Brad DeLong's Semi-Daily Journal (2004)

"because fifty years from now I want my grandchildren to live in a world in which Indian and Chinese schools teach that Americans did all they could to help the world develop, and not that Americans did all they could to keep the world poor and barefoot as long as possible"

Oh, it's either/or here? No OTHER alternatives? Cute. What about working toward a trade system that RAISES wages so the people in other countries buy things WE make instead of financing their growth entirely through our borrowing?

I'll tell you what - how about you send YOUR job over there to help them out, not mine!

Here is what I'm talking about -- if you try to start a union in China you are put in jail or worse. This is not "free trade," this is sending our jobs and our manufacturing base off to subsistence-wage countries that will not purchase from us, with the profits going toward increased concentration of wealth here instead of to those losing their jobs, and a consequent increase in the political power of those wealthy few.

Two Chinese Labor Leaders Get Prison Terms
By Philip P. Pan
Washington Post Foreign Service
Saturday, May 10, 2003; Page A18

BEIJING, May 9 -- China sentenced two labor leaders who helped organize a series of worker protests in the country's northeastern rust belt last year to prison today despite repeated appeals for their freedom by international labor and human rights groups.

Yao Fuxin, 52, and Xiao Yunliang, 56, were given terms of seven and four years, respectively.

They were detained in March 2002 during demonstrations in the industrial city of Liaoyang that attracted tens of thousands of laid-off workers demanding unpaid wages and the punishment of corrupt officials believed to be profiting from the privatization of state factories.

Brad keeps making the same mistake: for some reason he beleives that when the company located in US and selling its products in US lays off US workers it has something to do with free trade and helping poor Indians and Chinese. By the way, neither is US ally and China might come to blows with US over Taiwan yet. And if it comes to war, their schools will teach that disgusting US scum got what they deserved.

I met Charles Schumer a very long time ago. He was a freshman congressman at an American Enterprise Institute sponsored event...way back when the AEI was something considerably more than a partisan, ideological mouthpiece.

I was impressed with him then and, on balance, I remain impressed. Schumer is no dummy.

Mouthing the long term benefits of free trade is an exercise in triviality. I strongly suspect Schumer both understands the mathematical tautology and would like to see the utopian world society it mythologizes.

I suspect he also understands that, in the absence of draconian protectionist measures (which I do not believe he supports because they will never really work), China and India today and others later will continue to demonstrate that the US has no monopoly on brains and is in a difficult competitive position with respect to the cost of human labor compared with societies starting with a much lower general standard of living than ours where a job paying $40 per month is so much better than the alternative, regardless of working conditions or personal risk.

Unless one believes that in the long run we are not all dead and can cheerfully accept short term disruption in our ability to feed, cloth, shelter provide medical care for and educate our children, there is a very real political problem, with a small "p". In a game with short term winners and losers, it seems unreasonable to expect the losers to continue to congratulate the winners because many of them are "more deserving".

Until the proponents of free trade (of which I am one) acknowledge the existence of this problem and propose ways to mitigate it, we will continue to lurch like some great beast into the slough of despond (to mix literary allusions.)

How about some bright ideas, Brad?

Sam Taylor

To an economist the only metrics are profit, growth and efficiencies. This view fails to ask the most important question, what purpose do our economic institutions serve? Should they not serve us? (And then of course you have to answer the question who is us, but one question at a time.) But the point is if our economic institutions do not serve the interests of individuals then profit, growth and efficiencies are comply meaningless in any analysis that doesn’t include a balance sheet. Of course the interests of individuals are not served in the absence of profit, growth and efficiencies but the problem is that people tend to favor one over the other and which one you favor tends to have a curious relationship to your particular set of circumstances.

But the profit, growth and efficiency metrics are worthless abstracts if the economic institutions abandon real people. Without serving people the profit, growth and efficiency metrics become arbitrary and pointless.

Rick, are Chinese and Indian workers not "real people"? Are the Americans who reap benefits from being able to buy goods more cheaply because they are made more efficiently not "real people"?

Let us, as it were, count the house. Amazed Reader tells Dave he is an idiot for opposing free trade just because he could lose his job to someone who will do it for a renibi less, Steve Carr treasures Chinese and Indian workers as "real people" but hates Americans except those like he thinks he will be, who have a dime left to their name after everyone else gets thrown out of work. See, we can have an A-1 content free food fight.

Get serious guys, if you want to defend free trade do it.

One issue that peeks through the smoke screens is the question of how wide the society we live in is. I would suggest that you have more of an investment in those who live near you than others. If you wish to engage in moral calculus, how ethical is it to beggar your neighbor for cheaper toys while making a stranger slightly better off?

You know, I can't help but think there are some excellent Chinese and Indian economists who could do your job at a fraction of the price, Brad. Your position could probably be outsourced to 4 or more scholars of similiar IQ and ability, who knows, maybe they could just work in their respective countries and do their seminars online. Plus, your kids would thank you because of the new world you would be helping to usher in. Let's get to it, buddy. Do your part, pal.

"Rick, are Chinese and Indian workers not "real people"? Are the Americans who reap benefits from being able to buy goods more cheaply because they are made more efficiently not "real people"?"

In the eyes of those who whine against jobs being "stolen" from "Real Americans"™, I suppose not.

"You know, I can't help but think there are some excellent Chinese and Indian economists who could do your job at a fraction of the price, Brad. Your position could probably be outsourced to 4 or more scholars of similiar IQ and ability"

Diane,

that is a really disgusting bit of ad hominem on your part. Unless and until Brad starts to advocate protectionist measures on behalf of economics professors, I suggest you refrain from poisoning the well by making the sorts of accusations you've just made.

Cheap commodities and the entire population either flipping burgers or out of work. That's the grand vision of the Free Traders.

Okay: fine. Be protectionists if you want. You guys happen to be wrong, as far as I know, but regardless...

How can you defend teaming up with Paul Craig Roberts? Perhaps if Chuck Schumer had written his op-ed with, say, Robert Kuttner, then perhaps we wouldn't be furious. Perhaps we would just say "well, Chuck Schumer's misinformed, or a cynical politician, but that isn't terribly uncommon in these parts."

But he wrote it with Paul Craig Roberts.

Oh, and by the way: trade in factors is equivalent to trade in goods. So what? Well, the U.S. imports about 14% of GDP and exports about 10% of GDP. Can Brad's job be shipped overseas? Perhaps not, since teaching economics, if not researching it, is pretty much nontradable. However, they can bring workers into the U.S. to do it.

As a matter of fact, I think that a fairly large portion of Brad's co-workers ARE foreign. Since skilled labor finds it easier to get into the U.S. than unskilled labor, even though teaching is untradable, I don't think it's a stretch to say that Berkeley professors live with foreign competition too. There are 62 professors of economics at the University of California-Berkeley. Pranab Bardhan, the deified Gerard Debreu, Jan De Vries, Pierre-Olivier Gourinchas, Chang-Tai Hsieh, Aviv Nevo, Yingyi Qian, Shachar Kariv, and Botond Kõszegi are all, unless I'm mistaken, foreign, and possibly others too. That's 15%, higher than the total immigrant ratio as a whole in the U.S. From my personal experience, this strikes me as not at all atypical in American academe.

http://emlab.berkeley.edu/econ/facpages.shtml

Of course, Brad still has a job, like most Americans, but saying he, unlike the masses, is insulated from the international world, doesn't ring true.

