Whether because of a “jobless recovery” or election-year politicking, the movement of American jobs overseas has become a hot-button issue. In order to clear away some of the haze surrounding it, I interviewed Benjamin J. Cohen, a Louis G. Lancaster professor of international political economy at UCSB. He is the author of 10 books, the latest of which, The Future of Money, was published in January.
Why are American companies moving jobs overseas?
The main cause, obviously, is that companies can get the jobs done at lower cost. Earlier in American history, companies moved jobs from New England to the Southern states to take advantage of lower wages. Moving jobs to Mexico or Asia is exactly the same, except now the move is to foreign countries rather than to a different part of the same country. Markets are like water: If unimpeded, they seek their own level.
Do you think it is, on the whole, beneficial or harmful to the American economy?
In the long term it will no doubt be beneficial to the American economy, just as the move of jobs from New England to the South was, on balance, beneficial. Production costs and, ultimately, the prices that consumers pay for final output can be significantly reduced, and resources are released that ultimately can be put to more efficient use. But in the shorter term, there are obviously dislocations and adjustments to be made and, of course, a lot of pain for the people whose jobs are at issue. Benefits don’t come free. Although on the whole the economy will gain, there are individuals who lose, and we can’t forget them.
To what extent is outsourcing responsible for the current sluggish job growth?
Outsourcing is in fact only a very small part of the problem. It really is important to keep a proper perspective on the issue. When we speak of outsourcing, we are talking at most of job losses on a scale of perhaps a quarter million positions a year. That is literally a drop in the bucket in an economy with an employed labor force of over 130 million people, where every year some 10 to 15 million people change jobs. The real cause of sluggish job growth today is the productivity revolution of the last decade, which has made it possible for companies to produce more goods and services with fewer workers.
Should the Bush administration or individual states take steps to prevent job loss or to ease job transitions?
Any attempt to prevent job loss would be costly to the economy because by definition the policy would be preserving inefficiency. The solution must be not to block the transition but to ease the transition – to provide adequate adjustment assistance for the workers whose jobs are lost. We have a federal adjustment assistance program on the books, but it is wholly inadequate. Funding must be increased significantly and eligibility criteria eased sharply so generous unemployment benefits, job retraining, and, if necessary, moving allowances can be provided to the workers who are the victims of the process.
When CNN’s Lou Dobbs fumes about “exporting America,” he uses terms like “conscience,” “loyalty,” “social responsibility.” Should values like responsibility to America and loyalty to its workers intrude upon corporate decision-making? Does Dobbs have a point?
Terms like those used by Dobbs serve to indicate just how much of a hot-button issue the matter of outsourcing has become. But to suggest that corporate management should exercise “conscience” or “loyalty” is, in effect, to call for a revolution in our economic system. Like it or not, our economy is based on markets and the pursuit of profit; in our system, corporations have a responsibility only to their shareholders, not a social responsibility. And so unless we are prepared to replace that system with another, we will have to look to the public sector, not the private sector, for “decency” and “social responsibility.” That is why I put so much emphasis on adjustment assistance programs to ease the adjustment for the victims of change. Dobbs has a point, but does he really mean to end capitalism in the United States?
Joey Tartakovsky is a Daily Nexus columnist.