The Problem with “American Jobs”

Steel plant

[ Photo: Steel plant by Flickr: LibraryArchives ]

As the opening to his re-election campaign, President Obama’s rousing State of the Union address laid out a vision for a renewed American social compact, one in which hard work and responsibility offer everyone a decent life. It was a stirring message, aptly crystallizing the central theme of the 2012 campaign: Does our economy work for everyone?  Or does it just work for the lucky, wealthy, or unusually talented few?

One of the reliable applause lines in the speech – and in politics more generally – was about saving and creating American jobs.  The President assailed American companies that “outsource jobs” and “avoid paying [their] fair share of taxes by moving jobs and profits overseas.” President Obama is absolutely right on that latter point: it’s time for American corporations to stop shirking their tax responsibilities through complex accounting and putting subsidiaries in tax havens like the Cayman Islands.  In fact, as I wrote in a recent blog post, Congress’s latest desire to give these corporations a “tax holiday” to repatriate profits to the United States is both economically foolish and morally unacceptable.

As for outsourcing, though, I have a problem: I’m not sure that I believe in such a thing as an “American job.”  Of course, I believe in the literal fact that there are jobs in the United States, that they are primarily filled by American workers, and that they are at companies with headquarters in the U.S.  But, at a broader level, I worry about the notion of “American jobs”: it suggests that the United States has a moral claim on these jobs, that workers in other countries who do work that was once done by Americans are not entitled to that work.

There is no doubt that outsourcing and technological innovation – especially the loss of close to 6 million manufacturing jobs from 1987 to 2010 – have hurt many American workers.  It has been devastating to cities like Detroit and Philadelphia.  And it has been one of the primary reasons for widening income disparity, which threatens the very core of the American compact.

But, blaming companies that employ people in other countries with better skills or more modest costs is missing the point: American workers are simply not competitive in many industries.  In 1970, the U.S. had the highest high school graduation rate in the developed world.  We’re now 21st in high school graduation and 15th in college graduation.  And we all know that a diploma from many American high schools doesn’t mean nearly as much as one in Singapore, South Korea, France, or Japan.  Moreover, our meager investments in the infrastructure that supports business are no match for aggressive investments in China and elsewhere.  To a significant extent, outsourcing is not the cause, but the result, of years of economic mismanagement and foolish decisions.

Should the U.S. give tax breaks to companies for outsourcing jobs?  Of course not.  But, frankly, this issue is a political canard.  The one-time tax benefit that corporations get for writing off costs related to shutting down U.S operations is a minor factor in their decisions to outsource.  We should close this loophole, if only so that we can stop talking about it and get to the heart of the issue: the United States, led primarily by decades of neglect for investment in public education and infrastructure, has been losing its edge.

Call center by Flickr: Vitor Lima

On moral grounds, as well, I’m concerned that we do not see the other side of the equation: the shifting of work from the United States to other countries has often been a powerful driver of poverty alleviation in some of the world’s poorest corners.  1.4 billion people around the world continue to live on less than $1.25 a day.  But that number has fallen dramatically in recent decades.  In the much-reviled China, the impoverished portion of the population dropped from 85% in 1981 to 16% in 2005.  Over 600 million people climbed into a decent standard of living during that period.  One reason: many mid-skill manufacturing jobs for which Americans were no longer uniquely qualified went to China. The trend is similar, though less pronounced, in India, the heart of supposedly lamentable IT and call center outsourcing.  Can you really tell me that desperately poor people in India or the Philippines or Cambodia do not deserve “American jobs?”

(To be clear, I’m not talking about companies that move operations to other countries so that they can dump toxic pollutants with impunity or exploitatively employ child labor.  Those things happen, and they are morally bankrupt.  But they don’t account for the bulk of American job losses.)

Before going back to school, I worked at a New York-based company with a large office in Hyderabad, India.  The firm never specifically “outsourced” jobs to India.  But a large fraction of total staff was in the Hyderabad office.  There’s no question that at least marginally more workers would have been needed in the United States had we not had that office in India.  Was it immoral to employ people in India?  I don’t think so.  In fact, it may be one of the most beneficial things that the company has done for the world.  Those hundreds of people have good jobs, jobs that support families, jobs that pay taxes to the Indian government, jobs that transfer long-lasting skills to the Indian economy.  They have more than earned those jobs, through diligence and a commitment to education.  Over a relatively brief period, their wages rose dramatically, as the Hyderabad area developed and competition for skilled workers among American firms became fierce.  This is how it should be.  I don’t begrudge the Indian friends that I made over those years; I admire them.  Nor do I hold the company’s decisions against it.  Not at all.

I laud all of the energy that President Obama has put into trying to improve our education system, infrastructure, and economic competitiveness.  Republicans, who are so anxious about competitiveness and job creation, must stop obstructing his every move.  And I recognize that beating up on companies that employ people outside of the United States is a powerful political ritual that is inevitable every four years.  It’s hard to feel sorry for them. Many large corporations have done an awful lot to destroy whatever goodwill voters might have felt towards them, including avoiding tax payments that actually fund investment in our economy.  

But let’s not fall into the trap of thinking that this is a zero-sum game.  People in other countries are not to blame for our losing in the global economy.  We are doing a perfectly good job of losing all on our own.

Comments

  1. Bob Lamm says:

    One more terrific piece by Andrew Solomon!

    Two reactions:

    1. I detest nationalism. (And detest even more the notion of “American exceptionalism.”) Of course the notion that certain jobs are “our jobs” needs to be questioned. And Andrew has done this skillfully.