Abiola, let me see. An argument by the free traders is that it is OK if some in a society are made to suffer intensely, so that others may benefit by having more stuff for less money. Without even asking if this is true, why is it then really disgusting to point out that the folks who think this is OK, are not ready to sacrafice themselves or their families well being for the greater good?

"Excuse me, are you the same Abiola Lapite that just sent Nigerian scam letter to me?"

How nice of you. I suppose we darkies all look and sound exactly the same to you, don't we?

"Without even asking if this is true, why is it then really disgusting to point out that the folks who think this is OK, are not ready to sacrafice themselves or their families well being for the greater good?"

Because it's a lie? As Julian Elson demonstrated, Brad is *not* isolated from international competition, and in any case he's never argued for protectionist measures on behalf of others in his profession. Go ahead and find me one place where he has, I dare you.

I don't like these free-trade/protectionist spats that seem to be waged in a complete vacuum. Especially when each side accuses the other of being an Evildoer.

The effects of outsourcing and free trade would look very different to the average US worker in the current US economy if there had been effective fiscal stimulus. Then there would be a larger growth in domestic demand, rather than a zero sum game of cost-cutting led profit maximization. The increased trade in services would not seem to be so threatening to US workers

Regarding workers who lose jobs to inefficient government subsidized imports from China (or wherever): Well, US citizen X loses their job so US citizen Y can consume an import at below cost, because country Z wants to grow an export industry, or get dollars, regardless of whether it makes sense. I see no fundamental economic justice in that. There is inefficiency in country Z, Y gets stuff at less than real marginal cost, and X takes a really big hit. Why shouldn't X complain about this? You can't even claim it is a more efficient solution in real terms. So why shouldn't X ask for some reimbursement from Y. Why should we say everything is peachy because Y benefits from country Z games?

So, the battle between Good and Evil is interesting and dramatic. But unless the issue is put in context, I don't see how much light can be shed on feasible and desirable policy options.

And I tend to be an advocate of free trade.

I do agree that writing something with Roberts is outrageous. Even if Schumer was doing in the name of some kind of ideological bipartisonship, there surely could have been better partners from across the isle.

Diane,

that is a really disgusting bit of ad hominem on your part. Unless and until Brad starts to advocate protectionist measures on behalf of economics professors, I suggest you refrain from poisoning the well by making the sorts of accusations you've just made.

Posted by Abiola Lapite at January 30, 2004 06:54 PM

I agree 100% with Diane, it really would be pretty easy for Brad's institution to set up online classes with professors in low wage countries.

Let's see, professor X in low wage country makes $5000 dollars a year, Berkeley hires him/her, fires Brad, lowers their tuition by X% and American higher education consumers reap the benefits. Sounds like a GREAT plan to me. Until I see economic professors advocating this metric, I'll believe their free trade talk is just shit.

I can't side with the protectionists in this thread, but I would like to know from the free-traders whether we might have had a 200-year anomaly wherein "creative destruction" arighted itself quickly because capitalist growth was happening in only a few countries, but now that the whole globe's involved, labor arbitrage might outstrip the rate of innovation of new goods and services, further polarizing the distribution of income. This whole capitalist dream is based on the "infinite wants" of humankind, but in fact your wants are not nearly infinite, there being only so many hours in the day, and so many days in your life.

We could well be headed into a new political situation wherein the bizarre Paul Craig Roberts is the least ugly of the new-minted populists. We'd better be ready, well beyond simple put-downs of protectionist rantings.

Brad DeLong writes:

> But how does one put the fear of God (or at least of the
> Future) into the senior Democratic senator from New
> York?

Probably the same way that Mayor Bloomberg has put the fear of God into run-of-the-mill mayoral candidates in New York City. If the GOP can realistically threaten to get a Democrat to run as a "moderate free-trading Republican" against him in the next election, maybe Schumer's behavior will change.

I think there are few politicians who can't be caused to squirm at least a bit if faced with strong and solidly backed opposition. George W. Bush might just be one of them, though. Or maybe even he'll have to squirm. The latest vote share quotes from the Iowa Elections Market have him up by less than 1%. Of course, it is pretty early. I'm also pretty sure that Karl Rove would not underestimate the threat posed by a Kerry/Edwards ticket. (OK: so when was the last time we had a VP candidate who could flat out-talk everybody else on either ticket?)

Steve C, what a great idea! You are such a genius, that you will never have to worry about being outsourced.

By the way can you point out the lawsthat prevents Brad from being replaced by low wage Indian professors? Cause I am sure DJ and that bigoted idiot Leopold would want their jobs protected by a law just like the one that protects Brad's job from the Indian hordes.

>I agree 100% with Diane, it really would be pretty easy for Brad's
>institution to set up online classes with professors in low wage
>countries.
>Let's see, professor X in low wage country makes $5000 dollars a year,
>Berkeley hires him/her, fires Brad, lowers their tuition by X% and
>American higher education consumers reap the benefits. Sounds like a
>GREAT plan to me.

Now that's a really good idea. Let's face it people. It doesn't take a genius to teach undergraduate economics. Graduate economics - yeah maybe slightly more intelligence, but much of undergraduate economics can be taught by cheap labor like Indians - even ones living in India through online classes. Furthermore those Indians would not only be a lot cheaper but probably more willing to help students. There are a lot of snooty profs at big name universities who don't like helping students at all. A lot of them only have at most 4 official office hours a week to help students (has anyone else wondered why they can't have more official office hours to help their 100+ students?). Why we put up with those jerks is utterly beyond me. So instead of having a team of high priced economists we can have a bunch of cheap economists in India, and we can hire a mere, say, 2 or 3 high priced economists in the US who would supervise the Indian economists. This could drastically cut tuition, make the teachers much
more helpful to the students (no more snooty profs who won't help their students any more!), and the students would get a better education at a lower price. Who could be against that? I'll send my idea to the Governator to see what he thinks about it. This is a great idea to lower the California deficit.

Once again, remember competition:

If American firms don't employ engineers in India, then someone else will, for example, European companies, and if not that, Indian companies, or maybe maybe even Chinese companies. And when that happens, then American companies would have to shed many other jobs as well, because they would be going out of business.

Perhaps it is time that America viewed the software sector as Luxembourg viewed steel business once: Phase it out, and develop other, even better business to replace it.

Catherine Mann may be a good economist, but judging from Postrel's Times column, Mann is apparently ignorant of the existence of web job search facilities like Monster, Dice, and CareerBuilder.

" And she suggests that information technology itself may help with job searches, crossing the old boundaries of classified ads."

Gosh! You think! And someday, man will fly!

Mann also thinks IT workers are stupid, or else doesn't understand how an IT job search is done.

Postrel writes: "While their skills may be in demand, Dr. Mann explains, those jobs may be in new industries - a hospital, for instance, rather than at I.B.M. - and therefore be harder to find."

Does Mann really think an IT worker would be so stupid as to be unable to find an IT job because it's at a hospital, but would only look for work at "IT" companies like IBM?

