A Nation of Waitresses and Bartenders
The Bureau of Labor Statistics payroll jobs report released May 5 says the
economy created 131,000 private sector jobs in April. Construction added 10,000
jobs, natural resources, mining and logging added 8,000 jobs, and manufacturing
added 19,000. Despite this unusual gain, the economy has 10,000 fewer manufacturing
jobs than a year ago.
Most of the April job gain --72%--is in domestic services, with education and
health services (primarily health care and social assistance) and waitresses
and bartenders accounting for 55,000 jobs or 42% of the total job gain. Financial
activities added 26,000 jobs and professional and business services added 28,000.
Retail trade lost 36,000 jobs.
During 2001 and 2002 the US economy lost 2,298,000 jobs. These lost jobs were
not regained until early in February 2005. From February 2005 through April
2006, the economy has gained 2,584 jobs (mainly in domestic services).
The total job gain for the 64 month period from January 2001 through April
2006 is 7,000,000 jobs less than the 9,600,000 jobs necessary to stay even with
population growth during that period. The unemployment rate is low because millions
of discouraged workers have dropped out of the work force and are not counted
In 2005 the US had a current account deficit in excess of $800 billion. That
means Americans consumed $800 billion more goods and services than they produced.
A significant percentage of this figure is offshore production by US companies
for American markets.
The US current account deficit as a percent of Gross Domestic Product is unprecedented.
As more jobs and manufacturing are moved offshore, Americans become more dependent
on foreign made goods. This year the deficit could reach $1 trillion.
The US pays its current account deficit by giving up ownership of its existing
assets or wealth. Foreigners don't simply hold the $800 billion in cash. They
use it to acquire US equities, real estate, bonds, and entire companies.
The federal budget is also in the red to the tune of about $400 billion. As
Americans have ceased to save, the federal government is dependent on foreigners
to lend it the money to operate and to wage war in the Middle East.
American consumers are heavily indebted. The growth of consumer debt is what
has been fueling the economy. Social Security and Medicare are in financial
trouble, as are many company pension plans. Decide for yourself--is this the
economic picture of a superpower that can dictate to the world, or is it the
picture of a second-rate country dependent on foreigners to finance its consumption
and the operation of its government?
No-think economists make rhetorical arguments that the decline of US manufacturing
employment reflects higher productivity from technological improvements and
not a decline in US manufacturing per se. George Mason University economist
Walter Williams recently ridiculed the claim that US manufacturing jobs are
moving to China. Williams asks how the US could be losing manufacturing jobs
to China when the Chinese are losing jobs faster than the US: "Since, 2000,
China has lost 4.5 million manufacturing jobs, compared with the loss of 3.1
million in the U.S."
The 4.5 million figure comes from a Conference Board report that is misleading.
The report that counts was written by Judith Banister under contract to the
U.S. Department of Labor, Bureau of Labor Statistics, and published in November
2005 (www.bls.gov/fls/chinareport.pdf). Banister's report was peer reviewed
both within the BLS and externally by persons with expert knowledge of China.
Chinese manufacturing employment has been growing strongly since the 1980s
except for a short period in the late 1990s when layoffs resulted from the restructuring
and privatization of inefficient state owned and collective owned factories.
To equate temporary layoffs from a massive restructuring within manufacturing
with US long-term manufacturing job loss indicates extreme carelessness or incompetence.
Banister concludes: "In recent decades, China has become a manufacturing
powerhouse. The country's official data showed 83 million manufacturing employees
in 2002, but that figure is likely to be understated; the actual number was
probably closer to 109 million. By contrast, in 2002, the Group of Seven (G7)
major industrialized countries had a total of 53 million manufacturing workers."
The G7 is the US and Europe. In contrast to China's 109,000,000 manufacturing
workers, the US has 14,000,000.
When I was Assistant Secretary of the Treasury in the Reagan administration,
the US did not have a trade deficit in manufactured goods. Today the US has
a $500 billion annual deficit in manufactured goods. If the US is doing as well
in manufacturing as no-think economists claim, where did an annual trade deficit
in manufactured goods of one-half trillion dollars come from?
If the US is the high-tech leader of the world, why does the US have a trade
deficit in advanced technology products with China?
There was a time when American economists were empirical and paid attention
to facts. Today American economists are merely the handmaidens of offshore producers.
Apparently, they follow President Bush's lead and do not read newspapers--thus,
their ignorance of countless stories of US manufacturers moving entire plants
and many thousands of US engineering jobs to China.
Chinese firms, including state owned firms, have numerous reasons, tax and
otherwise, to understate their employment. Banister's report gives the details.
Banister points out that the excess supply of labor in China is about five
to six times the size of the total US work force. As a result, there is no shortage
of workers in China, nor will there be in the foreseeable future.
The huge excess supply of labor means extremely low Chinese wages. The average
Chinese wage is $0.57 per hour, a mere 3% of the average US manufacturing worker's
wage. With first world technology, capital, and business knowhow crowding into
China, virtually free Chinese labor is as productive as US labor. This should
make it obvious to anyone who claims to be an economist that offshore production
of goods and services is an example of capital seeking absolute advantage in
lowest factor cost, not a case of free trade based on comparative advantage.
American economists have failed their country as badly as have the Republican
and Democratic parties. The sad fact is that there is no leader in sight capable
of reversing the rapid decline of the United States of America.
Paul Craig Roberts was Assistant Secretary of the Treasury
in the Reagan administration. He was Associate Editor of the Wall Street Journal
editorial page and Contributing Editor of National Review. He is coauthor of
Tyranny of Good Intentions.He can be reached at: email@example.com