Daniel McGinn


March 1, 2004


Help Not Wanted

Jobs: Where did they go? Offshoring's a problem, but there's a bigger culprit.


March 1 issue - It's a set of questions that would make any cubicle dweller a bit nervous. "Exactly how do you do your job? Would you mind writing it down?" When Hank Williamson, a tech administrator at a Virginia bank, heard those questions recently, he took them as a sign his job may soon be going on an exotic trip. The likely destination: India, where a homegrown techie could use Williamson's instructions to do the work for dimes on the dollar. "My job security here is nonexistent," says Williamson, 49, who's still earning six figures but is polishing his resume. He's better off than Lisa Pineau, a mainframe programmer in Plano, Texas. She was forced to train her foreign-born replacement before being laid off in late 2002. Spotting few openings for tech workers, she's considered going into bookkeeping or medical transcription, but now she's worried those jobs are moving overseas, too. "Anything on a computer is getting 'offshored'," she says. So lately Pineau, 46, and her husband Patrick (also a tech worker) have considered switching into a field they figure can't be exported. They want to open a Subway sandwich shop.


Their experiences are small pieces in a complicated and disconcerting puzzle, one that's fast becoming an election-year focal point. More than two years after emerging from recession, why is the mighty U.S. economy struggling to produce jobs? There are few simple answers. But economists are beginning to identify the forces shaping this "jobless recovery." Many of them have nothing to do with cheap Asian labor; instead, the phenomenon is largely the result of companies' finding new ways to coax more work from existing employees. Still, offshoring is already affecting enough workers—and threatening the livelihoods of millions more—that it's likely to remain a battle cry on the campaign trail. Federal Reserve Chairman Alan Greenspan described the anxiety in a speech last week: "Fears about job security are understandably significant when nearly 2 million of our work force have been unemployed for more than a year."


History suggests the slow-mo job market should have picked up long ago. Economists say the recession ended in November 2001. Since then economic output has marched steadily upward; the U.S. economy grew by 3.1 percent in 2003. Although employment traditionally lags during recoveries, eventually the stats should have begun climbing in tandem. Not this time: lately the economy has struggled to produce even the 110,000 or so jobs needed each month just to keep up with population growth, let alone reabsorb folks laid off since the slowdown began. Most observers say this recovery has been more tepid than even the jobless recovery of the early'90s. That's true even as the stock market roared, corporate earnings soared and interest rates remained mercifully low. "Businesses are rolling in cash," says Mark Zandi of "But they've yet to step up and expand their hiring."


Why the disconnect? Economists offer some theories. Maybe health-care and pension costs have risen so dramatically that CEOs will do almost anything to avoid adding staff. Maybe firms overhired during the boom, creating unreasonable expectations for how many workers America can employ. While those arguments may have some merit, experts lay most of the blame on soaring productivity. It's a problem most workers understand on a personal level, since many feel like they're clocking longer hours and worker harder than ever. As long as workers keep becoming more efficient, hiring will remain muted.


How are businesses making more with less? Steven Friedman, director of the Bush administration's National Economic Council, suspects that as business slowed during the recession, firms used the downtime to learn to better exploit the high-tech gizmos they'd stockpiled during the boom. "There's a lag period from the time people buy software and hardware to when they start getting maximum mileage out of it," he says. Consider your own experiences: have you checked into a flight using a workerless airline kiosk, or scanned out at a supermarket using a self-checkout aisle? Had you before 2000? Over time, higher productivity is a good thing; it leads to better wages and living standards. The downside is that as long as workers keep boosting efficiency, managers can keep a lid on payrolls. Most observers expect productivity growth to eventually slow (there's only so much more work you can wring out of workers) and job growth to pick up. But for Bush's team, the acceleration can't come too quickly. Says Friedman: "The job market is not where we want it to be, but it's turned in the right direction."


Even as the recovery finally kicks into full gear, there's a new worry rising. It's given voice by the thousands of unemployed folks—like Lisa Pineau—who say they've lost their jobs to India, China and Malaysia. For all the vitriol over the issue, it's hard to say exactly how many offshoring victims really exist. Guesstimates put the exodus at anywhere from 300,000 to 600,000 jobs annually. That's a tiny sliver in an economy that delivers paychecks to more than 130 million workers, but its punch is magnified for several reasons. First, in an economy that's hardly producing any new jobs, any losses hurt.


Second is the growing sense that even if the numbers are small today, they're growing quickly. In 2002 Forrester Research predicted 3.3 million U.S. tech jobs might migrate overseas by 2015. When economists at the University of California, Berkeley, recrunched the numbers last fall, they concluded that a staggering 14 million positions could be at risk. Many of those in the bull's-eye are white-collar office workers. Some involve lesser-skilled fields like telemarketing, but others are highly educated. Some of them—radiologists, accountants, engineers—have invested in years of schooling, so they feel especially burned.


The fear factor is also growing because no one is entirely certain whose job might be next. Common sense says it's hard to outsource work that requires a hands-on presence (think plumbers, car mechanics or Subway-sandwich makers) or face-to-face contact (think realtors or psychotherapists). But those boundaries are fuzzy. Consider health care. Nurses and surgeons appear immune from the threat, but Ohio University economist Alfred Eckes speculates that as health-care costs rise, airline prices fall and Asian medical training increases, Americans might someday be shipped to Asia for certain surgical procedures, dampening U.S. surgeons' wages. Says Eckes: "Everybody is imagining the future for their kids [and saying], 'My god, where is America going to be in 20 years given these trends?' "


The doomsday scenarios will likely prove overblown. Some firms have tried offshoring and been unhappy with the results; they've reversed course by "in-shoring" work back to the United States. And, over time, workers are remarkably flexible. White House economist N. Gregory Mankiw sparked a firestorm this month by calling offshoring "probably a good thing for the economy in the long term," but the fact is, most economists—even Democrats—agree with him. Yes, offshoring creates painful transitions as people have to shift professions, but recall how many of our forbearers migrated from farms to factories to offices in the 20th century. And even if politicians try to stop offshoring, it's easier said than done. Protectionists traditionally use tariffs to boost the prices of imported goods like cars or steel; taxing services that travel via broadband and fiber-optic cable is more difficult. Driven by angry voters, elected officials are trying anyway: according to the National Foundation for American Policy, more than 20 state legislatures are considering bills to limit the awarding of state contracts overseas or require foreign call centers to identify their location when answering Americans' calls.


For now, worker anxiety seems destined to remain high—and the demographic that Wired magazine has dubbed "pissed-off tech workers" seems likely to grow more vocal. "You have people who did exactly what these economists said to do—their parents saved and sent them to school ... and now their high-tech jobs are moving offshore," says Marcus Courtney, president of WashTech, a Seattle-based worker-advocacy group. It's a disorienting reversal, the kind that's punishing people who "played by the rules," as John Edwards says in his stump speech. Standing in a crowd at an Edwards rally in New York last week, Linda Muller recognized the conundrum. Muller, 60, a retired textile worker, recalls how everyone flocked to high-tech when textile factories closed. Now those jobs are threatened, too? "It sure makes you scratch your head," she says. Or raise a fist. Or pull a voting lever.


With Jason McLure, Barney Gimbel and Joan Raymond

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