"America's strongest suit is innovation, which will always create new high-paying positions
Think of the world economy as a ladder. On the bottom rungs are the countries producing mainly textiles and other low-tech goods. Toward the top are the U.S. and other leading economies, which make sophisticated electronics, software, and pharmaceuticals. Up and down the middle rungs are all the other nations, manufacturing everything from steel to autos to memory chips.
Viewed in this way, economic development is simple: Everyone tries to climb to the next rung. This works well if the topmost countries can create new industries and products. Such invention allows older industries to move overseas while fresh jobs are generated at home. But if innovation stalls at the highest rung -- well, that's bad news for Americans, who must compete with lower-wage workers elsewhere.
Today, many are worried that the U.S. has reached the top of the ladder and run out of rungs. A growing number of high-tech and other white-collar jobs are moving to India, China, and other places. At the same time, there's nothing readily apparent to replace those exported jobs. What's more, the countries snatching jobs are producing large numbers of college graduates for the first time. The fear is that the U.S. educated class will be ground down by globalization, just as blue-collar workers were in the 1970s and '80s.
It's a scenario that shouldn't be dismissed out of hand -- but it's not likely to happen. The U.S. still has a distinct competitive advantage in innovation. If there's any country well-suited to find a new rung for the economic ladder, it's America. Outside of tech, the labor market for educated workers still seems fairly decent, given the stage of the business cycle.
Despite anecdotes of well-paying jobs being sucked overseas, there's little evidence that educated workers, overall, are worse off than they were after the last recession. The average unemployment rate for college-educated workers 25 years and older for the 12 months ended in July was 3.0%. That's lower than the 3.2% for 1992, the year after the last recession.
Some economists have argued that this low unemployment rate stems from educated Americans pulling out of the labor force. Declining labor-force participation over the past year, though, is part of a long-term trend -- it fell during the boom of the 1990s as well.
Moreover, the number of jobs held by college-educated workers 25 years and older has risen by 2.2% over the past year, compared with a 0.4% gain for the less-educated. The jobless rate for college-educated workers has been around 3% since the end of 2001, while the unemployment rate for other workers has increased by half a percentage point, to 5.7%. Wage growth has also been stronger for better jobs. Over the past year, median earnings for managers and professionals are up by 2.8%. Blue-collar and service workers showed no gain.
True, there is pressure on educated workers in the tech sector -- but that's coming off a boom. For example, jobs in software and computer-systems design have fallen by 1.6% over the past year but are still up by 70% since 1995, vs. a 7% gain for all private-sector jobs. "I think people are overreacting a little bit," says Steven P. Jobs, CEO of Apple Computer (AAPL ) Inc., since big chunks of the tech labor market -- including the most innovative parts -- are not going to move overseas.
Still, history does offer cause for worry. There was a period, from 1973 to 1985, when technological change contributed almost nothing to growth, according to government data. Not coincidentally, that was also the same stretch when U.S. manufacturing became vulnerable to foreign competitors.
That's why the American economy needs a boost from innovation if it is to continue creating the next generation of leading-edge industries and new high-paying jobs. By its nature, technology leaps are unpredictable and risky -- yet that's where the U.S. shines. It has the the biggest economy on earth, enabling America to make technological bets that would crush other nations. The U.S. has by far the best-developed financial markets in the world, including venture-capital and high-yield bond markets for financing new businesses.
And for the foreseeable future, the U.S. still has the best-educated workforce among the major economies, a plus for invention. The latest figures from the Organization for Economic Cooperation & Development show that 30% of Americans aged 25 to 34 have a college degree, compared with 24% for Japan and 14% for Germany. That's essential: Better-educated workers can better cope with rapid change, adjust on the fly, and imagine and develop fresh products and strategies.
Where will the next big innovation come from? It could be telecom, or biotech, or energy. Nobody knows. Nobody knew in 1994, either, when real wage growth was still slow, unemployment was above 6%, and the Netscape Communications Corp. initial public offering, which marked the start of the Internet Revolution, was a year away.
The biggest danger to U.S. workers isn't overseas competition. It's that we worry too much about other countries climbing up the ladder and not enough about finding the next higher rung for ourselves.
By Michael J. Mandel
Chief Economist Mandel writes about innovation and economic growth from New York. "
Just some light reading on outsourcing and basic economics. Outsourcing has always gone on and always will.....regardless of who is president.
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Topic: The 2004 Presidential Election (Read 619 times)