Sunday, March 16, 2008

New Economy : Skilled Labor Wage Inversion Imminent

I have been giving a lot of thought to where Wages are headed in this "New Economy" of global competition and such. My conclusion: wages for those generally considered "skilled labor" are going to fall, and wages for what has been historically considered "unskilled labor" are going to rise (certainly substantially relative to that skilled labor).

I call this my geographically-bound-wages-theory in a global economy, and the subsequent education-vs-wages "inversion" I see coming. Fact is, if your job CAN be outsourced to a cheaper, lower wage country, it WILL be, and there is nothing you can do to stop it. The only jobs that can not be outsourced to cheap-labor markets are those that require a physical presence right here in the United States.

What does that leave here in the United States not subject to outsourcing? Not much! If you do any work that does not require at least half of your time being spent physically "on location" here, forget it. So, if you happen to fall into nearly any job considered "White Collar", get ready for a rude awakening as you job is shipped overseas. Thanks to high-speed communications (aka, the Internet and telecommunications), any "desk job" type work is instantly subject to relocation abroad. This includes:
  • Information Technology jobs
  • Accounting jobs, including tax preparation
  • Lawyers - unless you are one of the RARE lawyers actually chairing a case in a courtroom
  • Most management positions - trust me, hiring and firing decisions can be made from abroad based purely on underling performance statistics
  • Psychologists
  • Architects
  • Engineers
  • Artists
  • Advertising and marketing
  • Fundraisers
  • Call-Centers and Customer Service
I'm not just making this list up... I have seen news about nearly every type of white-collar position moving overseas, little by little, and the pressure for that movement will only continue as Congress bends to the will of Corporate America.

Very few "skilled worker" or "white collar" jobs will remain physically here in the United States. Sure, some health workers will remain, like surgeons that require immediate on-site access to the patient, but even that is under threat as remote surgery is enabled (this tech already exists!) Nursing: yeah, it seems that would stay here, but don't count on it. I guarantee some enterprising persons or companies will find a way to outsource most longer-term care situations to cheaper geographies eventually, even if if means moving the patient, invalid, elderly, whatever, to foreign shores or South of the border. You wait. It'll happen.

So, what will remain (and remain a decent paying profession)? Essentially, the "blue collar" jobs that require a worker to physically be here (and I do NOT mean manufacturing - since, as we all know, that is going, going, gone!).

Don't believe me? I read recently that in 2005, the average College grad made $51,206/yr (i.e., just under $25/hr.). Now, have you checked the bill from your mechanic lately and compared the hourly rate to what you make? I have seen hourly mechanic rates of $75/hour charged at automotive dealers for service, and I know plenty of people with College degrees that make no where near this amount. And, even if you were to take out over 50% for "shop charges" and "overhead" and so forth, I still know many College-degreed individuals that don't make even close to the remaining figure. The list of people I am comparing to includes quite a few PhD's that just constantly seem to find themselves "overqualified" for positions. I know people that mow lawns for a living or plow snow for a living that make a better hourly rate than people with Masters and PhD level educations. Is this wrong? Not necessarily,... it's just a sign of the times, as jobs that require the work be done HERE have some current demand imbalance that allows them to charge great rates.

How did this happen? We were always told to graduate...go on to College... get advanced degrees... etc. Well, the whole time our government is constantly in the media talking about how we need a better educational system, more people with advanced degrees, and so on... they are (helping Corporate America with) shipping all the jobs that require such degrees to overseas locations.

What is the incentive for ANYONE to get an advanced degree, unless they have some "in" with someone in government or will be one of the few remaining at the top (of the management hierarchy) exploiting those below by stripping the value of their College educations from them daily when they force their US labor force to compete with much cheaper foreign labor? In fact, why even get a College degree? Wages for College-grads are stagnating, to no surprise, for the reasons I'm discussing.

We even offer "retraining" programs for workers... why? Fact is, if retraining of displaced manufacturing workers was successful, we'd have more than enough skilled labor to fill all those Technology jobs our leaders are now pushing for foreigners to fill (I just blogged about the current push to yet again raise the 2008 cap on foreign IT workers via H-1B Visas).

Again, trust me, regardless of the talk coming out of the government with regards to advanced education and retraining workers, the only real government push that is going on is to help large multinational companies expedite the transition from a domestic (and "expensive") workforce to a foreign-sourced labor pool (mainly not residing here, as such local people are "expensive" relative to nearly the entire rest of the world's labor pool. Even H1's will become too expensive, unless they quickly erode the average pay-rate here considerably, but, more likely, they are just a transitional step towards overseas outsourcing quite frequently, which is why they are so desired now).

So, if this wage pressure on the middle-class wasn't enough, and you (the College grad or potential College grad) start thinking you should perhaps take up a profession in plumbing, construction and remodeling, housekeeping, lawn care, automotive repair, or any of a multitude of decent jobs that seem like they'll be "safe" from this globalization push, guess what? Next, you'll face the fact that even those good local jobs that require local talent are under attack by our government, as they push for open borders and allow a flood of (mostly illegal) immigration further put pressure on the labor market in an effort to suppress wage-growth and fill the Corporate coffers.

I can't help thinking how dismal the future for the American worker looks if we don't, as a Country, start doing something to stem the flow of decent paying middle-class jobs out of here. I'm not advocating outright protectionism, but we really need to start making companies that outsource their workers and/or their pollution/environmental-damage, pay some type of tax to level the playing field for the US workers and the companies here that truly care about the long-term health of this country.

One massive problem with the whole overseas outsourcing thing is how the average small business can not achieve the economies of scale to outsource like their larger competitors. This all but ensures that few startups will ever be able to compete long-term against those firms that can - in fact, they'll be lucky to gain a foothold at all, since most any product or service (unique, patented, or not) can be copied (illegally in many cases) and brought in to the US within months of going on the market.

This isn't competition. Either is "dumping", and it's rampant -- I often see products from China at stores where the retail price is less than the cost of the raw materials (not even counting labor). This is all part of the systematic destruction of the American Dream and middle class. Something has to change. And, I am looking forward to anyone (with any power) to stand up and slow this bleeding of American jobs, though I have little hope anyone will be able to take on the entrenched establishment in Washington and actually "win". So, you best start figuring out how YOU are going to ensure some sort of unique value proposition in your own job situation, lest you be next on the "sorry, your job has been outsourced" list.

No comments: