TOPICS > Economy

Jobs Moving Overseas

March 11, 2004 at 12:00 AM EST
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JIM LEHRER: Now, the mushrooming debate over outsourcing and U.S. jobs going overseas. Spencer Michels begins with some background.

OPERATOR: Can I have your card number, please?

SPENCER MICHELS: For months, outsourcing, in other words, hiring low cost overseas firms and workers to do jobs Americans were doing, has been a hot topic on the campaign trail. Democrats have blamed the Bush administration for policies that they say contribute to the problem.

SEN. JOHN KERRY: Workers, factories gone, outsourcing jobs, this president thinks it’s good for America. The one person in the United States of America who deserves to be laid off is George W. Bush, and we’re going to do it.

SPENCER MICHELS: Today, President Bush said he too was concerned about outsourcing.

PRESIDENT GEORGE W. BUSH: People are saying, well, we’ll stop jobs from going overseas by making sure we put up walls and barriers between the United States and the rest of the world. That’s lousy policy. Consumer prices will go up if we wall ourselves from the rest of the world. Economic isolationism is bad economic policy, and it will cost people jobs.

SPENCER MICHELS: For decades, some American companies have manufactured their goods in factories overseas: sneakers in Vietnam; textiles in China; even cookies in Mexico, all places where workers come cheaper than they do in the U.S. Now, more and more white collar jobs are being performed thousands of miles away from America. Call centers in India house telemarketers and fill orders from American catalogs.

TELEMARKETER: The black bra and the CD recorder will be delivered by 6 p.m. Friday.

SPENCER MICHELS: Engineers develop software and radiologists read X-rays for doctors and patients, all oceans away from their American clients. Last month, one of President Bush’s top economic advisors threw fat on the fire when he said outsourcing provided some economic benefit. Gregory Mankiw, chairman of the Council of Economic Advisors, said, “Outsourcing is just a new way of doing international trade. More things are tradable than were tradable in the past.” Likely Democratic nominee Sen. John Kerry has said he will crack down on corporations which outsource jobs.

SEN. JOHN EDWARDS: I’m going to go to that tax code that’s gone from 14 pages to 17,000 pages and we’re going to take out any benefit, any reward, any incentive or any Benedict Arnold company or CEO to take American jobs overseas and stick the American people with the bill, that’s what we need to do.

SPENCER MICHELS: President Bush said yesterday his administration was helping workers adapt to the changing economy.

PRESIDENT GEORGE W. BUSH: We’ve got programs to help workers who have been displaced by the effects of trade, by giving them assistance in job training and health care, and relocation. I propose what’s called personal reemployment accounts for people who need extra help so they can pay for child care and transportation and other costs of finding work. In other words, we’re trying to help people.

SPENCER MICHELS: Meanwhile, Congress and some state legislatures have begun examining the outsourcing problem.

JIM LEHRER: And to Margaret Warner.

MARGARET WARNER: For our own debate over outsourcing, we turn to Jagdish Bhagwati, professor of international trade at Columbia University and author of the new book, “In Defense of Globalization,” and Harley Shaiken, professor of labor and the global economy at the University of California, Berkeley. Welcome to you both. Professor Shaiken, how big a phenomenon is this? How many jobs really are going overseas?

HARLEY SHAIKEN: I think we’re looking at a significant number. If we look at outsourcing, that is white collar technical computer jobs, we’re just at the beginning but we’re likely talking in the three hundred to six hundred thousand range. In terms of manufacturing, what’s often called outsourcing, we’re looking at a much larger number. Manufacturing employment peaked in the late 1970s at around 20 million. We’re down to 14 million people in manufacturing today.

Now clearly not all of these jobs have been outsourced, some go to productivity, a few to reclassification. But outsourcing has played a very important role. Most importantly, we’re at the beginning of the curve rather than the end. There are far fewer technical barriers to either outsourcing or offshoring than at any time in the past. As one CEO of an information company in India put it, anything that goes down a wire is up for grabs in the outsourcing area.

MARGARET WARNER: Would you agree, Professor Bhagwati, that it’s significant in scope and scale?

JAGDISH BHAGWATI: Not yet really, if you look at the bureau of labor statistics if you take all the information related to categories, and you add them up, you basically still have about 17 million jobs as of 2002, and the maximum estimates which I’ve seen of things which will be going out in the next 15 years will be about a little less than 250,000 per annum and that’s less than 1.3 percent off the total.

So if you just look at the total number it’s not a very big, and I think Professor Shaiken was, I think, not talking about outsourcing, he was really talking about imported goods as well. You know, in manufacturing. And that has been going on for decades. And we have this big yellow peril problem that the far eastern economies were just going to swamp us with all kinds of labor intensive goods and now we’re talking about labor intensive services, of course, on line.

But at the time the unions and everybody was worried, you know, and President Clinton had a terrible time with NAFTA trying to get it through Congress just one-by-one vote. I think that fear turned out to be unjustified in my judgment. This one will be also down the road.

MARGARET WARNER: Professor Shaiken, respond to that point that the loss of jobs or the movement of jobs, let’s say, are not that great if you compare it to the U.S. economy or jobs picture as a whole.

HARLEY SHAIKEN: I think that’s the wrong frame to look at it. First of all, if we look at outsourcing which is the white collar and service jobs, it is true three to six hundred thousand today, but a recent study at UC Berkeley pointed out that 14 million U.S. jobs are vulnerable. That doesn’t mean that 14 million are going to be outsourced, but to have that large a group of jobs that are vulnerable is very much a cause for concern.

