Outsourcing Addendum, 27 March 2009

2009/03/27

Yesterday, I posted some thoughts regarding the President’s answer to whether or not we could reclaim some of the outsourced jobs lost over the past decade or so as part of a solution to our current economic crisis. After reading the transcript of the President’s responses to the online “town hall” meeting yesterday, [1] a few addition thoughts occured to me.

The President seems to think that it would not be good for our economy if we were to reclaim these jobs from overseas, and that we should be transitioning our economy towards only high-skill, high-paying jobs. It is a noble aim, to be sure, but I wonder if this does not indicate an enormous lack of understanding on the part of our President. Ignoring, for the moment, whether or not every single individual in this country can be educated up to such high standards, [2] an important question is a simple one: will there be enough high-paid, high-skill jobs to go around? One of the fundamental principles of economic theory is supply and demand. As we’ve seen from the recent mortgage crisis, when demand outpaces supply, price inflation is a natural consequence (and, unfortunately, also self-reinforcing). In the opposite direction, if supply outpaces demand, the unit costs associated with the supply drop, generally in proportion to the degree to which the supply outpaces the demand. Thus, if we have an overabundance of highly skilled workers, but not enough jobs for all of them, there will be excessive competition for each available job, and the tendancy will be to try to underbid the competition in an effort to secure the job. So much for higher wages.

Additionally, if there are not enough jobs to go around, what happens to the remaining workers who did not get jobs? How will they provide for themselves? How many unemployed citizens will each working citizen need to support by the sweat of his or her brow? And do we not risk legitimizing largesse in a large part of our population? If they retain their voting rights, will not more and more citizens, naturally, vote to expand and extend their status on the government dole, while a smaller and smaller percentage of the population feel the urge to perform useful work? If we strip the non-working population of their voting rights, do we not run the risk of creating a legal underclass? Is this not the first step towards re-establishing slavery?

Another concern is that if we have an overabundance of highly skilled workers and not enough jobs for them all, what’s to stop them from applying for jobs overseas? If there are nations out there who have higher demand than supply for highly skilled workers, how many workers would we lose if said nations can offer better compensation than we can? Should we not be concerned with creating a highly skilled workforce, only to see said workforce employed by our competitors around the world? What if some of these workers decide to go to work for nations that could prove to be our strategic enemies? Patriotism is not a natural instinct, and we cannot guarantee that it exists in a high degree in every citizen (short of abhorrent indoctrination practices that are more at home with totalitarian regimes, and are truly anathema for our system of guaranteed civil liberties). “Brain drain” is a serious concern in any job sector, and it would be of exponentially higher concern if high-skill professions comprised the only source of jobs for our citizens.

A further aspect that concerns me WRT such a situation is where we would obtain all of the goods and services that were once provided by domestic low-skill, [3] low-wage jobs. Manufacturing, and by extension, manufactured goods, are a fundamental part of our economy, and will be required even after we transition all of our citizens to high-skill, high-wage jobs. Where will we obtain these goods? “From overseas” is the natural answer, but why should we continue to finance the economies of other nations, when our own economy could also benefit from such financing, especially now that we are in dire need of any kind of economically stimulative projects?

Just as an example, assume that we implement a wind-powered super grid throughout the nation. [4] Granted, we will need highly-skilled individuals to design the grid itself, carry out engineering analyses, design the windmills, etc. But what about actually building the system? Will we import landscaping crews from Canada to prepare the ground for building the windmills? Will we import steel components from China? Turbines from Germany? Construction workers from Mexico? What about maintenance? Who will perform routine checkups and maintenance on the thousands of windmills, or the thousands of miles of power transmission lines? While I don’t have hard data here, it appears to me that the personnel requirements for implemenation and maintenance of such a system will far exceed the personnel requirements for the front-end design and development. Is it wrong to suppose that these “low-skill, low-wage” employment needs would be just as useful (if not more so) for our economy as the far fewer high-skill, high-wage jobs? Am I wrong in thinking that it would be absurd for us to outsource so much of these needs to other countries, when we have plenty of warm bodies here that could satisfy the needs of such a project (or several)? I doubt anyone could argue that the enormous manufacturing output we undertook in WWII was harmful to our economy at that time; what has changed in the fifty years since that would make such production harmful now?

World War II also brings up a pertinent point WRT industrial production. If we continue losing domestic manufacturing capability, and, just as importantly, the knowledge of how to manufacture such items as we need, what happens if, God forbid, we must go to war again? Diplomacy and internationa civility was supposed to make war obsolete after the War to End All Wars [5], and history shows us just how successful that was. What happens if we find ourselves suddenly in need of 40,000 tanks or 10,000 heavy bombers? [6] Could we do the same again, if the need arose? And if we transition over to being a universally high-wage society, what happens if the worldwide “second class” of manufacturing nations decide that our wealth should be their wealth, too? What if they are willing to fight for it? Should we not do everything in our power to maintain our own manufacturing capability, even if we never need to use it in anger again? The ancillary benefits would still be useful in peacetime, enough so that it would not be a waste to maintain such capacity, and the security it provides WRT our ability to respond to external threats should make this unquestionably beneficial.

As you can see, I have many concerns with the President’s attitude in this matter. I worry that his notions will handicap our great nation, while concurrently saddling us with record amounts of debt as we forcibly transition to his vision of the ideal American dream. I only hope that the handicap does not prove to be permanent, and that the citizens of our Republic come to their collective senses about these matters, before it is too late.

Notes:

[1]: White House website, 3rd question; 26 March 2009.

[2]: Jerry Pournelle has a few insights to offer on this topic in his blog. See here and here for some of his comments.

[3]: In many ways, the term “low-skill” is a misnomer. While it is true that such jobs do not require the same kinds of specialized skills that, say, a brain surgeon needs, these jobs still require skills that must be learned in order that the worker can complete the requirements of the job. Don’t believe me? You try managing meat on a grill for 40 orders, all with different timing and perparation requirements, and assigning each to their proper plates. Its not as easy as it looks, and I guarantee that very few people could just “jump right in” and perform smoothly without prior training.

[4]: See link here for a general description of the concept. Wikipedia article, mostly because I just don’t feel like doing independent research this time.

[5]: One of the names for World War I was “The War to End All Wars”, and while all nations were universally tired of war after that , it only took two decades to bring the world back to war again.

[6]: During WWII, we produced 49,000 Sherman Tanks, 18,000 B-24 Liberator heavy bombers, two dozen Essex-class fleet carriers, along with thousands of other ships, tanks, planes, artillery pieces, guns, bombs, etc. Concurrently. I wonder if we could do the same thing today.

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