    2. There’s just one point that I believe is missing from Andrew’s excellent examination of this issue. Those of us from New York City and nearby who care about social justice should support strong and principled labor activism not only in the United States but all across the world. Workers in EVERY country deserve good wages, substantial benefits, healthy and safe workplaces, reasonable limits on working hours, child labor protections, meaningful grievance procedures, and every other humane protection available.

    • Andrew Solomon says:

      Very good point, Bob. As a first principle, supporting workers’ right to organize is incredibly important, both in the US and abroad. The challenge here — and this is no small question — is how to find the balance between advocating for humane work conditions and arguing for conditions that are just not realistic in a developing country.

      By way of example, it’s critical that children in Bangladesh have the opportunity to go to school and that companies be barred from employing them in ways that are either inhumane or interfere with their education. By contrast, it’s not obvious to me that Americans advocating for a Bangladeshi textile worker to get paid the U.S. minimum wage is doing that Bangladeshi person any good. In the latter instance, the Bangladeshi person would just not be employed at all. In other words, it’s complicated.

      • Bob Lamm says:

        In my mind, it’s actually NOT complicated. We in the United States shouldn’t be advocating for any specific rate of pay for workers in Bangladesh or any other country. Instead, we should be supporting local unions and labor organizers in Bangladesh and elsewhere and letting those workers determine which demands are reasonable for them. And we should support those demands.

  2. Alan says:

    Another precise, perceptive, analytical piece, Andrew. Thanks for going beyond the easy rhetoric to more thoughtful considerations. My hope: Obama and the Dems really rally people to finally pressure Republicans to get off the simply oppositional stance to move our country’s needs and agenda forward. Our future depends on it.

  3. Allison Tupper says:

    Agreed all around. The more people are better off, the more the rest of us are better off, at the neighborhood through the global level. But there are too many instances of exploitive American (OK–not only American, but those are the ones I hear about) companies providing low wages and cruel working conditions and environmental damage. As wages rise in China and India, companies move to other countries, where wages are still low.

    Do we even have laws about what American companies can do overseas?

    Can we support a global effort at union building?

    • Andrew Solomon says:

      That’s a very good question, Allison: do our laws govern multinational corps operating overseas? I’m not an attorney. But I would guess that the answer is largely no, especially because there are often complex ownership structures in which the firm operating overseas (say, in Cambodia) is actually a wholly owned subsidiary of the U.S. corporation.

      In our Ethics class at Wharton, we studied an interesting case in which the Canadian corporation, Barrick Gold, operated a gold mine in Tanzania with horrifying results. (http://en.wikipedia.org/wiki/North_Mara_Gold_Mine) Tanzanian environmental and worker rights laws were far too weak and unenforced to constrain the company. So, the Canadian left tried to pass a law that would give the Canadian government some authority to regulate “extractive” firms operating in semi-lawless nations. I believe that the bill was blocked by Barrick and the Conservative government. (http://www.miningwatch.ca/bill-c-300-corporate-accountability-activities-mining-oil-or-gas-corporations-developing-countries)

  4. Lenny says:

    Interesting question whether U.S. labor laws have any application to foreign employees working for U.S. companies abroad — generally U.S. laws are presumed not to have extraterritorial effect. And if the employees are working for a foreign subsidiary, as Andrew notes, or an independent contractor, there’s probably very little U.S. law can do. But there are other ways to put pressure on U.S. companies to require humane working conditions abroad, and to support fair conditions for foreign workers.

    I like your piece very much, Andrew, in that it explores a layer of complexity in the “American jobs” question that’s usually overlooked. One observation, that I think is implicit in your analysis: whether or not it’s “moral” for foreign workers to do jobs for U.S. companies that Americans could do, the fact is that the U.S. is in economic competition for those jobs with other countries. Our government owes it to us to compete vigorously (and fairly) for those jobs. The way to compete is not by trying to punish foreign workers for “taking American jobs,” but, as you suggest, by making U.S. education and infrastructure more favorable to employment here.

  5. Abhimanyu says:

    Great piece, Andrew – thoughtful and well written.

    The need of the hour is to realize that we are competing for global jobs now, and not for American jobs or Indian jobs, especially in industries like information technology and financial services.

    As you’ve rightly pointed out, this is not a zero-sum game. I feel it’s necessary for everyone to accept and understand that outsourcing and the increasing unemployment rate in the US are not as strongly, and directly, correlated as they’re portrayed to be.

  6. Kenan says:

    Well argued, Andrew, and all the more valuable for being an argument so few are willing to make.

    I have two quibbles:

    1) I suspect you may be underestimating the lure of poor environmental regulations and a legally abusable workforce. This may not have been a huge factor in your former employer’s decision to hire oversees, but financial services are a very different industry from manufacturing, which employs less-educated workers and has a more direct environmental impact. Given the absurdity and expense of manufacturing electronics, clothes, cars, what-have-you half a world away from their final destination, to which they will have to be transported at no small cost, the decision to do so must carry a great confluence of benefits. I suspect increased regulation from foreign governments would alter that equation substantially.

    2) While it’s fine and even laudable for you, as a private citizen, not to mind the transference of jobs from the American workforce to that of other nations, that would not be okay for our elected officials. They work for us and toward our benefit, and preventing the outsourcing of manufacturing jobs, arguably the lifeblood of our dwindling middle class, is an appropriate ambition. Obviously, investing in education and infrastructure are important steps, but I think tax codes and tariffs are also fair game. We have a voracious consumer market to which everyone wants access, and we should have a cost-of-admission. Making it more expensive to do business in countries that don’t protect their workers and environment would help pressure those countries to improve conditions, and level the proverbial playing field for American workers, who should be able to compete on their skill, not their willingness to accept less than a living wage.

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