Solutions for U.S. Unemployment and the Loss of Manufacturing Jobs: 29

[rhodie]

I almost lost it when I read this article:

http://businessweek.com/smallbiz/content/dec2003/sb2003122_8887.htm

To think this fool thinks he has really stumbled upon the "solution" to lost job is absurd. All he is doing is amplifying the problem as we accelerate the US's "Race to the Bottom."

 

[BruceP]

"To think this fool thinks he has really stumbled upon the "solution" to lost job is absurd. All he is doing is amplifying the problem as we accelerate the US's "Race to the Bottom." " -- rhodie

I share your angst. BUT, let's look at both sides.

On the one hand you have a corp exec with shareholders to satisfy. He is under pressure to off-shore to save a bundle of $$. BUT he believes that there is value in using local folks and is willing to pay a small premium to get them -- over what he would pay overseas. He gets highly trained programmers WHO COULD NOT FIND OTHER WORK AND WERE WILLING TO ACCEPT MUCH LESS THAN THEY HAD BEEN MAKING.

So, one could look at this and say both sides were winners. The programmers wanted more $$, of course, but realized that some $$ was better than no money. And the manager got the local expertise he needed and willing workers.

So, what's the problem?

It's that "race to the bottom" thing -- the programmers making much less than they had reason to expect but could not achieve. Multiplied by tens of thousands, this puts a lot fewer dollars into circulation in the US economy than there had been (but more than there would be if the jobs went off-shore!). That reduces the standard of living for everybody -- with the possible exception of the corporate moguls and tort lawyers. But they will eventually live in a meaner, more squalid America.

So, paying Americans Indian wages is not all bad but it certainly is far from a solution to the off-shoring of American business.

Unfortunately it is probably as good as one can expect in the current economic milieu.

I relate to this scenario personally because, after taking an early retirement package from one employer, I was not able to find new work at a comparable salary without relocating, which I did not want to do. So, I am working but making about $20K less than I was. My next retirement is a L-O-O-O-NG ways off!

 

[GregLocock]

Being an occasional Slashdotter I watch the antics of the coders with amusement. Let's face it, they managed to invent a nice little earner in the lead-up to Y2K, and have been keen to carry on earning in the manner to which they became accustomed.

This free market solution (asking for coders to accept a globally relevant wage) is the correct response - for Heaven's sake, 45k a year is not bad money in a global sense, and the cost of living in the USA is not bad either. This for a job that needs no degree, and no has no professional liability. Is a coder really more valuable than a high school teacher?

So, rhodie, I ask again (third time now), how can you justify paying an American a lot more money for doing the /same/ job as an off-shore worker? It ain't gonna happen, you can either live in a straw house that will come tumbling down when the wind blows, or, preferably, gently deflate people's expectations back to a global level.


Cheers

Greg Locock

 

[Iskit4iam]

From what I've read about the actual salary levels in India and Russia I am surprised the cost difference was as small as it was. I suspect that the market price for India and Russia is set by the market price in the US. If this strategy took hold I would expect overseas prices to drop in response.

 

[arunmrao]

iskit4iam,
A top level professional working in a MNC earns about 1000-1500$ per month in India. Ordinary folks like me earn half that. Salaries are grossly exagerated due to the presence of MNCs which has set an imbalance in the society.

 

[EngineerDave]

The approach of lowering salaries is one way of giving out of work people a job again.

I know if it was me I would rather work even if it means earning less.

In fact, that's exactly what I did. After a 6 month unemployment period, which was precipitated by an employer hiring freeze (Myself and a colleague were on leave of absence to complete our masters and much to our surprise were frozen out when we tried to return to our jobs), I took a job for much less than what I was earning.

I'm still there. I'd much rather have some income than none or government assistance.

My solution to all of this is to use our creativity as engineers and think of other streams of income. For instance, I know some engineers that teamed up to do real estate on the side.

I think small engineering projects on the side could be a very good idea, as long as they aren't a conflict of interest with your main source of employment.

