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It's Fine

Drezner expresses disatisfaction with having been given the headline "Where Did All the Jobs Go? Nowhere" by the sneaky NY Times op-ed page because "I'm not claiming that the employment situation is hunky-dory -- it's not. I'm claiming that the contribution of offshore outsourcing to that employment picture is prett minimal -- contrary to popular belief." That strikes me as a rather apt headline for Drezner's thesis. The good jobs didn't go to India, insofar as they aren't here anymore they're mostly just gone. Demand has not increased quickly enough relative to productivity to sustain a healthy job market. As a result, good jobs are vanishing, victims of a demand shortfall or, if you want to be mounting a weird defense of the Bush administration, a productivity surplus.

September 29, 2004 | Permalink

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» Drezner on Jobs from The Cardinal Collective
In a recent op-ed piece, Daniel Drezner claims that outsourcing really isn't hurting the job market: Now, however, we can add some actual figures to the overheated debate. The Government Accountability Office has issued its first review of the data,... [Read More]

Tracked on Sep 30, 2004 1:10:29 AM

Comments

Dude, i think you got it backwards. Demand would only increase during a recovery if jobs and wages increased first. And if productivity is increasing at such a rapid rate, why would not outsourcing of new jobs be the obvious reason?

Posted by: Tim H. | Sep 29, 2004 11:27:25 AM

Demand has not increased quickly enough relative to productivity to sustain a healthy job market.


Well, that's not true for about the last year or so, for which period the job market has been relatively healthy. It just hasn't been healthy enough to overcome the aggregate losses accumulated during the prior 2 years.

Posted by: Al | Sep 29, 2004 11:27:26 AM

Also, wages haven't kept up with productivity, either.

Posted by: praktike | Sep 29, 2004 11:33:42 AM

The Bush Administration has had the most wildly successful economic policy since WWII

We have had remarkably good productivity growth, and ALL of the gains from productivity growth have gone to corporate profits and highly paid executives. After Clinton spent eight years steadily bringing down the unemployment rate, until finally, wages at the bottom of the pyramid began to rise for the first time since Reagan was elected, under Bush the unemployment rate immediately shot up to levels at which wage growth once again stopped dead.
Predictably, right-wingers distract attention from the simple reality that the results coincide with the policymaker's desiderata. We are suppose to believe that what happens, just happens -- its all due to factors beyond any President's control.
Meanwhile, wimpy Democrats play along, implicitly absolving Bush and his economic teams of managing the economy in the interests only of the very rich and powerful, by suggesting that Bush's economic policies fall short.
Bush hasn't fallen short on the economy! He has hit the target, struck the bonanza!
Bush is all about making the rich, richer. Every day in every way -- macroeconomic policy, environmental policy, prescription drug policy, tax policy, . . . -- what is so hard about saying so?
Criticizing the Bush Administration for falling short on jobs or any other aspect of economic policy is fundamentally misleading. They have not fallen short. They were not trying to benefit most Americans, and, surprise, surprise, they didn't.
Daniel Drezner is thrilled that IBM's profit improved, and that IBM, then, hired more workers; and, quite rightly, he doesn't mourn the loss of Kodak jobs to digital photography. But, he doesn't confront the reality that the unemployment rate is being held at a high level to hold down wages -- he'll never mention that. IBM's profits are not going to increase the wages of any but the already grossly overpaid executive management.

Posted by: Bruce Wilder | Sep 29, 2004 11:34:20 AM

It's the trend of the future, better get used to it: Productivity growth isn't due to anything labor does, it's due to better machinery, in other words, capital. And as automation starts wringing out that last bit of human labor involved in production, labor has less and less negotiating power to demand a share of wealth capital is generating. Eventually there won't be ANY human labor involved in production.

And, yes, there's an obvious problem: Who the heck is going to BUY the products of those machines, if nobody is being paid to run them? But that's not a problem Republicans or Democrats caused, it's a problem inherent in the progress of industrial automation, it's just Bush's poor luck that the tipping point hit during his administration.

Bush has something of a point with his "ownership society": The only real solution to this problem IS for everyone to become a capitalist. Typical; Right idea, utterly feckless execution... Not that Democrats have much better in the way of solutions that I've heard of.

Posted by: Brett Bellmore | Sep 29, 2004 12:45:47 PM

Same old, same old. The economy is basically functioning as it should, subject to cyclical variations. The wealth and prosperity-generating capacity of the U.S. economy continues to maintain itself at a high level by world standards. And the frayed and outdated state of the safety net contines to add to the jitters of ordinary folks, thereby increasing the political pressure to enact the very policies that would gravely harm the aforementioned wealth and prosperity-generating capacity of the U.S. economy.

