Official: China not cause of job losses (CBO chief and former Bush adviser)

Syracuse Post-Standard ^ | 10/5/03 | Rick Moriarty

[jalisco555]

If you're looking for the causes of the nation's steady loss of manufacturing jobs, our trade imbalance with China and other countries should not top the list, the director of the Congressional Budget Office said Friday.

Former Syracuse University economics professor Douglas Holtz-Eakin, who has directed Congress's budget office since February, said most of the factory job losses the nation has been suffering have been caused by productivity growth, not the exporting of jobs overseas.

"We're producing more," he said during a visit to SU. "We're just doing it with fewer people."

Manufacturing job losses have been getting a lot of attention lately, with some industries and many labor unions complaining about jobs being exported to low-wage countries such as China and Mexico.

While the loss of jobs to other countries is the most visible reason for the decline in factory jobs in the United States, it is not the biggest reason, Holtz-Eakin said.

Productivity growth is something that's much harder to see but accounts for much more of the reduction in manufacturing jobs, he said.

And the greatest increases in productivity are not coming from great new business strategies or new computer software, he said. They're coming from companies closing antiquated manufacturing plants in favor of newer, more efficient ones, he said.

That's why northern states have lost many manufacturing jobs to southern states, he said.

"You go to the Southwest and they don't have 150-year-old plants," he said.

While manufacturing job losses hurt the people who are losing the jobs, it's not necessarily a bad thing overall for the economy, he said.

Holtz-Eakin, who served for 18 months as chief economist for President Bush's Council of Economic Advisers, said he is more optimistic about the economy's outlook than he was when he spoke to a Greater Syracuse Chamber of Commerce luncheon in January.

Back then, he said the economy was ready to bounce back, but that several unknowns could derail a recovery, including a reduction in consumer spending.

[jalisco555]

I know many here will take issue with this view. I'm no economist but I present it as an addition to the debate.

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[Zipporah]

I do take issue .. just look at Target.. KMart.. Walmart etc etc.. now major appliances.. LG electronics.. Korea..

New world order I suppose means the world is taking the orders and in the US people are looking for new jobs. Only problem, they're far and few between.

[Gunslingr3]

New world order I suppose means the world is taking the orders and in the US people are looking for new jobs. Only problem, they're far and few between.

I suspect, as transportation continues to improve across the world, and as foreign governments become less hostile to capital and their own workforces become available that manufacturing will only continue to dwindle as a portion of the U.S. workforce. It'll be robots eventually, but before then it'll be cheaper foreign labor.

Americans are going to be called upon more and more not to find someone who can dispose of their labor and effort (an employer), but come up with their own business, directly offering their labor and effort. A lot of people are not predisposed to do this, and will be at a loss without being able to find a 'boss' to tell them what other people want them to do...

[jim_trent]

This is NOT just manufacturing. I went to a structural engineering conference last week (mainly to hear about the proposed 2005 AISC standards). One of the speakers there told us about when the EU was created. The number of structural engineering jobs for German engineers dropped like a rock. This was surprising since they were expecting more work. German structural engineers have a very good reputation. However, without borders, the jobs went to the lowest bidder. Turns out that Portugal was the winner in this case. Many German structural engineers left the business (retired early, mostly), some got retrained, and some moved to Portugal and got work there. Although the wages were less in Portugal, the cost of living was also less.

[Mears]

I'm no economist either but the major reason for manufacturing job loss has been sending jobs overseas.

Just look at anything you've purchased in the last five years,including expensive clothing,and it was manufactured outside the country.

The Maytag manufacturing is going to Mexico I read someplace on FR yesterday. A whole new reason for the lonely Maytag repairman to be lonely.

[ampat]

We aren't producing more textile products in the US, because those jobs are being done in foreign countries. Just who does this guy think he's talking to: Forrest Gump? Companies are lowering their overheads by paying lower wages to workers all over the world. That's whats happening. If you want to say "we're producing more" fine, but that isn't the reason for loss of jobs.

[neefer]

"The Maytag manufacturing is going to Mexico " And when the Mexicans unionize, demanding higher wages and better benefits, Maytag will go somewhere else.

[raybbr]

I am so sick and tired of being told that the sun is shining when I can feel raindrops on my face.

Why can't someone in our government realize that Americans (jobs) are being flushed down the toilet?

This productivity arguement is so lame. If it were true, then last decade, when he had the lowest unemployment we would have had the highest productivity. Instead, they are telling us the he have higher productivity now. Have there been that many new factories in the U.S. in the last two years? Have that many companies invested in new equipment in the last two years?

It doesn't add up. You can't have it both ways. By telling us that high unemployment is due to high productivity are they saying that times when we have low unemployment it is due to low producttivity?

I propose a new symbol for the GOP:

Here we see a top GOPer talking to his cohorts:

[raybbr]

Ping

[Final Authority]

You got his head in the wrong orifice for my thinking. This government guy is just full of it. Productivity goes up because we are discounting all the labor (people on the payroll) in Mexico, China, and other dirt poor nations building the sub-assemblies and finished goods we once built. An example, raw castings and some other materials go to Mexico, it is counted as an export, the material gets worked on by hundreds of laborers and is sent back to the USA, with the attendant cheap labor burdened into the product, as a subassembly. The US manufacturer realizes the value added without the actual labor in the USA. It is now cheaper and produced with fewer people, hence, higher productivity, and, hundreds of US jobs are lost. If they work it right they can value the export higher than the return of the goods and skew the trade imbalance accordingly. I suspect there is also a way to play games with the IRS as well but I am not clear on if or how this may work. BTW, never trust an a-hole with a hyphenated name.

[raybbr]

Amen! Try to tell this to the super-capitalist free-traders in this forum and you get talked like you are an idiot. It's all a money game.

[Libertarianize the GOP]

bump

[waterstraat]

Bush is in complete denial, much like Herbet Hoover was in 1932, and the consequences will be the same.

[waterstraat]

Have there been that many new factories in the U.S. in the last two years? Have that many companies invested in new equipment in the last two years?

Have there been ANY?? new factories in america in the last two years? Just where are american companies building new factories? Asia is booming with new american factories and offices, where are all the new factories in america?

[Imal]

So the problem isn't this guy,

But this guy?

[Fishing-guy]

These low paying labor-intensive jobs are not coming back to US. If they don't go to China or Mexico, they will just go to some other poor third-world countries.

IMHO, the solution is to make sure China, Mexico, and other countries are not putting up unfair trade barriers to our high-end products, and then export, export, export...

[A. Pole]

It'll be robots eventually, but before then it'll be cheaper foreign labor.

Cheap/slave labor inhibits automatization of work. One of the reasons why ancient Greeks did not care to develop machines is because they had "talking tools" ie slaves.

The technological explosion in Europe took place after the plague of XIVc when serfs became less available. If there were "free" trade with China at that time, Europe would not move ahead as much.

[Gunslingr3]

Cheap/slave labor inhibits automatization of work.

What difference does it make the American assembly line worker whether he's replaced by a robot or someone who was scratching dirt last week to make a living?

One of the reasons why ancient Greeks did not care to develop machines is because they had "talking tools" ie slaves.

I believe the level of scientific understanding was more important. Slaves may be unpaid, but they are not without costs. Machines are developed to handle tasks at lower costs.

The technological explosion in Europe took place after the plague of XIVc when serfs became less available.

Technological advance is an upward sloping curve. It is impacted by countless variables, but the most important isn't the availability of labor, but the science of yesterday that it's built upon.