You go to Monster. You set up a search, looking for employers who are looking for the skills you already have. If a hospital needs a Java programmer, it'll be there. If a bank needs a Java programmer, it'll be there.

Oh, that's right. Dr. Mann doesn't know about Monster.com. She doesn't think IT people are stupid, she's just woefully ignorant and out of touch.

What I want to know, is why a person with *no clue* about the IT job market is opining about the IT job market?

I wish to reiterate what I just wrote above, and acknowledge that it's much in agreement with what Sam Taylor wrote above, except for the fact that Schumer, who's been a good man, may have finally gone off his nut, as sometimes happens.

As for many of the other comments here, I think they illustrate that we may be embarking into a long-term, enormously dangerous political situation in this country. The fact that the Bushies appear to have screwed up short-term policy does not help one bit. I think we all ought to take a deep breath.

Strawman wrote:
"Steve C, what a great idea! You are such a genius, that you will never have to worry about being outsourced.
By the way can you point out the lawsthat prevents Brad from being replaced by low wage Indian professors? Cause I am sure DJ and that bigoted idiot Leopold would want their jobs protected by a law just like the one that protects Brad's job from the Indian hordes."

I don't think the sarcasm is necessary. I stand by my post, I think it would be a GREAT idea. Let some of these academic economists, protected by tenure, become exposed to the global economy, see how much they like it.

Steve As Julian and others have asked you here. -can you identify a single piece of evidence to support the claim that economists are not "exposed to the global economy"? And if you can't why keep repeating this ridiculous assertion over and over again.

Steve, let's make a deal. Tomorrow morning, why don't you pick up the phone and call the ten best graduate programs in Econ (and Chemistry and Science and Math and Engineering) and ask them what percentage of their Ph.D. students come from the United States (hint its not a large percentage).

After refreshing yourself with a cool glass of Chinese green tea, think about what that implies for the pool of new faculty that universities hire every year. Undertake a futile search for the laws that ban Ph.D's from other countries from coming here. After you fail to find such laws, ponder about what the addition of those Ph.D's does for the number of American faculty entering Economics, Science and Engineering Dep'ts.

Finally, after a nice dinner at the local Indian restaurant try to find the laws that restrict the granting of tenure to U.S. faculty alone. After failing miserably at that, you can tell us what you think about global competition for tenured academics.

Suppose the government of China decides to arrest and imprison a large number of scientists and engineers whose work product can be easily exported. As prison labor they would cost almost nothing. Should the US government buy their work product? Should private industry? I think most people would answer “no.” There is precedent for such a thing, after all Stalin had millions of innocent people arrested and sent to labor camps to work in mines, timber and digging canals. That’s one of the moral dimensions of unfettered free trade. Another problem is national security. If the wages of engineers and scientists are driven low enough then people will not choose these careers and eventually most this kind of work will be done elsewhere. Work will shift into areas that cannot be so easily exported. Such a situation would have dire consequences for national security-- an externality not captured conventional economic reasoning. I’m much more worried about these things than what the Chinese might think of us in 50 years. We are not one world, we have national entities that have opposing interests, and it is the responsibility of our government to promote our interests over the interests of other countries. We are not responsible for the prosperity of India and China, that is their affair.

Shorter Zarkov:

"My job must be protected at all costs or the terrorists will have won"

Shorter Dan

"I make less sense in a sentence than I do in a paragraph."

strawman:
I guess you missed the testimony given to congress by the CS professor from UC Davis(can't remember his name right now}. The prof showed why there are so few American PHD students(hint for you: a PHD gives very little extra increase in pay for Americans). I'm sure if more Americans decided they wanted to pursue a PHD there would be more Americans in these programs. You still haven't answered my question. How is Mr. DeLong, tenured professor NOT protected from free trade. Please just answer that question.

Earth to SteveC: One has to beat out scholars from all over the world to get tenure at Berkeley. Where's the protection there? SO unless you can show that tenured academics oppose global competition before they get tenure and then support competition after you have not managed to prove anything other than your own limited analytical powers.

So I ask you again, why keep making bold claims that are so patently false?

Dan, me thinks the shorter format is too long for you.

"As Julian and others have asked you here. -can you identify a single piece of evidence to support the claim that economists are not "exposed to the global economy"? And if you can't why keep repeating this ridiculous assertion over and over again."

Actually we were talking about a single tenured economist, so let us not generalize and yes, he is not exposed to the global economy. As to the rest, what the heck, they brewed the Kool Aid and they drunk it. Kind of like Scholes and Merton.

WRT new faculty hires at US Universities, obviously you guys are not very familiar with the academic underworld and hiring practices therein. Suffice it to say that it can make Wal-Mart look generous (consult your local community college and immigration lawyer). Getting a tenure track faculty position at XYZ U, is a guaranteed track to a permanent resident visa. Question: What does this do for wages?

And yes, I still want to know why I should care more about someone I do not know in Wherever, Pakistan than my neighbor, especially if my neighbor sends his kid to my school of economics?

Eli, I am still waiting for you to demosntrate exactly how Prof. DeLong got tenure without facing any global competition. Heck even Prof. DeLong might like to know that himself. Some of us in the audience may like to follow this magical `competition-free` path to lifetime job security as well. Sounds like a piece of cake. Heck even Dan may be able to give it a shot as long as `witty comebacks' is not a category of exam question.

If your code is as repetitive as your wit Dan, I suspect that trained seals may take over your job instead of highly educated, intelligent Indian programmers.

Our politicians are supposed to take care of US. That's what we elect them to do. We're a nation. They are our leaders.

India and China have leaders who are suppose dto watch out for their interests.

And our corporations are supposed to be working for OUR benefit - that's why we charter them.

Part of watching out for us citizens should be to protect our jobs AND promote wage growth in other countries so they can buy from us. THAT means using TARRIFS and other measures to block imports if the workers are not paid enough to make the importing of the goods a fair deal. If they ARE paid enough, they can buy stuff from us. Mutual growth rather than a "race to the bottom." DUH!

SteveC: The professor who gave testimony to Congress was Norm Matloff. He also gave testimony to the California legislature and posed the question: Why does the UC system continue to enroll large numbers of CS students? According to Matloff even in 1999 about half the CS graduates ended up in low paying service center jobs. Why spend the taxpayers’ money generating an ever-greater surplus of IT workers? The legislature ignored him, and we continue the folly.

It’s true, professors of economics (at least in theory) face global competition for tenured positions. But once they achieve tenure, they’re protected from further competition. If we are to have a truly competitive system, then why have tenure? Why protection for professors but not for industry and government workers? It seems no one is willing to address this question.

Strawman is clearly right that Brad faced international competition in getting a tenured job at Berkeley. Berkeley can and does hire economists and professors from all over the world. The fact that Berkeley imports the actual foreign worker versus just importing the product of the foreign worker's labor -- as, say, a company that outsources programming work does -- makes no difference in terms of whether there's free trade. To say nothing of the fact that Brad also competes against foreign workers all the time with his written work. When Brad publishes his history of the 20th century, he will be competing against economists from all over the place. There are no tariffs on the work of foreign authors. So it's wrong to say that he's insulated from the global marketplace.

The argument that we are more responsible for our neighbors than for people in China or India seems reasonable to me. But the question is how that responsibility should be discharged. Limiting free trade does two things: first, it allows inefficient businesses to survive (jml's argument that foreign firms are producing "below cost" is without foundation), and reduces the total size of the global economic pie; second, it forces some American workers to pay more to subsidize the jobs of others. This mockery of the idea that "cheap commodities" matter is baffling to me, since I don't see computer programmers happily choosing to pay more for their haircuts and food and beer, even though if they did American barbers and bartenders would live a lot better. A tariff is a tax that everyone has to pay. It is a regressive tax, and it privileges certain jobs over others. If you are a barber, you get no help from the advocates of tariffs. Not only that, tariff advocates want you to pay to help keep the steelworker at work. The utilitarian logic here escapes me.

If we want to help the "victims" of free trade, let's be upfront about it, either by guaranteeing people a year's salary if they lose their jobs to foreign competition, or paying for their relocation, etc. But let's not pretend that keeping them working at a job that others can do just as well for significantly less is making the economy stronger. In all seriousness, we could have put massive taxes on automobiles in the early 20th century and thereby kept the buggy-whip makers in business. The U.S. would not have been better off had we done so.

Zarkov, you know why we have tenure for professors. It's so they can do research and produce work that may be politically challenging or inflammatory and not have to worry about getting fired. The assumption has been that if professors, particularly at state institutions, have to worry about what some state legislator is going to think about their most recent article, society will lose because the only stuff that gets written is stuff that's congenial to those in power.

Now, it may be that this no longer makes sense, although I think the hubbub in Georgia over evolution suggests that education remains a remarkably politicized realm. But pretending that tenure for professors is about insulating professors from economic competition is simply misleading.

"Globalization of IT hardware production is a model for the global evolution of IT services and software."

This is from the Catherine Mann article and it is baloney. I have worked in computer companies for 18 years and assuming equivalence between software and hardware development processes merely shows profound ignorance of the industry. Projections from the outsourcing of hardware manufacture just do not apply. This is not because of any characteristic of outsourcing. It's the difference fundamental to developing/manufacturing software and hardware.

There are so many issues that are being ignored here that I don't know where to begin. For one thing, if you want to know what the real issues are, read slashdot. Since you econ types probably won't do that, I'm dumping an informative post from slashdot, on outsourcing...
http://ask.slashdot.org/comments.pl?sid=89880&cid=7765227

Competition for the position of professor of economics is not like job transfer to India. It is like Indians coming here _not on H1B_. Nobody has a problem with someone from India or China going to US school and than getting the job here at US rates. It is 15-20% of US rate that people in India are getting paid that is a killer.

Ok, so today you seal your nation from buying Indian services to create products from US companies. This drives down wages in India further, allowing cash-strapped Indian companies to buy the services of their own citizens. This leads to even cheaper Indian products (eg shrink-wrapped software).

Now you have a new problem - the Indian products compete even more favourably pricewise with US products. So you seal your nation from buying Indian shrink-wrapped products to protect US companies. Meanwhile you insulate yourself from the rest of world academically to prevent US knowledge from permeating to the rest of the world. why teach those lean-hungry-dark men how to compete with you?

Now you have a new problem - the stuff the US companies used to export to the rest of the world are too expensive, and the rest of the world starts buying Indian. Exports and overseas investment are down, taxes are ridiculous, and you have tons of products created by employees with guaranteed jobs, but nowhere to sell them. Welcome to the Indian protectionist economy circa 1970.

taj:

No, it is not quite like that. It is not Indian companies that produce great software and compete with MSFT, IBM, HWP. It is US companies that lay off their engineers here and hire engineers in India at 15-20% of US rates. Those engineers in India may not be much worse than what we have in US but they sure aren't any better - those who are really smart come to Europe and US and work at the Western rates. In fact, India produces software engineers to a large extent to fulfill the needs of the Western companies rather than for the domestic market.

Steve Carr said,

Strawman is right that Brad faced international competition in getting a tenured job at Berkeley.

This thread is supposed to be discussing international and domestic labor markets in a global capitalist economy. UC at Berkeley is not a private for profit firm. Federal and state governments in this country and other governments abroad determine compensation levels and the number of positions for university faculty. So called private schools and private endowments do not begin to affect the market for college faculty as does public policy and public subsidy.

Brad may compete against an international labor pool but he does not compete in a for profit industry. The government decides what Brad De Long is worth not the market. If the government gets it wrong no one will ever know it.

As I mentioned in my comment above I am of average intelligence and I'll add without a college education. However, I am not nearly as myopic as all the intellectuals at this site who think that the trials and tribulations of publically employed elites belong in a discussion of the threat to the US labor market posed by globalisation.

CMike, if you really think that Indian children stolen away from their schools and mothers are competing with Americans for software and call centre jobs, you must have a very low opinion of the skills required to be employed in those industries.

It is in manufacturing that child labour is used, but until skilled labour outsourcing began, I found the concern about issues like this from the middle class to be muted at best. (Perhaps you personally were concerned, of course. If you were, and were boycotting imported goods, my apologies). Meanwhile, software engineers in India are rarely earning less than the US minimum wage, which was your other straw man.

Leopold,

One of the ways in which MSFT, HP and IBM are able to remain cost-competitive with firms from the rest of the world is by accessing cheap labour from India. I was trying to say this, but I guess I don't write too well.

As an Indian programmer who spent almost a decade in Australia (I'm in India at the moment), I agree with you about Indian engineers not being necessarily "better". But the cost savings are important. If the US cuts itself off from this labour pool, soon your products will be facing competition from firms (Indian and others) who have not cut themselves off in this way.

All the talk about US firms remaining competitive is of little solace to you I guess, as you are squarely on the receiving end of all this. I'm sorry I can't offer you solutions, but all I'm saying is that protectionism is not the solution. We've been through that for more than a generation in this country and there were very few upsides.

A few numbers first:

I. How many IT jobs were lost and found?

BLS Unemployment numbers and rates (http://data.bls.gov/servlet/SurveyOutputServlet, LNU03032237 & LNU04032237):

Year Num Unemployed Rate
2000 124K 3.4%
2001 190K 4.9%
2002 253K 6.9%
2003 246K 6.8%

So, 122K jobs are gone between 2000 and 2002. 10K (0.1%) have been added in 2003.

II. Where did they go?

There is no precise statistics for outsourced jobs (guess why?), but Morgan Stanley says (http://www.morganstanley.com/GEFdata/digests/latest-digest.html of Jan, 30): [...] this hiring shortfall in the US has been matched by surging employment growth in India’s IT export industry; Indian employment in IT-enabled services (ITES) outsourcing (of which about 35% is in call centers) jumped by 54,000 to 160,000 in the year ended in March. Our colleague, Morgan Stanley’s India Economist Chetan Ahya, believes that by March of this year, India will host 75,000 more ITES jobs.

These numbers show that IT industry between March 2002 and March 2004 hired back almost the same number of people it lost between 2000 and 2002. However it hired them in India. So I hope Brad will stop telling us that outsourcing is not related to the current IT unemployment rate.

