin, even McDonald
jobs are on the way offshore. Augustine reports that McDonald is
experimenting with replacing error-prone order takers with a
system that transmits orders via satellite to a central location
and from there to the person preparing the order. The technology
lets the orders be taken in India or China at costs below the
U.S. minimum wage and without the liabilities of U.S. employees.
economists, some from incompetence and some from being bought
and paid for, described globalization as a "win-win"
development. It was supposed to work like this: The U.S. would
lose market share in tradable manufactured goods and make up the
job and economic loss with highly educated knowledge workers.
The win for America would be lower-priced manufactured goods and
a white-collar work force. The win for China would be
manufacturing jobs that would bring economic development to that
It did not
work out this way, as Morgan Stanley's Stephen Roach, formerly a
cheerleader for globalization, recently admitted. It has become
apparent that job creation and real wages in the developed
economies are seriously lagging behind their historical norms as
offshore outsourcing displaces the "new economy" jobs in
"software programming, engineering, design, and the medical
profession, as well as a broad array of professionals in the
legal, accounting, actuarial, consulting, and financial services
industries".6 The real state of the U.S. job market is revealed
by a Chicago Sun-Times report on January 26, 2006, that
25,000 people applied for 325 jobs at a new Chicago Wal-Mart.
to the BLS payroll jobs data,7 over the past half-decade
(January 2001 - January 2006, the data series available at time
of writing) the U.S. economy created 1,050,000 net new private
sector jobs and 1,009,000 net new government jobs for a total
five-year figure of 2,059,000. That is seven million jobs short
of keeping up with population growth, definitely a serious job
payroll jobs data contradict the hype from business
organizations, such as the U.S. Chamber of Commerce, that
offshore outsourcing is good for America. Large corporations,
which have individually dismissed thousands of their U.S.
employees and replaced them with foreigners, claim that jobs
outsourcing allows them to save money that can be used to hire
more Americans. The corporations and the business organizations
are very successful in placing this disinformation in the media.
The lie is repeated everywhere and has become a mantra among
no-think economists and politicians. However, no sign of these
jobs can be found in the payroll jobs data. But there is
abundant evidence of the lost American jobs.
past five years (January 01 - January 06), the information
sector of the U.S. economy lost 644,000 jobs, or 17.4 per cent
of its work force. Computer systems design and related work lost
105,000 jobs, or 8.5 per cent of its work force. Clearly, jobs
offshoring is not creating jobs in computers and information
technology. Indeed, jobs offshoring is not even creating jobs in
manufacturing lost 2.9 million jobs, almost 17 per cent of the
manufacturing work force. The wipeout is across the board. Not a
single manufacturing payroll classification created a single new
declines in some manufacturing sectors have more in common with
a country undergoing saturation bombing during war than with a
"supereconomy" that is "the envy of the world." In five years,
communications equipment lost 42 per cent of its work force.
Semiconductors and electronic components lost 37 per cent of its
work force . The work force in computers and electronic products
declined 30 per cent. Electrical equipment and appliances lost
25 per cent of its employees. The work force in motor vehicles
and parts declined 12 per cent. Furniture and related products
lost 17 per cent of its jobs. Apparel manufacturers lost almost
half of the work force. Employment in textile mills declined 43
per cent. Paper and paper products lost one-fifth of its jobs.
The work force in plastics and rubber products declined by 15
five-year period, U.S. job growth was limited to four areas:
education and health services, state and local government,
leisure and hospitality, and financial services. There was no
U.S. job growth outside these four areas of domestic nontradable
for example, which has been handing out thousands of pink slips,
has recently announced two thousand more jobs being moved to
India.8 How is Oracle's move of U.S. jobs to India creating
American jobs in nontradable services such as waitresses and
bartenders, hospital orderlies, state and local government, and
Engineering jobs in general are in decline, because the
manufacturing sectors that employ engineers are in decline.