Posted by: P.B. Almeida | Sep 29, 2004 1:00:18 PM

Assuming Brett's correct, I'd like to suggest that the consumer debt crisis poses serious problems for our brave new "ownership society." Large swaths of our citizens (including me due to student loan debt) are essentially insolvent, thus I don't see how folks are going to become productive little micro-capitalists any time soon. I smell a rat. Am I wrong?

Posted by: fnook | Sep 29, 2004 1:08:36 PM

No, you're not wrong. The only optimistic detail is that the government itself has a large positive net worth, due to the value of all that land it confiscated from prospective states on the West side of the country. It might be possible to pull off some kind of inverse collectivization(sp?) of those assets, endowing every citizen with some minimal stake in the new society. It's certain in any case, that any solution which would actually work would be quite radical in nature, since our economy is beginning a very radical change in it's nature.

Posted by: Brett Bellmore | Sep 29, 2004 1:33:38 PM

any solution which would actually work would be quite radical in nature

And it seems that radical changes in labor and production would result in radical changes in the nature of capital. Maybe since capital is already relatively abstract and concentrated we should work on automating it too.

Posted by: robot | Sep 29, 2004 1:47:44 PM

"It might be possible to pull off some kind of inverse collectivization(sp?) of those assets...."

You better be loaded for bear if you try. Some of the ranchers who have leased millions of acres for generations think that they actually own them.

Posted by: ol'cowhand | Sep 29, 2004 2:01:27 PM

I don't think anyone can quite explain why the productivity numbers keep increasing. One explanation 2-3 years ago was all the upgrading that went on due to the Y2K panic. Now, some mention the fact that 1 worker is often doing the job of 2 or 3 workers. But, this is difficult to measure as a true increase in productivity. If a great deal of the workforce consists of frustrated people consistently working 10-12 hour days and weekends I should think that after a certain point quality would begin to drop. Which would mean that overworking people was more of a short term stop gap measure than a true productivity increase.

Posted by: altec | Sep 29, 2004 2:11:59 PM

Almeida blythely comments: "The wealth and prosperity-generating capacity of the U.S. economy continues to maintain itself at a high level by world standards. And the frayed and outdated state of the safety net contines to add to the jitters of ordinary folks, thereby increasing the political pressure to enact the very policies that would gravely harm the aforementioned wealth and prosperity-generating capacity of the U.S. economy."

What safety net?? A little bit of unemployment insurance, half of which the average worker pays themselves through their taxes? Welfare? Are you not familiar with Welfare reform requirements? What other safety net/protections are left? OSHA, the EPA, and the Labor Relations Board are toothless under republicans.

I would say that your view is quite outdated. The tax rates of US companies, and the proportion of their contribution to federal revenue, is the lowest in over 65 years. And, if you're reading the financial news at all, you have to be aware of the number of profitable large corporations that aren't paying any taxes at all. So, citizens are forking over a greater and greater percentage of their income. Now, a citizen is as self-interested as a corporation. If corporations are constantly lobbying for, and receiving, handouts from the govt in the form of tax breaks,etc., how can you view the citizens wanting the same thing as trying to "gravely harm the aforementioned wealth and prosperity-generating capacity of the U.S. economy." Please. During the time Enron was generating billions in profits and not paying taxes, were they not geting a free ride on the back of citizen taxpayers? Who was paying the bulk of the expenses for the roads and other public infrastructure that were vital to Enron's operations?

You also state, "The wealth and prosperity-generating capacity of the U.S. economy continues to maintain itself at a high level by world standards." This may true at the macro level, but certainly not at the micro level. We have the biggest range between CEO pay and worker pay in the world, and the proportion of middle class Americans is shrinking when compared to developed world standards and our own historical standards. Now, you may have a rationalization that allows you to believe that $5.15 per hour is acceptable. However, if you are really an advocate for maximizing the 'prosperity-generating capacity' of our economy, the greatest safety nets the world has ever seen, the typical CEO pay/benefits packages/golden parachutes (which there're entitlted to regardless of job performance), should make your blood boil more than some measly little unemployment insurance check the average worker is entitled to.

Posted by: Abigail | Sep 29, 2004 2:53:25 PM

From what I can see 'productivity' is kept up by keeping wages (relatively) low. Wages are kept low by outsourcing to cheap labor and increasing working hours.

Farming productivity is increased by automation and conglomeration. The family farm is nearly gone.

Posted by: Tripp | Sep 29, 2004 3:19:44 PM

"From what I can see 'productivity' is kept up by keeping wages (relatively) low. Wages are kept low by outsourcing to cheap labor and increasing working hours."

Since productivity is measured in terms of production per man-hour, it's hard to understand how keeping wages low would have any impact at all on it, any more than increasing hours would. On the contrary, if wages were maintained artificially low, it would tend to bias industry in favor of the use of labor over machines, reducing productivity.

