Sunday, March 20, 2011

Where the jobs have gone... and why

In the third quarter of 2010, US corporate profits hit an all-time high: $1.659 trillion. US unemployment remained around nine percent. What's wrong with this picture?

From 1995 through 2008, US gross domestic production grew on average by 2.9 percent per year. Chinese growth was 9.6 percent. India's was 6.9 percent.

American jobs started moving offshore in the 1970s. They continue to flee. Here's a particular;y poignant horror story:

“I’d like my new team to meet my old team,” Myra Bronstein’s boss said, by way of opening the meeting at WatchMark, a Bellevue, Wash., developer of software for cell phone companies. Bronstein and 17 other U.S.-based software testers were meeting the 20 engineers, fresh off the plane from India, who had been hired to replace them. Bronstein and her colleagues were expected to spend the final two months of their WatchMark careers training them. If they refused, WatchMark would withhold their severance payments. “It totally knocked the wind out of me,” Bronstein said. “It was the most difficult situation in the world.” WatchMark managers said they had little choice but to export the jobs. Salaries for U.S.-based software engineers start at $75,000 a year; India-based engineers start at $15,000. Bronstein was left feeling like a sucker. “I never would have gone into the technology field in the first place if I had a crystal ball and knew the bottom was going to drop out. Now they want much more from you for much less.” A lot of Americans know exactly how she feels.Source: http://news.yahoo.com/s/theweek/20110318/cm_theweek/213217

Lower wages are a big part of the puzzle. But there are other aspects. Americans' dismal abilities in math and sciences don't help.

Nor does US tax policy:

1. There is no US tax on the earnings of US corporations' overseas earnings, if the companies keep those earnings overseas. Ergo, re-invest the money abroad.

2. Companies that relocate plants from the US to other nations are allowed by the IRS to deduct the the cost of closing the US plants from their taxable income.

Not only did the GOP hold extended unemployment benefits captive until Obama agreed to extend the Bush tax cuts for the wealthiest among us. Republican lawmakers also have consistently blocked efforts to close these gaping loopholes.

Let me suggest that, if you call yourself a liberal, you need to ask yourself where your primary loyalties lie: with your fellow (unemployed) Americans or with the workers of the world.

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