As for the future, India has around 1 million new college grads every year - no pricing pressure. Conclusion: if you have a job in US IT industry you will lose it. And when you lose it, you will not find a new one. Go drive a bus or something.

taj writes: I'm sorry I can't offer you solutions, but all I'm saying is that protectionism is not the solution.

I am sorry for the people - those 100K engineers that lost their jobs in 2000-2003 and will not regain them. I am also sorry to see yet another area of US competence destroyed. I am asking myself if a higher ROI number of IBM or HWP is worth it. Consider a guy at Enron responsible for ordering the paper clips. In the end, is it really important that he saved $1000 by refusing to order more when people asked for them?

Leopold:
"In the end, is it really important that he saved $1000 by refusing to order more when people asked for them?"

I'm sorry about all that stuff too, I don't live in a vacuum (rich vs poor debates haven't suddenly become moot in India). Still, how will a protectionist system solve this? The only evidence I have at hand is that since India opened its economic borders, the number of people living below the UN poverty line has halved, partially due to foreign investment.

Very nice site. Keep up the good work.

カジノ

Steve Carr,

If you had read what I said you would notice that I did acknowledge that the debate needs to include a discussion on who “we” are. Yes Indians and Chinese are people, and as such they need to compete in the global market. I would like to see them develop their own products and offer them as competition to products in our market then we would realize the true goal of globalization. The “competition” is all in labor right now it seems. To call outsourcing “globalization” is a bit of misnomer, what we are calling globalization is little more then latter day colonialism. When the Indians and Chinese develop an operating system to compete with Windows or start shipping autos to the US, or allowing labor to organize get back to me.

I would also ask the question, what is the point of US sovereignty? Is the US simply a political framework to allow corporations to operate more efficiently? And finally when we outsource we ship more then a job overseas, we ship investment in US companies, tax base, and expertise. As more and more entry level jobs in IT go to other countries the higher skill jobs that we are allegedly creating we not have anyone experienced enough to do those jobs since right now American kids are avoiding IT like the plague because they have correctly figured out that there will be no job for them in that field. Kids who graduating right now will not find an entry level job to start their careers so thy will have to look for work in something else. Then when all these “higher skilled “ jobs come on line we will have to hire Indians and Chinese to do them because there will be no Americans with the correct skill set.

I not anti-globalization nor am I “protectionist”, I do think we need to stop assuming that aggressively pushing either agenda will solve all the problems and right the wrongs.

Not the best tone that I have seen on one of these threads.

As educational institutions continue better integrate web-based course applications like WebCT and better video compression technologies (H.264?) provide more flexible and higher quality interactive distance learning, it will be interesting to see what share of teaching jobs become portable. Of course teaching is only part of the job at a research university.

Remember, folks: It is high productivity plus military strength. That's the combination that makes the world order.

And productivity level is key.

There was a time when each and every Mongol man was shepherd and warrior combined, with levels of productivity like hundreds of sheep per capita and three horses for each warrior on battle ground. In those days, nobody could stand in front of them.

That was around the years 1000 to 1400 and about the same time, seeds of new knowledge were being planted in some place called Oxford, knowledge that would ultimately bring about something that could pack the power of eight hundred of those Mongol horses in less than one eighth of a cubic meter: The internal combustion engine.

And that was the end of the shepherd - warrior combination.

And then came electricity.

Keep an eye on what happened to productivity meanwhile.

Before productivity went high enough, it was inconceivable that somebody would be paid 70 grand a year to type up funny little things called a "code".

It now looks inconceivable to have someone type up those funny little things called a "code" for only 10 grands a year, but it is happening and, once again, productivity is making it possible.

And it is again productivity that makes OSS possible -- these guys don't even care about that 10 grand. These guys are a funny bunch. They don't seem to give a hoot to profits, for example.

And nanotech and biotech are coming up and people are getting old and...

I wonder if the science of economics would need to be invented.

Profits?

What is "profit"?

"I got the Nigerian scam letter signed by Abiola Lapite. Was it you or not? Sure seems like it."

"Leopold", you are a liar and a slanderer. I dare you to reveal your identity show us all just how big your balls are. If you think you can get away with uttering any falsehood you please on the web, you are severely mistaken.

Camille, the post from slashdot you linked to is, in fact, informative about outsourcing. It's especially informative because the writer -- a project manager dealing with coders abroad -- argues that in a few years it's going to become clear that 90% of offshoring projects don't actually save companies money -- which means that companies are going to stop doing it. Even more interesting, the writer says that right now "Cost is not that much better" -- which goes against this idea that the Indian cost advantage is insuperable. And he makes the point that everyone seems to simply skip over: "Quite soon, firms will try to up the prices and then you will lose the benefit in terms of cost." So how does this article support your thesis that we're on a permanent downward spiral.

The protectionists on this thread seem to assume that Indian programmers will accept 10-20% of American wages forever. But there is no reason to believe this. In every country we know of where successful development has occurred, wages have risen steadily -- in line with productivity -- as the country has grown richer. Look at Japan in the 1950s or Korea in the 1960s. These countries were sources of cheap labor. Today, Japan's labor costs are higher than the U.S.', and Korea's workers earn more than most European workers. Indian programmers are not going to keep accepting penny-ante wages if their work is worth significantly more than that to corporations.

Leopold, you're matching apples and oranges stats. The U.S. is not the only country where corporations are outsourcing work to India, so looking at the increase in Indian jobs and saying that's where the U.S. jobs went is preposterous. That's especially the case because a sizeable chunk of those jobs -- and remember that the MS numbers are estimates -- are, as you say, call-center jobs. Are you really saying that the U.S. should be putting in place tariffs to hold onto $8.50-an-hour call-center jobs? In any case, by your own stats the U.S. lost 120K IT jobs between 2000 and 2003 -- 40,000 jobs a year, in the wake of the biggest information-technology bubble in history. That 120K jobs includes all the webmasters who worked for Internet companies, all the coders who were working to set up back-office operations for Net companies, all the people who worked for telecom firms that were playing with free billions that investors had given them. Do you really think India is responsible for the lion's share of those losses?

taj:

"It is in manufacturing that child labour is used, but until skilled labour outsourcing began, I found the concern about issues like this from the middle class to be muted at best. (Perhaps you personally were concerned, of course. If you were, and were boycotting imported goods, my apologies). Meanwhile, software engineers in India are rarely earning less than the US minimum wage, which was your other straw man."

Taj, concern about child labor has been publicy noticeable in the US, albeit cheifly from Evul PC Leftists.

Concern about manufacturing offshoring has been very, very noticeable for the past 30 years to any American who lived anywhere near any manufacturing region of the US (I was born and have lived in the greater Detroit metro area). The comments that you may be encountering in the US media about how there was little of no concern about this while blue-collar jobs were being lost are simply false history.

It's similar to David Brooks (ex. Wall Street Journal, Weekly Standard) expressing shock at people criticizing his president.

A few comments about economics professors and foreign competition:

1) The comparison of the percentage of immigrants in the ranks of professors is looking at the most relevant statistics of a decade or two (or three) back. What really frightens people, IMHO, is that the jobs themselves are going overseas, where even a decent standard of living is much cheaper.

