A Jobless Recovery and a Witless Society

Friday, November 6, 2009

The Dow Jones is now hovering close to the 10000 mark. However, the unemployment rate in the US has reached a high of 10.2% in October 2009. (Highest since April 1983.) Also, it was recently revealed that the US economy expanded at an annualized rate of 3.5% but the unemployment rate continues to rise. As one commentator puts it: "Jobless recovery is like Joyless orgasm"

What we have witnessed is increased outsourcing of jobs or as American corporations put it "diversifying their business in the emerging economies." Many corporations, which have outsourced hundreds of thousands of jobs, are using this recession as a pretext to do so. The economists have only focused on jobs lost in the US but nobody seems to be worried or at least concerned about hiring sprees of American corporations abroad. So are we to understand that the jobs lost in this recession are lost forever? or as long as India and China remain emerging economies with cheap unskilled (China) and cheap skilled (India) labor?

There are two arguments given by the corporations:

1. Competition: Of course, the Americans are competing with corporations world over and thus, they need to be "competitive" and all that. Here's an interesting example.

" At first, British Petroleum (BP) floated a contract worth $ 1.5 bn to outsource their IT business to India. A day after the BP formally awarded over $1.5-billion outsourcing contracts to TCS, Infosys and Wipro (all Indian companies) along with IBM and Accenture (which have more employees in India than in US) , top Indian offshore vendors including L&T Infotech and HCL Technologies (the Indian newbies) —along with other MNC vendors—have locked horns with each other for almost $1-billion outsourcing deal being fleshed out by ExxonMobil."

So as I understand it, BP first contracted Indian companies to cut their costs and ExxonMobil had to follow suit in order to be competitive?

2. Skills: The new American economy will create new job markets that do not exist today and thus, Americans are at an advantageous positions because they have the opportunity to be part of these "futuristic industries".

Here is an argument on these lines:
"Great inventions, like grand ideas, move the world forward. Railroads, television, airplanes, transistors, computers, satellites, space travel, microchips, cell phones. The reality is, a great many folks entering the workforce will work at jobs that don't yet exist in industries that have yet to be invented. Look what the Internet did for IT. Computers remain the central, indispensable element of modern life. That will not change any time soon."

Guess where I am coming to? ... H1B!

If the new economy is going to produce new job markets, I am certain that those job markets would require specific (and in most cases extreme) skills. That leads us to question whether Americans have those skills? Do they have the right education?

According to some estimates, 60% of the recipients of degree certificates in America, are foreigners. Even if one analyzes the current unemployment one would find that the unemployment is highest among people who do not hold a degree and least among people with graduate education. Interestingly, Prez. Obama is emphasizing on higher education, talking to school children about importance of education.

But till the Americans enroll themselves in the higher educational institutes, don't we need to import skilled labor?

Here's an example:

"America like most of the Western countries is faced with acute shortage of nurses and in recent years it has allowed medical personnel from India, China and Philippines to immigrate to work in hospitals."
"The notion that we would have to import nurses makes absolutely no sense," Obama told a gathering of health experts and lawmakers at a White House meeting on health care reforms. Instead, Prez. Obama argued that the best possible approach to meet this shortfall is to train people inside the country. And according to the Department of Labour, the current (March 2009) national nursing shortage exceeds 126,000. So Obama plans to train large number of nurses as it is expected that there will be a shortage of over 500,000 nurses in the next seven years (according to Democratic lawmaker Capps).

So are we to understand that in next seven years America will train 500,000 nurses?
It is interesting to note that in the US training of nurses and doctors is essentially the same. It takes about 2-4 years to finish a degree program in nursing (Associate program is 2 years and Bachelors program is 4 years)and some more time to become a registered nurse (by taking a test called NCLEX-RN). But what about experience? It will take years to gain experience in nursing (just like any other profession) and to specialize even further. Anyway, how is Prez. Obama going to induce Americans to take up nursing as a profession? Of course, he must raise the salaries of nurses all over the US. There are about 2.5 mn nurses in the US today and a salary hike of even $10,000 a year would mean $25 bn of additional costs every year.

My argument is that why not to import labour from the emerging countries? If the capital can flow from where it is in abundance to where there is dearth of capital and an opportunity to invest capital, why can't labour flow in the other direction?

There are many job categories where Americans do not want to work as they find those jobs beneath themselves. So far they have imported cheap labor from other countries (and now they are blaming those laborers for the unemployment in America.) Also there are many categories where one needs the right training (as I mentioned above.)

Note that American corporations invest billions of dollars abroad and thus, make profit from the labor provided by other countries. Would it be right if those countries banned American corporations from investing their capital and selling their products in their economies?

Globalization is going to work both ways. It will present many lucrative opportunities to the corporations and it will present many job opportunities to peoples world over.

On one hand, Americans can and do make money by investing in India and China because of the so-called liberalization of those economies and on the other hand they don't want Indians and Chinese to "arrogate" the opportunities created by globalization. Lo...you can't have your cake and eat it too!

By the way, this recession is America's own making, senators who de-regulated the markets were Americans, elected by Americans. Why blame foreign workers? Because they are a soft-target? Americans should first understand the nexus between the Wall Street and Capitol Hill. Isn't it obvious that politicians are looking for a scapegoat?


Sorcerer said...

i stumbled across your blog
this is quiet nice.and simple

you explain the things easy and with flow :)
will come again

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