Experts Differ on Health of Economy

Talk of jobs, foreign workers and productivity levels has left many voters reeling from too many numbers, but some financial analysts say closer scrutiny of the issues and numbers shows not all the news is bad.

“The world has been changing for thousands of years and the changes have always been painful in the short term,” said Ronald E. Bird, chief economist of the Employment Policy Foundation (search). “In the long term, we are all better off.”

Some economists argue that the current transitions in the American labor force are healthy. Lower production costs overseas have translated into lower prices for consumers back home as well as the opportunity for companies to free up capital to invest in other areas. They add that while lower-skilled workers move overseas, competitive industries will be created at home, and the high rates of productivity by American workers will naturally lead companies to keep their best jobs in the United States.

“Productivity leads to economic gains, which leads to economic expansion, which leads to jobs,” said Chris Horner, an economist for the Competitive Enterprise Institute (search).

Horner told that after a recession like the one experienced in late 2001, productivity tends to bounce back first, as leaner companies produce more with fewer resources. He said job recovery is certain to follow as greater output results in increased demand and the need for more workers.

But not everyone buys the scenario. Union groups and other organizations argue that low wages overseas will continue to drain employment from America and have the effect of slowing demand for high-end products.

“There is a risk here. The numbers are worse than the globalist cheerleaders would care to admit,” said Marcus Courtney, chief economist with WashTech (search), an alliance between high-tech workers and the Communication Workers of America (search) labor union. WashTech members generally come from Seattle, Silicon Valley in California and other regions impacted by the fabled crash of the tech sector in 2000.

In December, the Department of Labor Statistics announced that business sector productivity levels — the amount of work produced by an employee per hour — grew at an annual rate of 8.6 percent in the third quarter of 2003. Combined with 2002, it was the biggest two-year surge since the fiscal years that started in 1949 and lasted to 1951.

“In the long run, productivity is really good news,” for better wages and standard of living for workers, said Barry Bosworth, an economist for the Brookings Institution (search). “But it can create problems in adjustment. There is a short-term cost.”

That short-term cost appears to be the “jobless recovery” — a scenario marked by a slow increase in the number of jobs available as well as a matching slow rise in wages. Democrats are willing to wager that job growth will be President Bush's Achilles heel in November.

The current jobless rate is 5.6 percent, lower than it has been in the last two years, but higher than the annual low of 4 percent in 2000, the lowest point in 31 years.

But the numbers may also be misleading. In 2003, an average 130.1 million people were employed, more than the 129 million in 1999, when the unemployment rate was 4.5 percent. Since 2000, the eligible labor force has increased by 3.9 million workers.

In January, payrolls rose by 112,000, the most in one month since December 2000. Still, Bush took a hit for backing off numbers in his White House economic report that projected 2.6 million new jobs by the end of this year.

Despite the emerging job market, workers say there is little comfort from the decision by employers who have recently downsized to consider outsourcing jobs to companies in other countries. The manufacturing sector started bleeding jobs overseas in the 1980s. Now, white-collar, high-tech sector positions are headed out — primarily to India and China.

“This is really about the fact that these companies are exploiting the huge wage differences between foreign workers and the people in this country,” Courtney said

WashTech commissioned a survey in February in which 56 percent of the 410 technology workers polled, including software designers, engineers, programmers and managers, said outsourcing has resulted in job cuts and lower wages. In the same survey, 25 percent said their company has recently moved work overseas.

But the number of high-tech jobs moved overseas is elusive. Courtney estimates that 600,000 U.S. jobs have moved abroad. Global Insight (search), international economic forecasting and data providers, figure the number is closer to 300,000 white-collar jobs, including less-skilled call center and telecommunication positions. But it warns that the number could swell to 3.3 million by 2015.

On the flip side to outsourcing, many high-skilled American workers are frustrated by the U.S. policy of granting visas to foreign workers to come to the United States to fill high-tech jobs. Under pressure, Congress lowered the cap for H1-B visas (search) in fiscal year 2004 to 65,000 from 195,000 for each of the last three years.

Economists and tech industry officials argue whether the visa system is the result of poor skill sets by U.S. workers, but they do agree that better education and training programs for unemployed technology workers can fill the gaps currently being absorbed by foreign workers.

“The really important thing we have to do is get our education skill levels so high so that we can transition into higher skill level jobs in order to replace those that have been lost,” said Bruce Bartlett, an economist with the National Center for Policy Analysis (search), which is pro-free trade.

Economists say whatever the number, the global movement of jobs is part of the painful adjustment period U.S workers must face until companies here create new jobs here for high-skilled workers — many of whom will have to upgrade their skills to compete — and for displaced lower-skilled workers still on the tail end of the declining manufacturing sector.

Experts say the shift for these displaced Americans will likely be to the burgeoning retail, health and financial service industries as well as an education sector that has the potential for growth.

“This is a less secure world, so a large part of the workforce feels more vulnerable,” said Bosworth. “Ultimately, we will find jobs for these people.”