 

[jmw]

Are we talking at cross purposes here? Are we, perhaps, talking in generalities?
Engineering jobs are going.
We know that and we know where they are going.
But is that all engineering jobs?
And what do we mean by “engineer”?
How about we think about different types of engineer and figure out which types are going.
Let me see if I can explain what I mean.
The industrial revolution was not about engineering. It didn’t start with engineering. It was about IDEAS (we are only concerned with ideas that require engineering skills, let other disciplines worry about their own fate). The creative types were the ones with ideas. Sure they were engineers but engineers of the creative, innovative type. Some, I’ve no doubt, were not even that good at engineering but knew enough to know a good idea when it came to them. Thus the best of them were the ones with the original ideas and the engineering skills to recognise the potential, and whatever else it took to turn those ideas into reality.
Even the best idea is only viable if (a) it is valuable and (b) if it can be done.
The next level of engineers are ones who, when presented with the idea or the first working or nearly working model, then went on to trouble shoot the design and make it work. They are also creative but in a problem solving way. They are also the ones who don’t get a mention (Edison didn’t work just by himself, he employed lots of others and every so often added a little bit of a spark).
Now we come to my last group of engineers. These are the guys who don’t innovate, at least, they are not expected to, who don’t trouble shoot and find engineering solutions.
These are the guys to whom you say, design and build me a boiler. These are the specs. These are the codes. Get on with it.
These are the “mechanics” if you like.
If you split the engineering profession down you can bet there will be a lot of “mechanics” out there.
My bet is that these are the jobs that are going fast.
Look at it this way (and I think someone has referred to this earlier on) the decline in engineering has hit the UK hard and is hitting the US hard and a few others. But take a look at the ideas. The UK still accounts for a totally disproportionate number of new patents. Even without Thomas Alva, I guess the US is still doing pretty well. But some countries are proving very good at refining ideas and at highly efficient manufacturing and marketing, but haven’t had a good idea for a 100 years or more. They probably will later on, as they accumulate the depth of knowledge and develop a culture based on that knowledge.
We all know that however much money you pour into R&D, you cannot guarantee, or even expect new “ideas” but give them an idea and they will make it work, if it can be made to work, and they will refine it, time and again.
This might seem like it is suggesting that only a few people have ideas. That’s wrong. I think lot’s of people have ideas. Good, valuable and do-able ideas but only a few put them into practise.
What we have to do is figure out which are the jobs that are going. I would suggest it is the “mechanic” end of the scale that goes first because these are the easiest engineering skills to acquire; the ability to do things the way they are meant to be done.
This is what I meant in my earlier post. Take the skills and the accumulated knowledge and focus those skills on innovation. Reinforce in the culture the aspects of creativity. It is creativity that will count and that will secure the future. Not every one will be saved. But don’t let’s kid ourselves that the world is going to hell in a hand basket. All those years of design and innovation have produced some very good transferable skills. And they are being transferred. To my mind, this is right and proper. It is the big sign of the success of engineering as a profession. But let go of these aspects and concentrate on what is the best and least reproducible part of engineering. Creativity is what keeps you at the front and employed.
Now decide which type of engineer you are or are capable of being.
Of course, the next problem is to decide if the established industries are the right home for those newfound skills. All too often, though they are engineering companies, they are not the home for innovation. They are about manufacturing and the skills they mostly need are the “mechanical” skills. Take the focus away from these companies and take a look at the new small and ideas driven companies, among them are the future giants. Take a look at history and see what has happened to all the great companies. They day came and went and new companies came after them. How old are some of todays biggest companies? Who went before them and who will follow.

 

[BruceP]

Hey folks, take a look at this link

http://www.alwayson-network.com/comments.php?id=1477_0_7_0_C

to see the 10 most overpaid jobs in USA.
(Engineers did NOT make the list!)

 

[EngineerDave]

I think engineers might earn the most underpaid list! That with fast food workers!

 

[GregLocock]

Gosh, bad luck. According to Engineers Australia recent survey the average respondent was aged 43, earned 66k basic and had a package worth 76k. (frankly this doesn't even sound like being worth getting out of bed for, to me, but hey it is a number to work with).

The average full time worker is on 53k total

So the average engineer would appear to be on about 50% more than the average full time worker, in Australia.

Not exactly McJob money is it?

Cheers

Greg Locock

 

[razzer]

I am not sure this makes any sense, but here goes. If a company has so much percentage of employees in another country, shouldn't they be taxed massive importation taxes in proportion to the amount of overseas workers they have? This would make the large companies, who have move almost a hundred percent of their employees overseas to realize they must have jobs in this country. This would give preferential treatment to companies that keep US workers employed. After all, moving jobs overseas, how can anyone here compete with a child working for pennies an hour? This will level the playing field for companies which employ US workers.