2) This is illustrated by the main example of that project manager written up in the latest issue of Wired magazine. She has a degree in engineering, and 10 years of experience. She is now a project manager. She earns $US 11,000/year, which is around minimum wage for a full-time US worker. Asusming that her husband makes the same salary, their houshold income would be $US 22,000/year. However, their standard of living sounds much, much better than it would be for a couple in the US earning the same amount. A nice apartment in a nice neighborhood and a full-time babysitter would not be possible in the US, IMHO. Given this set of circumstances, it seems likely that any job which can be offshored, will be offshored, due to tremendous cost-savings.

3) Anybody who wants to use academia as an example should type in 'www.invisibleadjunct.com' into their browser, read some posts and follow some links. Academia is now built around a deliberate 'use and discard' system for graduate students and junior faculty.

Zarkov writes:
*************
It’s true, professors of economics (at least in theory) face global competition for tenured positions. But once they achieve tenure, they’re protected from further competition. If we are to have a truly competitive system, then why have tenure? Why protection for professors but not for industry and government workers?
***************

Surely, Zarkov, you can distinguish between job security in the form of lifetime employment offered VOLUNTARILY by an employer to an individual who has distinguished themselves amidst fierce competition both domestic and abroad and job security in the form of government MANDATED laws that prevent companies from hiring someone else who can do you job better for cheaper, right? Or maybe that is too much to ask for.

If you are any good perhaps you should ask your company to offer you tenure instead of running crying to the government like a six year old running to mommy asking to be saved from the bogeyman.

And Leopold, I still have not seen you apologize to Abiola for your despicable slur. Abiola's political views and opinions differ from the norm in this blog (and from mine) but I don't recall anyone insulting him in such an ugly way.

Barry, you are probably right, I don't spend as much time reading US media as I possibly should (until the Internet I had little access to it besides MTV and the like). Still, US consumers are voting with their dollars; from what I gather there seems to be no noticeable groundswell of movement away from imported toward US manufactured goods.

Strawman and Carr: If a private university (or any other private company) wants to offer lifetime employment, that’s their business provided they do it without government money. But a state university system such as the UC is a different story. Let’s compare a tenured physicist who works on the UCB campus with another physicist just up the hill at the Lawrence Berkeley Laboratory. They both might do similar work and publish it. In fact they might even work together on a joint project. They both work for the Regents of the University of California and both got their jobs in a competitive market. Yet the LBL physicist has no job security at all unlike his campus counterpart. And guess what’s happening at LBL? According to one person I spoke with the other day, the staff is being replaced with Chinese post docs who will work very cheaply because they want a green card. Why do the campus academics deserve job protection over virtually everyone else-- at the taxpayers’ expense? There is nothing voluntary for the taxpayer here; he is forced to pay higher faculty salaries to provide job protection because of a legacy system. Private universities too rely on taxpayer money for their operations. Higher faculty costs because of tenure ultimately means more taxpayer money to help support the private university.

As for the argument that we need tenure because then the faculty can then express themselves without fear of reprisal, I say that is an old and weak argument. What makes the inflammatory political opinions of the campus physicist more valuable to the taxpayer than the LBL physicist, or any other government or private sector worker? Moreover tenure really doesn’t seem to help where we really need it. For example Wallace Smith tenured professor at the Haas School of business at UCB was fired after he blew the whistle on the financial improprieties being committed at Haas. Tenure or not, Smith broke the code of Omerta, and campus officials pressured Smith to resign or face “unpleasant consequences.” So here is a case where tenure should have helped Smith protect the taxpayers, but it didn’t. The following is off point but shows something else is rotten at Haas. I know of a graduate student who had his thesis work plagiarized by this faculty advisor. The officials at Haas joined ranks against the graduate student, but made the mistake of putting their lies in writing. So they had to settle or face the consequences of a lawsuit they surely would have lost.

Gee Zarkov, did you ever stop to think about what would happen to the quality of the education offered by Berkeley if they did not offer tenure to their accomplished faculty but Stanford, Haarvard, Princeton, MIT, CalTech and Chicago did? That's what the California taxpayer deserves, an education by the rejects of all other academic departments around the country? Wow!

The implicit equation of state university professor's salary with charity is also amusing. The professors at Berkeley are paid a salary by the California taxpayer for a service they provide. They are not being given that money by the taxpayers of California out of the goodness of their hearts. Lower that salary (either monetarily or by reducing job security) and the profs are gone and you are left with worse faculty. The UC system (which I am not a part of by the way) VOLUNTARILY provides job security to attract the best faculty they can. They could also do this presumably by not offering tenure and increasing wages 10 fold but they have chosen to do it the other way VOLUNTARILY. Why voluntary activities continue to be conflated with MANDATED job security remains a complete mystery to me.

Zarkov,

The arguments you raise against the tenure system are certainly worth taking seriously (and in fact I share your criticisms to a great extent), but I must say that I haven't seen Brad defend the current state of affairs as sacrosanct anywhere. As such, I don't see how anyone can justify accusing him of hypocrisy in his defense of free-trade.

It is entirely possible to be the beneficiary of a setup while criticizing it, and there's nothing hypocritical about doing so. For instance, would a judge who had benefited from sexist and racist laws all his life be somehow hypocritical for striking them down (not that I'm saying tenure is equivalent to either of those things)?

Contrariwise, it is possible for one to be harmed by a trend even as one advocates on its behalf: like many of those on here raging against outsourcing, I too am in the IT industry, and I too have felt the effects of the downturn in the IT jobmarket, yet here I am defending a trend that has had negative professional consequences in my own life. There is no necessary connection between defending free-trade and having a safe, cushy job, and those who rush to accuse defenders of free-trade of "hypocrisy" are either unable or unwilling to make the distinction between what is good for them as individuals, and what is good for the country as a whole.

Barry, I don't understand the static picture of living standards you paint. Right now, $22K provides a reasonable middle-class standard of living (we'll say for the sake of argument) in India. But there has been relatively little foreign investment in India and so not all that many good jobs. Again for the sake of argument, let's say that investment in India increases and more capital moves there, competing for labor. That will raise wages, which in turn will increase demand for goods. Living standards will rise but so too will the cost of living, so that experienced, skilled workers will not longer be satisfied with $22K a year. This is why I don't understand the "race to the bottom" narrative of globalization. What evidence is there -- empirical or theoretical -- that when investment rises in a country, its standard of living decreases or even stands still?

"Camille, the post from slashdot you linked to is, in fact, informative about outsourcing. It's especially informative because the writer -- a project manager dealing with coders abroad -- argues that in a few years it's going to become clear that 90% of offshoring projects don't actually save companies money -- So how does this article support your thesis that we're on a permanent downward spiral."

My views of the consequences of outsourcing the software industry is based on almost two decades of experience in the industry and I haven't summed it up adequately. This thread is exploding so fast I'm not sure I'll be able to before thread length becomes unmanageable.

So, let me try, in just a few words.

Software is not a product like hardware. It is more like a habitat. (Bear with me!) This is a reflection of its dynamic complexity. Chip design is complex, yes, but for every chip design that goes to fab, there are probably millions of applications (which require maintainence and even re-design after release). I wouldn't be surprised if the ratio of bugs discovered in the field for software vs hardware is at least a million to one. Software requires a depth & breadth of intellectual capital which hardware does not, due to the more concentrated complexity of hardware.