Posted by: Brett Bellmore | Sep 29, 2004 3:29:23 PM

From what I can see 'productivity' is kept up by keeping wages (relatively) low. Wages are kept low by outsourcing to cheap labor

Here's someone who OBVIOUSLY read Drezner's op-ed.

Posted by: Al | Sep 29, 2004 3:37:08 PM

"Also, wages haven't kept up with productivity, either."

That's one of the problems with traditional pro-business policy. Growth relies on demand keeping up with productivity. Demand is strongly (though not entirely) based on the incomes of working people. Depressing wages cuts disposable income, which cuts demand. Good for the cost side, bad for the revenue side. It is great if your business is the only one that does it. It is bad if everyone does it.

The same problem applies to the Bush tax cut. Tax cuts for the rich increase investment funds available to the market. Tax cuts for the rest increase demand. Rich people buy more stock. Poor people buy more stuff. There was no shortage of money for investment.

Tax cuts for the rich are a perfectly acceptable response to inflation caused by spiraling wages and prices due to demand outpacing productivity. That was not the problem though.

Posted by: Njorl | Sep 29, 2004 4:12:51 PM

What safety net?? A little bit of unemployment insurance, half of which the average worker pays themselves through their taxes? Welfare? Are you not familiar with Welfare reform requirements?...However, if you are really an advocate for maximizing the 'prosperity-generating capacity' of our economy, the greatest safety nets the world has ever seen, the typical CEO pay/benefits packages/golden parachutes (which there're entitlted to regardless of job performance), should make your blood boil...

Abigail: The USA maintains a reasonably large, and rather expensive, social safety net. Washington spend hundreds of billions on cash pensions and free healthcare for old people. Throw in free healthcare for the poor (via an admitedly shitty system), plus the billions orginally intended as a safety net for rural economies (aka subsidies to agribusiness), plus foodstamps, unemployment insurance, etc., and you're talking about one rather huge bucket of money.

The problem with this safety net, as I mentioned above (and as you apparently ignored) is that it's "inadequate" and "frayed". It's simply not suited for the vicissitudes of life in a global economy. Social program spending in the United States fails the very people who insure the productivity of the economy as a whole, thereby threatening that productivity via political pressure to enact simplistic, and ultimately damaging, "solutions", such as trade barriers and government micro-management of firms' investment decisions.

The global economy produces spectacular winners in all the world's rich (and in many of the not so rich) countries. The USA is not unique in this regard. It just produces more and bigger winners because of its larger size and greater economic vigor.

But being one of the "losers" in the economic game tends to be more painful in the USA than in say, Western Europe or Canada, because of the poor outcomes we get from those hundreds of billions we spend. I mean, losing your job in Canada to a more economically efficient factory in Guangdong province must suck (just as it does in Michigan), but in Ontario at least your kids will get innoculated, and you're not forced to choose between your mortgage and a $1,300 COBRA payment.

It seems to me that there are three principal areas where government safety net efforts need to be refocused, retooled and reformed:

a) Health Care - See above.

b) Worker Retraining - We deem education of the young so vital to our society that we guarantee and require its availability with public funds. And yet clearly, if we're going to remain competitive, the over eighteen crowd needs help just as much as children. I would argue for some sort of universal retraining benefit for all adults. I'd probably make it contingent upon length of time served (ie, you'd be entitled to more funding if you're laid off after 15 years with a company than after 6 months).

c) Income Replacment Insurance - The thing is, retraining is great, but not everybody is going to train in graphic design and move to Seattle. What about the 58-year old machine tool operator in Wisconsin with 4 grandchildren? He might be able to pull three shifts at WalMart, but that's not going to replace near enough of his income. It seems to me we ought to have a voluntary insurance policy workers could buy that would kick in for the truly long-term unemployed/underemployed, and tide them over until they're eligible for Social Security. I would make the benefit available only to workers over a certain age (though participation - ie paying premiums - would be encouraged for young workers), and only to those who had paid premiums for a length of time (and the longer you've participated in premium-paying the greater your benefit would be). My guess is the moral hazard involved prevent the market from providing such a product, but perhaps the federal government could bridge the gap to enable such plans to be economically viable.

I think many a right-wingish free market fan (a la Drezner, Brooks, Sullivan, etc) would gladly allow government to eat an additional point or two of GDP to accomplish some needed safety net repair work provided it's accompanied by reform of existing, badly-designed programs (means-testing, anyone?). But doing so is going to require right-left compromise and cooperation, not to mention boldness and political courage, and those commodities are in short supply these days in both parties.

Posted by: P.B. Almeida | Sep 29, 2004 4:59:07 PM

"As a result, good jobs are vanishing, victims of a demand shortfall or, if you want to be mounting a weird defense of the Bush administration, a productivity surplus."