 

[BruceP]

Greg,
Let's review some of the dialog in this thread.
Bruce: I relate to this scenario personally because, after taking an early retirement package from one employer, I was not able to find new work at a comparable salary without relocating, which I did not want to do. So, I am working but making about $20K less than I was. My next retirement is a L-O-O-O-NG ways off!

You: how can you justify paying an American a lot more money for doing the /same/ job as an off-shore worker? It ain't gonna happen, you can either live in a straw house that will come tumbling down when the wind blows, or, preferably, gently deflate people's expectations back to a global level.

Dave: I think engineers might earn the most underpaid list! That with fast food workers!

You: Gosh, bad luck. ... the average [US] engineer would appear to be on about 50% more than the average full time worker, in Australia. Not exactly McJob money is it?

So, here is my interpretation of the above:
You are apparently making a LOT more than US$76K since you would not get out of bed for that amount. We are happy for you.

But your harsh dismissal of US engineers who think they should be making more $$ comes across as arrogant and insulting.

Your high salary suggests that you are Management, rather than Engineer. I have long suspected that Management people delude themselves into thinking that they are worth their high salaries, are, in fact, entitled, to them, and that anyone not making such a salary is lazy and/or stupid.

Greg, you have stated that US workers have no right to earn more than engineers in 3rd world countries and need to lower their expectations to a "global level". Apart from its insensitivity, such a statement ignores the differences in standards of living and cost of living. Of course the US or Candian or Euoropean engineers should expect a higher wage than a Sri Lankan. They have to pay bills in the place where they live! That is a major reason that there are large wage differentials even within the US. People would not expect or need the higher salary if they were living in a lower-cost area.

The developed countries -- especially the US -- have elaborate and costly governmental programs and laws which increase the cost of production and the cost of manufactured goods and shipped goods. Think OSHA, EPA, SSI, etc. etc. Licenses, bonds, etc. increase the cost of services. These are costs that are built in to our economies which are much higher than in the less-developed countries.

Companies who off-shore put a double-whammy on the US citizen. First, they escape paying the taxes to provide these programs, and second, they deprive the US citizens of the employment to pay the additional tax burden resulting from item 1.

If US companies continue to off-shore as much work as possible to foreign countries while US citizens are looking for work, it is clear that, at some point in the future, there will no longer be a market for the manufactured goods in the US because low-wage and unemployed people cannot afford them. So, it is a short-range strategy with poor long-term expectations for the US citizen.

The global level you mention would quite likely be below what we in the states call the poverty line. Is that what you think is a good scenario for the future US? Instead of living in nice houses and driving reliable cars, we should return to mud hovels and ride donkeys?

 

[ietech]

BruceP,,

I wish I could give you FIVE STARS.

Your post hits the nail on the head in all of the areas you mentioned. There are many more but you have certainly made impressive comments.

Especially:

1)Companies who off-shore put a double-whammy on the US citizen. First, they escape paying the taxes to provide these programs, and second, they deprive the US citizens of the employment to pay the additional tax burden resulting from item 1.

2)The developed countries -- especially the US -- have elaborate and costly governmental programs and laws which increase the cost of production and the cost of manufactured goods and shipped goods. Think OSHA, EPA, SSI, etc. etc. Licenses, bonds, etc. increase the cost of services. These are costs that are built in to our economies which are much higher than in the less-developed countries.


Thanks and MERRY CHRISTMAS

ietech

 

[BruceP]

ietech:
Thanks for the kind words.


Merry Christmas right back at you and to all the other people who contribute to these message boards.

 

[GregLocock]

Oh dear.

You really have got hold of the wrong end of the stick, several times over.

"You: how can you justify paying an American a lot more money for doing the /same/ job as an off-shore worker? It ain't gonna happen, you can either live in a straw house that will come tumbling down when the wind blows, or, preferably, gently deflate people's expectations back to a global level.

Dave: I think engineers might earn the most underpaid list! That with fast food workers!

You: Gosh, bad luck. ... the average [US] engineer would appear to be on about 50% more than the average full time worker, in Australia. Not exactly McJob money is it? "

Wrong, that's an /Australian/ survey of /Australian/ engineers.