Software is hard to develop successfully even in one place, one culture. I wouldn't be surprised if the failure rate for major projects is one in four. The simple projects train engineers and managers for the complex ones. There is no escaping this. If you outsource the 'low-level' software functions to another country, you outsource your training bed. You simply cannot 'move up the value chain' or whatever you guys say. The people who move up must have deep experience in the base. This is due to the dynamic complexity of software, it is not related in any way to trade.

Outsourcing software does not free up intellectual capital for other purposes, it outsources a chunk of the software habitat, and intellectual capital develops within that habitat. That is what is going to India. The outsourcing companies in India are tomorrow's software exporters & system designers. They will have the skills because we have given them the habitat.

One final point. The huge push towards improving productivity in the software field comes from one thing: the high cost of labor. Drag down that cost and you remove the incentive for innovation and productivity growth. So one consequence I see for outsourcing the industry to India is a decline in productivity growth and innovation. This is not due to any inferiority in the Indian software industry but simply to the cost incentives.

"The protectionists on this thread seem to assume that Indian programmers will accept 10-20% of American wages forever. But there is no reason to believe this."

Then CHinese programmers will.

Free trade in a world with hundreds of millions of unemployed is a prescription for disaster. It's basic supply and demand. It HAS TO lead to subsistence wages for most workers. This should be regulated and managed to bring standards up, not down.

"Why do the campus academics deserve job protection over virtually everyone else-- at the taxpayers’ expense?"

Perhaps because it is good PUBLIC POLICY to promote good paying jobs and good benefits in America? It should not be at the expense of anyone else - others should also have good jobs with good benefits.

Strawman: You have not provided evidence to link the quality of education to faculty salaries or tenure under current market conditions where we have a tremendous pool of foreign labor available ready, willing and able to substitute for current staff. The university can still have high standards (even higher) for its faculty. What makes you think we can’t satisfy high standards without offering tenure? Try publishing an ad for a faculty position without tenure and see what you get? It seems to me that every argument that justifies outsourcing or hiring H1bs also applies to university faculty. They are knowledge workers too and you can set whatever standards you want for research and teaching ability and let the market clear with the available supply. I’m sure we could recruit top faculty from foreign universities if we opened up all those tenured positions in the US universities to competition.

Steve Carr:

"Barry, I don't understand the static picture of living standards you paint. Right now, $22K provides a reasonable middle-class standard of living (we'll say for the sake of argument) in India. But there has been relatively little foreign investment in India and so not all that many good jobs. Again for the sake of argument, let's say that investment in India increases and more capital moves there, competing for labor. That will raise wages, which in turn will increase demand for goods. Living standards will rise but so too will the cost of living, so that experienced, skilled workers will not longer be satisfied with $22K a year. This is why I don't understand the "race to the bottom" narrative of globalization. What evidence is there -- empirical or theoretical -- that when investment rises in a country, its standard of living decreases or even stands still?"

I'm not painting a static picture. I'm painting a current picture. As for a decreasing or static standard of living, that's not necessary for a very distressing scenario.

From the article (http://www.wired.com/wired/archive/12.02/india_pr.html)
""Someday," Janish says, "another nation will take business from India." Perhaps China or the Philippines, which are *already* competing for IT work."" (emphasis added). This suggests that the pricing pressure won't moderate, and might even increase over the next 20 years.

Let's assume that, over the next decade, that salaries double for people like those mentioned in the article. That'd be a 7% yearly increase, sustained over a decade. That would mean that an engineer/project manager with 10 years of experience would earn $US 22,000/year. That's still a devastating blow to anybody with similar skills in the US. If such salaries **triple** over the next decade, then an engineer/project manager with 10 years of experience would earn $US 33,000/year.

____

Zarkov,

For the umpteenth time NO ONE IS FORCING UNIVERSITIES TO OFFER TENURE!!! It is a choice they are making to attract and keep the best faculty they can. By going on and on about how universities can attract top faculty without tenure when ALL universities choose to use tenure to attract top faculty, all you are doing is trying to claim that YOU are smarter than EVERY university administrator in the entire country. You have certainly offered very little evidence of that.

And also for the umpteenth time: every tenured position in this country was opened up for foreign competition at some point before it was filled. If you wan tto argue against outsourcing, fine. Argue against Prof. DeLong's positions on the merits. Just stop perpetuating the canard that the only people who argue for the merits of outsourcing do so because their jobs are protected against outsourcing.

Please note that the link was broken (the ending ')' was put into the actual link, even after I fixed it once). Anybody who wants to read the article will need to manually copy and paste.

tcs:

"Not the best tone that I have seen on one of these threads.

As educational institutions continue better integrate web-based course applications like WebCT and better video compression technologies (H.264?) provide more flexible and higher quality interactive distance learning, it will be interesting to see what share of teaching jobs become portable. Of course teaching is only part of the job at a research university."

True, but OTOH, research should be quite easily outsourced. Probably to a number of contract firms, each specializing in certain areas.

Given communications hardware/software which is cheap, good and easy to use, and a little experience actually using it, the only reason to have people in one physical place would be actual physical labwork.

tcs:

"Not the best tone that I have seen on one of these threads."

True. Possibly because there is real reason for a majority of Americans to fear for their economic future. There's that figure tossed around a lot, that real wages declined for those in the bottom half of the US income distribution, from 1973-1997 (whereupon we had a slight increase from 97-00, and then back to the decline).

This was probably due to the loss of many, many blue-collar jobs in that time period. Industries were gutted, and didn't necessarily recover. Nor did many people.

Many who were aware of that, but thought that they were safer in white-collar jobs, are now seeing the same phenomenon come for them. And the competance/desire of the federal government to help with the transition is less than before.

More likely in 50 years you will be explaining to your children how America was asleep at the wheel while communist regimes armed themselves and started WWIII. I'm continually amazed at how some of these places get such a pass on human rights violations because we want to make use of them economically. It is a pretty big assumption to think that capitalism will make life better in places without free speech and rights. I'm afraid for the world if a place like China becomes a global power. Say what you will about the Western world, the concept of human rights and free speech was born in Greece and Rome, continued on the France and England, and came to fruition in America, Canada, etc. I see no such parallel development in China, etc. We must be very careful to leave the world a better place for OUR children as well as those of other nations.

I didn't say that Greece, Rome, and England were paragons of moral virtue, I said that the concept of human rights was born in these countries. As far as I am aware, I don't recall individual rights being on the agenda anywhere at all, other than these countries. So they didn't always live up to it, at least they had the idea in their heads. Enlighten me!

Strawman: You still don’t get it. I as a taxpayer don’t want the state universities to maintain a tenure system that I am paying for. Students should not have to pay higher tuition than they have to. I want the legislature to force the state university system NOT to have tenured positions subsidized by the taxpayers. For example the California legislature by statute could force the UC system to cease offering new tenured positions. This is a political question, not something university administrators get to decide by fiat. It’s up to me to convince my fellow citizens that this is a wise policy and express their will to the legislature. And yes I think UCB could compete nicely with Stanford without a tenure system in today’s market. If a true shortage of qualified people should develop, then we can reinstate tenure or some other perk to attract the necessary talent. You feel otherwise, evidently because you think we have a shortage of top talent, so we have to offer tenure to get the very best. I don’t. I base on my opinion on my experience in recruiting technical talent for projects in today's market. I could be wrong, and so could you.