During the last five years, the U.S. work force lost 1.2 million
jobs in the manufacture of machinery, computers, electronics,
semiconductors, communication equipment, electrical equipment,
motor vehicles, and transportation equipment. The BLS payroll
jobs numbers show a total of 69,000 jobs created in all fields
of architecture and engineering, including clerical personnel,
over the past five years. That comes to a mere 14,000 jobs per
year (including clerical workers). What is the annual graduating
class in engineering and architecture? How is there a shortage
of engineers when more graduate than can be employed?
many new graduates take jobs opened by retirements. We would
have to know the retirement rates to get a solid handle on the
fate of new graduates. But this fate cannot be very pleasant ,
with declining employment in the manufacturing sectors that
employ engineers and a minimum of 65,000 H-1B work visas
annually for foreigners plus an indeterminate number of L-1 work
It is not
only the Bush regime that bases its policies on lies. Not
content with moving Americans' jobs abroad, corporations want to
fill the jobs remaining in America with foreigners on work
visas. Business organizations allege shortages of engineers,
scientists and even nurses. Business organizations have
successfully used pubic relations firms and bought-and-paid-for
"economic studies" to convince policymakers that American
business cannot function without H-1B visas that permit the
importation of indentured employees from abroad who are paid
less than the going U.S. salaries. The so-called shortage is, in
fact, a replacement of American employees with foreign
employees, with the soon-to-be-discharged American employee
first required to train his replacement.
amazing to see free-market economists rush to the defense of
H-1B visas. The visas are nothing but a subsidy to U.S.
companies at the expense of U.S. citizens. Keep in mind this
H-1B subsidy to U.S. corporations for employing foreign workers
in place of Americans as we examine the Labor Department's job
projections over the 2004-2014 decade.
All of the
occupations with the largest projected employment growth (in
terms of the number of jobs) over the next decade are in
nontradable domestic services. The top ten sources of the most
jobs in "superpower" America are: retail salespersons,
registered nurses, postsecondary teachers, customer service
representatives, janitors and cleaners, waiters and waitresses,
food preparation (includes fast food), home health aides,
nursing aides, orderlies and attendants, general and operations
managers.9 Note than none of this projected employment growth
will contribute one nickel toward producing goods and services
that could be exported to help close the huge U.S. trade
deficit. Note, also, that few of these job classifications
require a college education.
fastest growing occupations (in terms of rate of growth), seven
of the ten are in health care and social assistance. The three
remaining fields are: network systems and data analysis with
126,000 jobs projected, or 12,600 per year; computer software
engineering applications with 222,000 jobs projected, or 22,200
per year; and computer software engineering systems software
with 146,000 jobs projected, or 14,600 per year.10
these projections are realized, how many of the computer
engineering and network systems jobs will go to Americans? Not
many, considering the 65,000 H-1B visas each year (bills have
been introduced in Congress to raise the number) and the loss
during the past five years of 761,000 jobs in the information
sector and computer systems design and related sectors.
from its ten-year jobs projections, the U.S. Department of Labor
does not expect to see any significant high-tech job growth in
the U.S.The knowledge jobs are being outsourced even more
rapidly than the manufacturing jobs. The so-called "new economy"
was just another hoax perpetrated on the American people.
outsourcing jobs offshore is good for U.S. employment, why won't
the U.S. Department of Commerce release the 200-page, $335,000
study of the impact of the offshoring of U.S. high-tech jobs?
Republican political appointees reduced the 200-page report to
12 pages of public relations hype and refuse to allow the
Technology Administration experts who wrote the report to
testify before Congress. Democrats on the House Science
Committee are unable to pry the study out of the hands of
Commerce Secretary Carlos Gutierrez. On March 29, 2006,
Republicans on the House Science Committee voted down a
resolution (H.Res. designed to force the Commerce Department to
release the study to Congress. Obviously, the facts don't fit
the Bush regime's globalization hype.
payroll data that we have been examining tracks employment by
industry classification. This is not the same thing as
occupational classification. For example, companies in almost
every industry and area of business employ people in
computer-related occupations. A recent study from the
Association for Computing Machinery claims, "Despite all the
publicity in the United States about jobs being lost to India
and China, the size of the IT employment market in the United
States today is higher than it was at the height of the dot.com
boom. Information technology appears as though it will be a
growth area at least for the coming decade."