"So, here is my interpretation of the above:
You are apparently making a LOT more than US$76K since you would not get out of bed for that amount. We are happy for you."

No, my package is rather more than 76k AUSTRALIAN, as do most 43 year old engineers in the Australian automotive industry.

"But your harsh dismissal of US engineers who think they should be making more $$ comes across as arrogant and insulting."

The board of a company has a responsibility to the shareholders to use the shareholders funds efficiently. If the /same/ job can be done by someone else but for less money then it seems to me the board has no choice but to go with it. Therefore, unless US engineers are more productive, or better, or some other synergy, then they should accept that in a global free market they will have to accept the global rate for the job.

"Your high salary suggests that you are Management, rather than Engineer."

No I am management proof. I am technical stream, and will be until they pry my keyboard out of my senile hands. Clue: check my personal profile.

" I have long suspected that Management people delude themselves into thinking that they are worth their high salaries, are, in fact, entitled, to them, and that anyone not making such a salary is lazy and/or stupid."

Whatever, irrelevant

"Greg, you have stated that US workers have no right to earn more than engineers in 3rd world countries and need to lower their expectations to a "global level". Apart from its insensitivity, such a statement ignores the differences in standards of living and cost of living."

I did not say that. Parity with other first world engineers would be a logical level. Erecting straw men is a good debating ploy.

If your economy is not more productive then how can you justify a higher standard of living? Your forefathers created a powerful and profitable economy that could support the highest standard of material comfort in the world. Your generation's job is to continue to excel, if you want to maintain that standard of living.


" Of course the US or Candian or Euoropean engineers should expect a higher wage than a Sri Lankan. They have to pay bills in the place where they live!"

If the Sri Lankan can do the same job as the USAn then in all fairness why should he not be paid the same? I am single, should I be paid less because I don't have children (ie my expenses are lower)?

" That is a major reason that there are large wage differentials even within the US. People would not expect or need the higher salary if they were living in a lower-cost area."

If I can 'black-box' the job then the rate should be the same, wherever the contents of the black box happens to live.


"The developed countries -- especially the US -- have elaborate and costly governmental programs and laws which increase the cost of production and the cost of manufactured goods and shipped goods. Think OSHA, EPA, SSI, etc. etc. Licenses, bonds, etc. increase the cost of services. These are costs that are built in to our economies which are much higher than in the less-developed countries.

Companies who off-shore put a double-whammy on the US citizen. First, they escape paying the taxes to provide these programs, and second, they deprive the US citizens of the employment to pay the additional tax burden resulting from item 1."

At last you make a sensible point.

"If US companies continue to off-shore as much work as possible to foreign countries while US citizens are looking for work, it is clear that, at some point in the future, there will no longer be a market for the manufactured goods in the US because low-wage and unemployed people cannot afford them. So, it is a short-range strategy with poor long-term expectations for the US citizen. "

Correct, so the dollar will drop, then US industry will be price competitive again, and people will get work. As I pointed out above, this is inevitable, given that the prime responsibility of each company is the efficient use of its shareholders funds, in a capitalist country at least.

"The global level you mention would quite likely be below what we in the states call the poverty line. Is that what you think is a good scenario for the future US? Instead of living in nice houses and driving reliable cars, we should return to mud hovels and ride donkeys?"

Well, at the risk of repeating myself, if your economy is no more productive than a third world economy, yes, you'll have a third world standard of living. By what right do you expect more?


Cheers

Greg Locock

 

[jmw]

Well now, let's just ask if the government wants to do anything about engineering jobs going.
In fact, they are probably encouraging some jobs out of the country.
Did you ever wonder why Puerto Rico has such a storng pharmaceutical base? or why European governments are paying subsidies to encourage companies to relocate and set up just wher the government wants them? Why did DeLorean set up in Ireland? why do so many of these companies end up in unusal places? Its because the government likes to do things like this. They give subsidies to "help" locations with low unemployment without realising that they're just shifting the problem around. Perhaps they could give some thought to creating an environment where new jobs are developed rather than trying to carry water in a sieve.
I'm not totally convinced governments are a good thing. For one thing, i don't think they have the smarts for anything useful and for another, if they can't win some votes they ain't interested, which is probably abpout the only way to get their attention, it's just they aren't worried about your votes till election time. In the meanwhile they have a hundred other opportunities to win brownie points around the world without realising what a mess these initiatives are cauising at home.