Posted by Steve Carr: Leopold, you're matching apples and oranges stats. The U.S. is not the only country where corporations are outsourcing work to India, so looking at the increase in Indian jobs and saying that's where the U.S. jobs went is preposterous.

Before making sweeping conclusions ("preposterous"), can you show some evidence?Which non-US corporations are outsourcing IT jobs to India? What is their share - 1%, 10%, 100%? We have outsourcing information from fuckedcompany every day. Anything similar from Europe, Asia, Australia?

Posted by Steve Carr: That's especially the case because a sizeable chunk of those jobs -- and remember that the MS numbers are estimates -- are, as you say, call-center jobs.

If you do not trust MS GEF, and have different numbers, show them. In 2 years (March 2002 to March 2003) the increase was 54K + 75K = 122K. I said "almost the same number". I should have said 65%.

Posted by Steve Carr: Are you really saying that the U.S. should be putting in place tariffs to hold onto $8.50-an-hour call-center jobs?

I am showing that the thesis "Outsourcing is not the reason for engineering unemployment" is only partially true. It was not the reason the employment dropped in 2000-2002. It is one of the main reasons it is not increasing now.

Posted by Steve Carr: Do you really think India is responsible for the lion's share of those losses?

I am not blaming India. I am saying that, just like with H1Bs, US IT industry is seeking the solutions that are cheapest in short-term and that hurts US engineers and the society as a whole.

What a train wreck this thread is. Brad should have just closed it to comments from the get-go.

Workers displaced by trade have always had a complaint. It's natural that they complain. And good economic policy reduces the friction of them retraining and finding new jobs. It's also simply decent in a human sense.

But what drives me absolutely nutty, what makes me physically ill, is how tech workers (of which I was one) have such a sense of exceptionalism about their particular version of the crisis. How many of these tech workers buy Japanese electronics? How many of these tech workers complain that the RIAA has no right to push for legislation that protects their business model? How many Slashdotters have said to the recording industry: "your industry is antiquated; deal with it"? How many tech workers enjoy the benefits of cheap clothing, steel, and the products of other industries that have moved overseas?

It's the sense of entitlement; the sense that because it's happening to *them*, this time it's different and the sky is falling; the self-righteousness among people who have heretofore been globalists and notably selfish—all this makes me sick.

Put a sock in it.

Well strawman lives up to his name, but seriously folk...

First of all straw, the best graduate programs in the US are the ones with the highest percentage of US students (I leave it to our host to fill in the statistics for Berkeley economics, others, I encourage to look through the list of graduate students in Berkeley departments). Your estimate that over half the students are foreign appears to be wrong. One finds high percentages of foreign students in the lower ranked universities where they are exploited as endless teaching assistants.

This, of course, holds down the number of faculty that such places must hire, and the amount they pay in teaching assistantships. A bracero program for academics as it were.

Second, we can use the academic job market to accurately predict what will happen with the latest proposal for work permits. A pecularity of tenure track jobs is that a job offer was/is considered proof of special national need, and the candidate was automatically given immigrant status. Thus foreigners were willing to accept just about any qualifying offer. Again, look at the composition of lower ranked schools faculty, and look at their salary levels. The future for everyone.

Third, tenure plays into this in an interesting way. For US students, the six or so years needed to earn tenure at low pay are a significant risk. Since people are in their late twenties or early thirties when they get their first academic appointment, many US students are discouraged from academic careers (and indeed from graduate study).

For foreign graduate students OTOH, getting that first academic appointment brings a significant economic reward, the permanent visa.

Fourth, stawboy asks if BdL did not face foreign competition for his current position. In doing so he distorts what we are saying. Our claim is that currently, as a tenured professor, he does not. He did, perhaps, at some level when he started, but now he does not.

Without casting aspersions on him, we are all familiar with folk who succeeded pulling up the ladder afterwards. More to the point with academics, is the question of who they perceive to be their "clan". Particularly in a research university, and in the context of the university (please note the caveats) this is more likely to be the international group of research colleagues than their fellow citizens in general. In other words they see little difference between countrymen and foreigners when it comes to making a faculty appointment.

I thank Steve Carr for at least trying to come to grips with the problem of whom are we most responsible for on either practical or moral grounds. Some comments have been made about the asymmetry between tenure and the normal (at will) conditions of employment in the US. I would like to point out that in other industrialized countries workers have serious rights with respect to job security. This does impose costs, but as we are seeing, at will imposes other costs. I would suggest that the US could use a bit more job security and the Europe and Japan a bit more at will. The latter appears to be happening. More job security rights for everyone in the US may be the best way of dealing with the current situation . Note, this is not a call for unlimited tenure for everyone..

Finally we come to the question about what replaces tenure. I know a number of places that are using multiple year rolling contracts (For example, each year you are evaluated, and then your contract is renewed for say seven years if your performance is satisfactory. If not you are told why and what you have to do to get renewed again next year.) This limits the deadwood effectively, while also limiting the arbitrariness of your local dean or chair(any one of them seldom lasts the full seven years).

The (shorter) xenophobic rantings of Eli Rabett:

"shut the doors, chase off those foreign Ph.D's, and lo and behold, we will have smarter graduate students, higher salaries, more accomplished professors, better educations for all."

Yep and then we can ban imports so we have more output, higher wages, more employment, higher income, more prosperity.

Good thing Prof. DeLong has tenure or otherwise the economic genius of Eli Rabett will soon render him obsolete.

Keith Ellis said it best:

"It's the sense of entitlement; the sense that because it's happening to *them*, this time it's different and the sky is falling; the self-righteousness among people who have heretofore been globalists and notably selfish—all this makes me sick. Put a sock in it."

People's jobs have been at risk for the last hundred years : from trade, from technology, from foreign competition. Why this one group must be pampered and protected at this time is beyond me. Suck it up, sport.

Zarkov on Straw:
"You still don?t get it. I as a taxpayer don?t want the state universities to maintain a tenure system that I am paying for."

But who cares what taxpayers want, Z?
Similarly, shareholders don't want the CEO's compensation to look like estimates for a Man to Mars Mission. Similarly, the argument there (from within that very small pool) is that you won't attract the best people. ( Compare another Beauty Pagent: all pretty nice, No? -no, only the winner is recognized.)
So the executive compensation levels have not budged. But tenure is getting some attention lately as states face rising deficits.
Do you really think that those schools that provide tenure attract better staff, Strawman?
From a student's prospective, I always found that the tenured staff (coasters) were the less inspired and less effective.
And often not available.

****
Do you really think that those schools that provide tenure attract better staff, Strawman?
****

Well Calmo, you genius you, you should probably email Larry Summers and tell him that Harvard is making a mistake by offering tenure. Yes, of course. The fact that no school in the top 1000 refuses to award tenure seems to be pretty strong proof to me, but hey what do they know.

The whole tenure angle to this discussion is a red herring pure and simple. