Charlie Rose Science Series
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A conversation about free trade and outsourcing with Alan Blinder, co-director of Princeton University's Center for Economic Policy Studies and former Vice Chairman of the Federal Reserve Board.
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Retrain them for what?
Guys like him were saying less than 10 years ago, that everyone who loses their manufacturing job can retrain for computer programming. Now, he says they shouldnt have spent their kid's tuition retraining themselves for computers, that's now 'out', (they shouldnt have done what he said to do) that they should retrain for 'something else' Notice he didnt elaborate on what that 'something else' is?
Let me see if I've got this right Prof Blinder conceeds that economists were wrong, and workers were right so far about globalization. Yet, going forward, he says economists are right and workers are wrong about what will happen with globalization. yeah, right my prediction going forward. workers keep getting screwed, and Blinder keeps his job
Okay, what if we do everything to look after displaced workers (retrain, carry over of pension, health care), and we make companies fiscally responsible to employees who they lay off (as per Michaels point below), and we do everything to make the playground fair (insist on foreign trading partners having a minimal and growing adherance to environmental and labour rights, remove tariffs which encourage outsourcing), what would happen then? Even if certain ecomomic (as a result of energy tightening) will bring production of certain consumer goods, back home, it seems to me that in the end those displaced will not be able to find the jobs, as they will continue to go to countries where price of labour is cheaper,until the price of labor equalizes. If that means that price of labor here drops, then the disparity between the rich (those that are in control) and the diplaced will continue to grow. Charlie, lets get a long term perspective on these issues.
I regularly watch Charlie Rose, and this interview with Alan Blinder (4/25/07) was particularly relevant to my situation. (I also found interesting the interview with Senator Byron Dorgan on 7/27/07, but Professor Blinder spoke more to the circumstance of the outsourced American worker, and thus I am compelled to comment.) I am one of those high tech workers whose job was moved abroad, and I even had the strange experience of helping to train those who were to carry on my task. I'm not opposed to American companies who choose to have foreign workers. Globalization is reality. But to Prof. Blinder's comments about the need for better laws and regulations relating to the outsourcing of jobs and the treatment of affected workers and affected communities, I totally agree. Based on my experience, I would like to offer three suggestions. 1. In this country, age discrimination is illegal. Within the borders of this country, a company cannot fire or lay-off a group of older workers and replace them with a younger group of workers. The same law should apply to global companies that outsource work wherein a group of domestic older workers is replaced by a group of younger workers abroad. 2. American law allows a wide berth to corporate actions that are based on clear economic reasons. And though there may be a clear economic advantage for a corporation to move work abroad, implicit contracts made to its American workers should not be broken. To this point I'm specifically referring to pensions. Where I worked, with sufficient years of service, you could retire at age fifty. The company rules concerning the pension program were quite clear, and the pension was used effectively as an incentive for continued good employee performance. For example, if you chose to leave the company at any time before age fifty, you would get a significantly reduced pension (a.k.a. "a deferred pension" worth (at most) about seventy-five percent less than "a full pension"). Likewise, if you performed poorly or if you worked on a product which failed in the marketplace, you were likely to be released and given the deferred pension. In sum, the company said if you work hard on a profitable product until you are fifty, you would receive a reasonable pension. I worked for my prior employer for nearly twenty-two years. I worked hard and was well rated in all of my performance reviews. The product on which I worked is still in production, and it makes large profits for the company. My component designs and the software elements which I wrote are still being used. I'm now about three years from age fifty. To this point in time, I did all that was asked of me to achieve a full pension, and yet, since there is no regulation or law concerning pension treatment in the face of outsourcing, the company said that I did not qualify for the full pension. In a case such as this, there should be a law to mandate a prorated full pension. 3. When high wage jobs are outsourced, the corporate costs incurred for the â??force reductionâ?? (i.e. severance packages, legal fees, training of the new workers, etc.) are actually recovered quickly. In my case, I estimate it was less than one year. The company undertaking the action achieves an immediate and huge reduction of labor costs in the range of 60%-80%. This reduction goes strait to the bottom line and shows up as new and continuous profit. The reality though is that the savings is a result of a gross arbitrage condition; the profit is unearned and undeserved. Hence I propose that it should be temporarily taxed, for the two years following the action, as a windfall profit (akin to that levied against the oil companies in the 1980â??s). Proceeds from the tax should be used to cushion the community and state impact of the outsourced jobs â?? in particular, to help schools which suffer from the sudden loss of what had been a stable tax base, and to help state level unemployment agencies to extend the scope and duration of their benefits. If these three ideas were adopted as regulation or law, the incentive for corporations to outsource work would be reduced, the rate of outsourcing jobs would be slowed, and adaptation for a portion of the high tech middle class might be feasible.