That's only true if you think employment is the most important measure of an economy. For some reason, most people massively overestimate the importance of employment. Productivity is far more important. The US is creating plenty of wealth and maintaining a very high standard of living while requiring less work. I can't figure out why this isn't more widely understood. It seems to me that "less work, more stuff" is something that most people would really like.

There is nothing weird about defending the Bush administration economy by pointing to increased productivity. It would be a little dishonest to pretend that Bush deserves any of the credit for that increased productivity, but it's not at all weird to claim that increased productivity is a very good thing.

Posted by: Xavier | Sep 29, 2004 5:13:37 PM

The problem with Social Security isn't that it is a frayed safety net. The problem is that it is a 'safety net' which pays millions to rich people who don't need it.

Posted by: Sebastian Holsclaw | Sep 29, 2004 5:29:57 PM

I suspect that outsourcing does have a lot to do with the productivity increases, as the amount of work done is increasing dramatically without any real increases in man-hours worked. Is that what's to blame for the job problems? I don't think so...

The problems are very multifaceted, almost like a diamond.

Costs of employment, read that as health care costs. The health care industry might be THE parasite that's causing the whole mess. That basically forces wages down. Which comebine with increasing other costs, you get less consumer power, which results in less spending. Which is big problems for the service industry, which is more and more of the economy.

A ha.

Of course, the problems with the health care industry stem backwards with their business model (basically making money off of investements), which ties into the whole idea (from all sides) that corporate profits need to be forever increasing almost at an infinate level. Stock market investements are well..so inefficient way of investing it's not even funny.

What will need to happen? One of two things.

#1. We can change our society around so people don't feel culturally pressured into spending so much money. Move away from the consumeristic economy towards a more..say..communal one (and I DON'T mean religiously). That will cut consumer debt and help out on the pressure.

That won't happen.

#2. Rearrange the economy to the new realities of labour and society. Universal Health care and increasing the minimum wage. As well, ensure fair investment so people can get ahead with some sort of reliablitiy. Eventually, you're talking about reducing the work week to spread out the jobs over an entire populace.

These are big problems that are going to need big solutions. Is it Bush's fault? No. Has he done anything to fix it? Ugh..less than no.

Posted by: Karmakin | Sep 29, 2004 5:34:06 PM

P. B. Almedia says: ***"I think many a right-wingish free market fan (a la Drezner, Brooks, Sullivan, etc) would gladly allow government to eat an additional point or two of GDP to accomplish some needed safety net repair work"***

You need to think about what this means. If GDP growth averages 3%, the total GDP will double every 23 years or so. If you sacrifice 2% of GDP growth for a more generous saftey net, the total GDP will not double for 70 years.

In other words, a more generous social saftey net today will mean less total resources for our children and grandchildren (to pay social security and medicare benefits for example).

Posted by: Robert Brown | Sep 29, 2004 7:33:26 PM

You need to think about what this means. If GDP growth averages 3%, the total GDP will double every 23 years or so. If you sacrifice 2% of GDP growth for a more generous saftey net, the total GDP will not double for 70 years.

Robert Brown: I have thought about what it means, and it doesn't mean what you think it does. I did not write GDP "growth" ; I was talking about actual GDP, a couple points of which would be roughly 250 billion in new spending. This doesn't mean growth would be reduced by 2/3rds (as your numbers imply), though, all things being equal, a larger share of the pie consumed by government certainly could dampen growth somewhat. Rather I'm proposing that the federal government spend (say) 23% of GPD in a wise fashion instead of spending 21% foolishly. Growth under such circumstances could still chug along at your quoted rate of 3%.

Posted by: P.B. Almeida | Sep 29, 2004 9:18:23 PM

P.B.Almeida,

I misunderstood. Sorry.

The effect of your $250 billion in new programs on growth would clearly depend on the details of the programs and any effect they had on productivity due to adverse incentives.

As far as spending 23% of GDP "wisely", that is a perennial promise of politicians at election time. By the time it gets through the lawmaking sausage grinder it is anything but.

Posted by: Robert Brown | Sep 29, 2004 10:05:35 PM

As far as spending 23% of GDP "wisely", that is a perennial promise of politicians at election time.

Robert Brown: Certainly my first choice would be to fund any needed new spending via trimming or eliminating existing programs, closing down and consolidating government departments, etc. -- in other words, there's a lot of wasted money out there. All I'm saying is that I'd accept a slightly larger (if there were no other way around it) government provided said government's spending actually furthered the national interest. My desire is to undercut the Lou Dobbs wing of elite and public opinion that threatens our economic well being. Rich old people and agribusiness don't need the taxpayer largesse they currently enjoy -- but embattled workers do. We may soon start to pay the price for this misallocation of resources.

Posted by: P.B. Almeida | Sep 30, 2004 3:45:37 PM

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