Where Are The Jobs?
Business Week Article
March 22, 2004
Economic growth is very strong, but America isn't generating enough jobs. Many blame outsourcing. The truth is a lot more complicated
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THE REAL CULPRIT. Yet there are things we do know. The real culprit in this jobless recovery is productivity, not offshoring. Unlike most previous business cycles, productivity has continued to grow at a fast pace right through the downturn and into recovery. One percentage point of productivity growth can eliminate up to 1.3 million jobs a year. With productivity growing at an annual rate of 3% to 3 1/2% rather than the expected 2% to 2 1/2%, the reason for the jobs shortfall becomes clear: Companies are using information technology to cut costs -- and that means less labor is needed. Of the 2.7 million jobs lost over the past three years, only 300,000 have been from outsourcing, according to Forrester Research Inc. People rightly fear that jobs in high tech and services will disappear just as manufacturing jobs did. Perhaps so. But odds are it will be productivity rather than outsourcing that does them in.
We know also where the benefits of rising productivity are going: higher profits, lower inflation, rising stocks, and, ultimately, loftier prices for houses. In short, productivity is generating wealth, not employment. Corporate profits as a share of national income are at an all-time high. So is net worth for many individuals. Consumer net worth hit a new peak, at $45 trillion -- up 75% since 1995 -- and consumers have more than recouped their losses from the bust.
We know, too, that outsourcing isn't altogether a bad thing. In the '90s, high-tech companies farmed out the manufacture of memory chips, computers, and telecom equipment to Asia. This lowered the cost of tech gear, raising demand and spreading the IT revolution. The same will probably happen with software. Outsourcing will cut prices and make the next generation of IT cheaper and more available. This will generate greater productivity and growth. In fact, as venture capitalists increasingly insist that all IT startups have an offshore component, the cost of innovation should fall sharply, perhaps by half.
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By Bruce Nussbaum |