Good interview. How about getting Burton G. Malkiel on the show. The ninth edition of "A Random Walk Through Wall Street" came out not too long ago and is one the most read investment books out there. He is a Princeton Economist like Blinder and Bernankle. I'd enjoy an interview with Malkiel.
Some of you seem to be getting mad at the messenger. Blinder states we are in a state of time where corporations are going to seek cheap labor. Since the economic world has gotten smaller, cheap labor is going to be found and used in China or other nations. We should plan to deal with this reality and focus efforts on re-training and providing healthcare to workers who have been displaced. Some of you still want to try to turn back time or whine, which is futile and pointless. I really enjoyed this interview. I hope Charlie Rose continues to interview economists like Blinder.
Another driver contributing to the "taking apart" the middle class, that may not be reported much in the US media, is the unfairness of the compensation system of the US corporation ceos and top executives, which usually earn about 2 orders of magnitude (100 times) of what their own employees' salary is, compared to what a European ceo makes about 1 order of magnitude (10 times) of what their employee makes. They control the board compensation committees which approve their pay packages and drive cost cutting programs usually as layoffs and off shoring/outsourcing programs, that effectively "squeeze" more pay into their own pockets. It's laughable that congress wants to propose legislation now that tells the ceos to police themselves on this matter. The US middle class is being "pillaged" from many sides usually via the laws and programs created by the formerly republican controlled congress, as spending for government programs is growing while incomes for the middle class are declining. Who is progressively going to pay the taxes for the future government spending needs, since the richest have their tax shelters which allow them to pay proportionately very little tax compared to the middle class to no tax at all? The business slanted republicans are too quick to cut entitlement programs that benefit the middle class while increase government spending of programs that make use of expensive consultants and drive oil and military related business strategies (ex Halliburton, etc). The middle class dodged a major bullet when the privatization of social security failed, saving temporarily the hard earned future retirement funds "promise", from the wolves/thieves in the financial industry. Let's get back to what a democracy is supposed to be: a government that is controlled and looks after the interests of the majority of the populace first, predominately the working middle class, not every other special interest bearing "large gifts" as they wedge their foot into the door of the congressman's/senator's office.
Dr.Blinder is intellectually commited to "free trade" but it appears that his subconscious (gut feeling) is telling him that this isn't right. He should pay more attention to his gut. The outsourcing of 40 million jobs significantly changes our society. Our middle class has been downsized. The core intrinsic value of this country has been the product of a vibrant middle class. Jobs,Gates, Dell, all college drop-outs, are the product of the fertile terroir of the USA middle class. Re-training and social safety nets did not make this a great nation. A major problem with free trade is sloshing of capital to low cost labor. The US multi-nationals take the profits generated by the US middle class and invest it overseas to the benefit of others. This capital, generated by the intellectual property created by US workers, should be invested in increasing the productivity of the US middle class.
Mr. Blinder made many incitefull comments about the subject of trade and outsourcing. The bottom line is that NAFTA was and is a diaster for American workers. The China situation is so "out of control" I don't know where to start. It is an unlevel playing field with a Communist Slave Labor state. This idealistic idea that the Communists are going to suddenly morf into free traders and democrats from Missouri is so outragious as to be laughable. They are stealing our jobs, stealing our money, and using it all to build their economic, political and military power. We will wake up some day in the not to distant future to find our way of life destroyed. This idea that everyone is going to be suddenly "Retrained" is poppycock and he has got to be smart enough to understand that.
Interesting interview. As with the war, and gun control, how bad must things get before we make signifigant political changes? When will the outrage of disenfranchized citizens reach a critical mass so that we invest in the weaving of a social safety net -- a net strong enough to catch those pushed off the cliff of unmitigated globalization and disastrous neo-con ideology?
He stated the US will experience pain (not his exact words) because we do not have good systems in place to take care of the workers in the US who will lose their jobs, their pensions, and their healthcare through outsourcing. I only thought how out of touch he was with those of us now working at lowpaying jobs, without pensions, and without health care -- the working poor in America today are already in pain.
To try to evaluate the impact of outsourcing of 40 million jobs, consider these two situations: 1. The U.S. economy outsources 40 million jobs to India and China to workers who are paid half of the prevailing U.S. wage rate. 2. The same workers as in No. 1 above, are transplanted into the U.S. Assume for this illustration that these workers are still paid the same wages that they were paid in India and China, but the transplantation process requires them to contract to work in the U.S.at the same wages they were earning in India nd China. Assume that the dollars paid to the workers in these two hypothetical situations eventually end up in the U.S. and are used to purchase goods and services from the U.S. economy. Therefore, the effect on the U.S. economy should be the same as if 40 million illegal aliens were living in the U.S. earning half of the U.S. prevailing wage rate. The question that should be asked: "Is the U.S. better for having 40 million illegal aliens living inside the U.S. working for half the amount paid legal residents?" I think that the answer is no. I would be interested in hearing if Dr. Blinder could refute my argument.
Please ask Dr. Blinder to take another look at all the sectors of the economy. For example, in medicine, the new tools of remote imaging and robotic surgery will drive more jobs overseas. It's only a small step from having the surgeon in the next room to him being located around the world. Jobs you never think about are being outsourced. Insurance agents, for example. The major companies are pushing their "personal touch" because consumers are flocking to the low cost mega-agencies. These new providers found they could staff large offices in low cost areas of the US, pay to train and license local employees as insurance agents in multiple states, and still make money. 5 or 10 years later, these jobs are now being transferred overseas. Faster and faster, skilled jobs are being outsourced to low costs "hot spots" in the global economy. What jobs being left behind are increasingly the low tech, and low paying, jobs that require a local face or hands. Jobs come and go. The difference today is the speed that they disappear. For US workers to keep up, they must constantly train and retrain. Private industry may do a decent job of it, but in large part, they manage it by showing older workers the door while hiring new freshly trained (and often cheaper) faces.
The US-based hi-tech jobs that Mr.Blinder says will likely remain in the US [the customized software design IT jobs\ see some interesting phenomena at the worker level. In the industry that I am familiar with, the workforce on these kinds of applications was from the best-and-brightest of a global pool of resources harnessed over the last 25 years. Today this international pool [foreign and US\ of talent working here was created by the need for these kinds of high-tech applications, and from the pressure to cost-reduce the working infrastructure. So I guess some industries have a more global workforce than others? It seems that we are part of a global economy which will have localized worker needs, while other job requirements can be filled by anyone that is available 'just in time' as Mr.Blinder said. But no matter how altruistic we think this sounds, here in the US the angst created by 'out-sourcing' can still be felt.
BRILLIANT! Finally, somebody that gets it. Only he didn't go far enough. Everything will be outsourced. The goal is zero american employment. They will outsource everything that is not strapped to the floor. EVEN the sectors he thinks is protected.
I do agree with Mr Binder that there needs to be a much better safety net for workers. At the same time all workers have to wake up to the fact that we can no longer be complacent. We can never assume our jobs are going to be there till we retire or that we will be doing the same thing in the same way. Who is looking after you?
Regarding globalization, outsourcing & stocks. Our country is not family friendly. Kids need security to thrive and that means job security for their parents. Parents need to be spending quality time with their kids, not to keep changing jobs and retraining every few years as their jobs get sent overseas. Job security makes for more stable marriages, also. Even the jobs that can not be outsourced will pay less and less as more people are forced to apply for them. Many times I hear that a business stock has gone up because of greater productivity. Often productivity means that they have fired employees (leaving the ones who are left to do more work for the same wage). It could mean that they are being replaced by robots or that the business has sent the job out of the country altogether to take advantage of slave labor. Slave labor means workers making $7 a day or less and working 10 hour days, 6 days a week. Maybe productivity means sending the job out of the country where the workers can not sue over breathing deadly chemicals and the business can do what they want regarding polluting the air and water of the foreign country. Most of the time the US consumer of products or the stock investors do not really want to know how their good lifestyle is being subsidized.