check this claim by turning to the BLS Occupational Employment
Statistics.11 We will look at "computer and mathematical
employment"12 and "architecture and engineering employment".13
and mathematical employment includes such fields as "software
engineers applications," "software engineers systems software,"
"computer programmers," "network systems and data
communications," and "mathematicians." Has this occupation been
a source of job growth? In November of 2000 this occupation
employed 2,932,810 people.14 In November of 2004 (the latest
data available), this occupation employed 2,932,790, or 20
people fewer. Employment in this field has been stagnant for
these four years, there have been employment shifts within the
various fields of this occupation. For example, employment of
computer programmers declined by 134,630, while employment of
software engineers applications rose by 65,080, and employment
of software engineers systems software rose by 59,600. (These
shifts probably merely reflect change in job title from
programmer to software engineer.)
figures do not tell us whether any gain in software engineering
jobs went to Americans. According to professor Norm Matloff, in
2002 there were 463,000 computer-related H-1B visa holders in
the U.S. Similarly, the 134,630 lost computer programming jobs
(if not merely a job title change) may have been outsourced
offshore to foreign affiliates.
Architecture and engineering employment includes all the
architecture and engineering fields except software engineering.
The total employment of architects and engineers in the U.S.
declined by 120,700 between November 1999 and November 2004.
Employment declined by 189,940 between November 2000 and
November 2004, and by 103,390 between November 2001 and November
variations among fields. Between November 2000 and November
2004, for example, U.S. employment of electrical engineers fell
by 15,280. Employment of computer hardware engineers rose by
15,990 (possibly these are job title reclassifications).
Overall, however, over 100,000 engineering jobs were lost. We do
not know how many of the lost jobs were outsourced offshore to
foreign affiliates or how many American engineers were dismissed
and replaced by foreign holders of H-1B or L-1 visas.
engineering and computer-related employment in the U.S.A. has
not been growing, whether measured by industry or by occupation.
Moreover, with a half million or more foreigners in the U.S. on
work visas, the overall employment numbers do not represent
employment of Americans.
employees have been abandoned by American corporations and by
their representatives in Congress. America remains a land of
opportunity but for foreigners not for the native born. A
country whose work force is concentrated in domestic nontradable
services has no need for scientists and engineers and no need
for universities. Even the projected jobs in nursing and school
teaching can be filled by foreigners on H-1B visas.
has been firmly established here that the jobs the U.S. is
outsourcing offshore are being replaced with better jobs. There
is no sign of these jobs in the payroll jobs data or in the
occupational employment statistics. When a country loses
entry-level jobs, it has no one to promote to senior level jobs.
When manufacturing leaves, so does engineering, design, research
and development, and innovation itself.
February 16, 2006, the New York Times reported on a new
study presented to the National Academies that concludes that
outsourcing is climbing the skills ladder.15 A survey of 200
multinational corporations representing 15 industries in the
U.S.and Europe found that 38 per cent planned to change
substantially the worldwide distribution of their research and
development work, sending it to India and China. According to
the New York Times, "More companies in the survey said
they planned to decrease research and development employment in
the United States and Europe than planned to increase
and the discussion it provoked came to untenable remedies. Many
believe that a primary reason for the shift of R&D to India and
China is the erosion of scientific prowess in the U.S. due to
lack of math and science proficiency of American students and
their reluctance to pursue careers in science and engineering.
This belief begs the question why students would chase after
careers that are being outsourced abroad.
author of the study, Georgia Tech professor Marie Thursby,
believes that American science and engineering depend on having
"an environment that fosters the development of a high-quality
work force and productive collaboration between corporations and
universities." The dean of Engineering at the University of
California, Berkeley, thinks the answer is to recruit the top
people in China and India and bring them to Berkeley. No one
seems to understand that research, development, design, and
innovation take place in countries where things are made. The
loss of manufacturing means ultimately the loss of engineering
and science. The newest plants embody the latest technology. If
these plants are abroad, that is where the cutting edge resides.
of jobs reality has become an art form for economists,
libertarians, the Bush regime, and journalists. Except for CNN's
Lou Dobbs, no accurate reporting is available in the "mainstream
have failed to examine the incompatibility of offshoring with
free trade. Economists are so accustomed to shouting down
protectionists that they dismiss any complaint about
globalization's impact on domestic jobs as the ignorant voice of
a protectionist seeking to preserve the buggy whip industry.