And if we look at manufacturing, we’ve lost a quarter of our manufacturing jobs in the last several decades — half of those in the last 42 months. We’ve lost 2.8 million jobs in manufacturing in 42 months. We had a big debate in this country in the early 1980s about the Chrysler Corp. and giving federal bailouts for a billion dollars. The huge crisis was 140,000 jobs to be lost. In manufacturing, we’ve lost the equivalent of a Chrysler Corp. every other month for 42 months. So I think these numbers are significant.

MARGARET WARNER: All right, so Professor Bhagwati, since the name of your book is “In Defense of Globalization,” let’s shift to whether this is a good thing or a bad thing. Do I take it you agree with the president — I mean, the chairman of the council on economic advisors that when all is said and done, this is a healthy thing for the U.S. economy?

JAGDISH BHAGWATI: Yes, I think the only thing that was wrong in the statement was that, you know, the insertion of the word “perhaps” or “probably.” It’s very definitely a good thing because also when you buy things cheaply from abroad we have to also build what we call an economics a counterfactual, meaning what would have happened in the absence of outsourcing. I don’t think it’s as great as Professor Shaiken makes out. But supposing you didn’t outsource ten jobs, well, you get cheaper online services or cheaper imported goods, like in the time of 1980s. You’re in the world economy.

The British for instance– I was in London last week– and the British were saying “look, why has America gone crazy again about, you know, competition with the poor countries” and, you know, the kinds of jobs, the losses that they fear. They’re not going to into modes of anti-outsourcing. They will be able to buy cheap goods and services from abroad, our firms will not be. So by refusing to outsource, because Senator Kerry has said he’s excited about it, if we go into not outsourcing, then we will … we think we are saving ten jobs, but we’re losing the entire 100, because the firms will simply collapse because they will not be able to compete in world markets, therefore, whoever is the next president will say it’s a much bigger problem for finding jobs for 100 workers rather than ten workers.

So actually, I think, just looking at the numbers doesn’t mean anything because there are things that have happened. But what you don’t see is what you’ve actually prevented from happening, and firms that have gone out can employ only ghosts, dead souls, they can’t employ living workers, and I think this is exactly the wrong way to go.

MARGARET WARNER: All right, let me get Professor Shaiken’s view on that about whether this is on balance healthy or not healthy for the U.S. economy.

HARLEY SHAIKEN: Let me quote a participant in a recent U.N. study about globalization. The participant said, “It doesn’t do much good for a father to be able to buy a pair of shoes more cheaply if that father loses his job.” And I think that’s an underlying principle that’s very important here.

The issue isn’t outsourcing per se, but what’s driving the outsourcing. If it’s a question of increased competitiveness, that’s very healthy. If it’s a question of entrepreneurship or education, that’s a healthy form of competition. But what’s driving outsourcing today is wage costs, and lower wage costs often attributable to government policy to attract investment and to a lack of labor rights that makes it impossible for workers in developing countries to earn a fair share of what they produce.

The issue isn’t pitting the U.S. economy or U.S. workers against workers in China, Mexico, or Brazil or anywhere else, it’s simply defining the rules of the game under which this takes place. What we’re looking at today in terms of outsourcing — that is computer and service jobs — are precisely the jobs that were promised to previous generations of factory workers who were displaced. The notion was, “not to worry, you too will be in the computer industry.” Well, now that industry isn’t here, and it’s being driven by low wages, and by government policies. It’s a perversion of free trade, not its example.

MARGARET WARNER: Professor Bhagwati?

JAGDISH BHAGWATI: I don’t think of a valid way to look at it. For one thing, essentially what Professor Shaiken is arguing is exactly what the Democratic platform erroneously is, which is that somehow there’s unfair trade out there. If you go out to countries like India and elsewhere, they say, “Look, it’s unfair for us to have to compete with American workers who have all this machinery and technology with them.” So they also want things for the handicapped. So are we going to say, “Look, you have cheap labor,” and are the Indians going to say “We have cheap capital or technology,” you would never get trade that way. And, you know, this whole notion that somehow there’s unfair trade at the other end, that governments are doing some crazy things to subsidize their workers is simply wrong.

MARGARET WARNER: Let me just ask you though, what about the professor’s point, the anecdote at the beginning, that it doesn’t do a man much good to be able to buy cheaper shoes, that’s obviously a metaphor, if, or have his X-rays read more cheaply, let’s say, if it’s a white collar job, if in fact he doesn’t are a job or doesn’t have health care?

JAGDISH BHAGWATI: Oh, that’s a separate issue, I think, whether he doesn’t have health care. But looking at just simply the number of jobs that a man who can read and is reasonably skilled will be able to get. The whole economics of this shows that technology which is the main driver of both for long-distance jobs of the kind we are discussing, you know, the outsourcing, where the provider and the user don’t have to meet together physically, that technology is also driving a great deal of demand for people who have to be here.

Remember the story — since he tells a story, let me tell a counter story — of the parent who tells the ten-year-old, you know, put this computer chip into my television set so I can prevent you from watching X-rated films because today a lot of people are into IT but are not competent to work with overseas people, who are telling them on the wire what to do. I’m one of them. And so we don’t want people who are telling us what to do and work with them. We want people who are here, here and now, physically, who will work for us, not with us.

MARGARET WARNER: Okay, gentlemen, we have to leave it there. Thank you both very much.