Our country is not family friendly. Kids need security to thrive and that means job security for their parents. Parents need to be spending quality time with their kids, not to keep changing jobs and retraining every few years as their jobs get sent overseas. Job security makes for more stable marriages, also. Even the jobs that canâ??t be outsourced will pay less and less as more people are forced to apply for them. Many times I hear that a businessâ?? stock price has gone up because of greater "productivity". Often "productivity" means that they have fired employees (leaving the ones who are left to do more work for the same wage). It could mean that they are being replaced by robots or that the business has sent the job out of the country altogether to take advantage of â??slave laborâ??. â??Slave laborâ?? means workers making $7 a day or less and working 10 hour days, 6 days a week. Maybe â??productivityâ?? means sending the job out of the country where the workers canâ??t sue over breathing deadly chemicals and the business can do what they want regarding polluting the air and water of the foreign country. Most of the time the US consumer of products or the stock investors donâ??t really want to know how their good lifestyle is being subsidized.
Clearly Mr. Binder would understand if you didn't invite him for further appearances and set up a video conference with an indian economist instead. We shouldn't train economists in North America, after all the number crunching can be done anywhere, they don't need to be on-site. Publishers of economics texts can get much better value by outsourcing the writing to lower paid markets like India and China. And obviously since we don't need any economists here we obviously don't need and economics professors either...
According to recent Fed studies, the idea that increased workforce productivity and value is a result of the adaption of new technology is a myth for companues outside the IT industry itself. As a veteran CEO, I can tell you the key to competing in a global economy for everyone else is a committed and engaged workforce. This is especially true for anyone in the service industry.
EVERYTIME I HEAR A DISCUSSION ABOUT OUTSOURCING AND THE GLOBAL ECONOMY;I HEAR THE WORDS â??RETRAINâ??. THEN; IN THE NEXT SENTANCE, THE DISCUSSION TURNS TO TECHNOLOGY. DO WE REALLY EXPECT A WORKER ON THE ASSEMBLY LINE, WELDERS, PEOPLE THAT STITCH CLOTHING AND OTHER JOBS NOT REQUIRING A COLLEGE DEGREE TO RETRAIN INTO COMPUTER TECHIES? WE TIPTOE AROUND THE ISSUE THAT MOST OF THE WORKERS THAT HAVE OR WILL LOSE THEIR JOBS WILL BE UNSKILLED, AND NOT HIGHLY EDUCATED. EVERYDAY WE HEAR ABOUT STUDENTS GRADUATING FROM HIGH SCHOOL WITHOUT THE ABILITY TO WRITE OR READ. AS A SOCIETY WE MUST BE MORE HONEST ABOUT EXACTLY WHAT JOBS WOULD BE FEASIBLE. IT IS SO FRUSTRATING TO HEAR ABOUT WORKERS OVER 50 LOSING THEIR JOBS AND THEN HEAR THE WORD TECHNOLOGY MENTIONED AS THEIR NEXT CAREER. THIS APPARENT REFUSAL TO TACKLE REALITY IS REALLY GOING TO HURT MANY PEOPLE.
Excellent interview with Alan Binder. The training and re-training of the US Workforce is absolutely essential. I understand that it is not the total answer to realignment of the workforce from trade consequences or other factors such as changes in technology but it is a huge part of it. In the sixties there were 6000 occupational counselors in what is now called "Workforce Centers". Each counselor could help align or realign aproximately 200 people a year into needed occupations. That was about 1,200,000 people a year which wasn't a lot but it helped. When Nixon came in all the occupational counselors were fired or not rehired. The reason was that "we were helping people". We were supposed to be helping the employer. The employers saw the Workforce Centers as extensions of their personel offices and a source for day laborers. Counseling people for choice, changes and adjustments in occupations was too far removed from their immediate needs to see the eventual value to them. Recently the Cedar Rapids Chamber of Commerce did a study that showed that between Cedar Rapids and Iowa City that we had 8000 job openings that few could qualify for. At the same time there were about 10,000 people looking for jobs. A real public effort needs to be reinstated to deal with this now. A good start would be to hire and train about 30,000 occupational counselors for the state Workforce Centers, They are funded through the US Dept of labor.
Mr. Blinder forgot to tell us which jobs we should retrain for? they don't care as long as its not happening to them!