Matthew J. Slaughter, a Dartmouth economics professor rewarded
for his service to offshoring with appointment to President
Bush's Council of Economic Advisers, suffered no harm to his
reputation when he wrote, "For every one job that U.S.
multinationals created abroad in their foreign affiliates, they
created nearly two U.S. jobs in their parent operations." In
other words, Slaughter claims that offshoring is creating more
American jobs than foreign ones.
Slaughter arrive at this conclusion? Not by consulting the BLS
payroll jobs data or the BLS Occupational Employment Statistics.
Instead, Slaughter measured the growth of U.S. multinational
employment and failed to take into account the two reasons for
the increase in multinational employment: (1) Multinationals
acquired many existing smaller firms, thus raising multinational
employment but not overall employment, and (2) many U.S. firms
established foreign operations for the first time and thereby
became multinationals, thus adding their existing employment to
Slaughter's number for multinational employment.
John Stossel, a libertarian hero, recently made a similar error.
In debunking Lou Dobbs' concern with U.S. jobs lost to offshore
outsourcing, Stossel invoked the California-based company,
Collabnet. He quotes the CEO's claim that outsourcing saves his
company money and lets him hire more Americans. Turning to
Collabnet's webpage, it is very instructive to see the
employment opportunities that the company posts for the United
States and for India.
Collabnet has openings (at time of writing) for eight engineers,
a sales engineer, a technical writer, and a telemarketing
representative. In the U.S. Collabnet has openings for one
engineer, a receptionist/office assistant, and positions in
marketing, sales, services and operations. Collabnet is a
perfect example of what Lou Dobbs and I report: the engineering
and design jobs move abroad, and Americans are employed to sell
and market the foreign-made products.
forms of deception are widely practiced. For example, Matthew
Spiegleman, a Conference Board economist, claims that
manufacturing jobs are only slightly higher paid than domestic
service jobs, so there is no meaningful loss in income to
Americans from offshoring. He reaches this conclusion by
comparing only hourly pay and leaving out the longer
manufacturing workweek and the associated benefits, such as
health care and pensions.
Occasionally, however, real information escapes the spin
machine. In February 2006 the National Association of
Manufacturers, one of offshoring's greatest boosters, released a
report, "U.S. Manufacturing Innovation at Risk," by economists
Joel Popkin and Kathryn Kobe.16 The economists find that U.S.
industry's investment in research and development is not
languishing after all. It just appears to be languishing,
because it is rapidly being shifted overseas: "Funds provided
for foreign-performed R&D have grown by almost 73 per cent
between 1999 and 2003, with a 36 per cent increase in the number
of firms funding foreign R&D."
industry is still investing in R&D after all; it is just not
hiring Americans to do the research and development. U.S.
manufacturers still make things, only less and less in America
with American labor. U.S. manufacturers still hire engineers,
only they are foreign ones, not American ones.
words, everything is fine for U.S. manufacturers. It is just
their former American work force that is in the doldrums. As
these Americans happen to be customers for U.S. manufacturers,
U.S. brand names will gradually lose their U.S. market. U.S.
household median income has fallen for the past five years.
Consumer demand has been kept alive by consumers' spending their
savings and home equity and going deeper into debt. It is not
possible for debt to forever rise faster than income.
States is the first country in history to destroy the prospects
and living standards of its labor force. It is amazing to watch
freedom-loving libertarians and free-market economists serve as
apologists for the dismantling of the ladders of upward mobility
that made the America of old an opportunity society.
seeing a widening polarization into rich and poor. The resulting
political instability and social strife will be terrible.
Paul Craig Roberts , was Assistant Secretary of the
Treasury in the Reagan Administration. He is the author of
Supply-Side Revolution : An Insider's Account of Policymaking in
Washington ; Alienation and the Soviet Economy and
Meltdown: Inside the Soviet Economy, and is the co-author with
Lawrence M. Stratton of The Tyranny of Good Intentions : How
Prosecutors and Bureaucrats Are Trampling the Constitution in
the Name of Justice
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