 

[funnelguy]

Greg's arguments are airtight when confined to a purely capitalistic system, IMO. Companies expected to maximize return to shareholders could do nothing else. Sorry, but if ALL governmental controls were removed from ALL countries, ALL production would simply go to the lowest wage country. Eventually the great levelling Greg speaks of would happen.

Asking publicly held companies to behave otherwise is silly. They would be remiss if they did. Asking privately held companies to forgo offshore sourcing is to ask your neighbor to take a pay cut for your benefit. Unlikely. All of this outsourcing was acceptable to many until it began to affect "professionals". Outsourcing was OK as long as it was the direct labor types. Engineers and IT types are concerned now? The irony is simply too rich.

Greg's arguments are airtight in a purely capitalistic world view with no governmental intervention. We do not live in that world. Trade barriers in the form of quotas, tarriffs, bans and differential policies for trading partners are all part of the current reality. Greg wouldn't have a job without these "barriers". I'm not a racist, so I believe there exists a likely replacement for Greg working somewhere else for less. I'm sure there are many who could replace me for less money.

Wake up and smell the coffee. The solution is a political one. Every country's government should strive to improve the lot of it's governed. If yours doesn't, change it. My government no longer represents my interests. My interests are not necessarily the same as those of NASDAQ or Dow members.

Some globalization proponents seem to believe economic activity is a zero sum game. Hence the belief that the US should "relinquish" wealth to other "oppressed" nations. I do not share these views. Real wealth is created through innovation and inventions that increase man's ability to produce wealth. Not merely produce the same product with cheaper labor.

But the innovations that create wealth and move economies forward are a direct result of perks provided by the taxes and tarriffs on employees and products. The public schools, state colleges, food safety, public health, police, firefighters, roads, bridges and other infrastructure are all provided by tax dollars. Not just yours, but your neighbor's as well. As the jobs leave, so do the taxes and later the services provided by those taxes. Rust Belt? Talk to the police department in Johnstown, PA. Find out what happens when your tax base leaves. Now, think national.

 

[PBroad]

For years US and other G8 nations have maintained a currency exchange rate that does not reflect true living costs in order to inflate standards. Once the news of this reached the have-nots in the countries we advertise in a deluge of other products were added to the tidal wave. The US/ Canadian problem is we have no idea of what money is. I recently bought a laser pointer in a bulk hardware store for $1.99 (made in China). A month later I saw the same unit, same attachments in a specialty store (pet shop) for $11.99. If we think that "wealth" is what we spend then no wonder that Canada (and now parts of Ohio) is the only country with "food-bank" in its dictionary.

There may be a solution. Lean Management using tried and tested engineering principles, but not in a land where CEO's earn more than the President or Prime Minister.

 

[PSE]

It's been a while since any postings here. I recently found that Machine Design magazine is going to host a webcast on March 24 with the topic of Manufacturing moving offshore from the US. The webcast is free though registration is required.

http://www.pentonsurveys.com/survey.asp?s=01234190235048165

Regards,

 

[sacem1]

I had not been aware of this thread as it had so long from any posts on it until PSE returned it to life.

The discussion about if a USA engineer needs to earn more than a 3rd world engineer because of cost of living differences really I think is mistaken, look at this facts:

A house in Florida is cheaper than in Lima (my hometown) the Publix prices for food and ordinary household needs are cheaper there than at home, I buy my clothing there because is better quality and cheaper than here (probably made in other part of the world but is besides the point) gas for the car costs less than half of our prices, a car is usually 1/2 the price that we pay here if new and much less if used, what costs more is: everything that has personal labor or attention involved, be it a restaurant, a dentist, a medical bill or a car mechanic, so finally the problem of "cost of living" goes more to HOW YOU LIVE than what the cost of living is, you feel miserable if you don't have a late model car (I drive a 91 Cherokee, which by the way runs flawlessly) the last HD TV, and so on.

The point is that we simply have learned to live on less income even if our bread and butter prices are similar or even higher than yours, so stop saying that the problem is that you need 25$/hr wages to survive in the US.

Just meditate a litl¡tle on that.

Cheer up

SACEM1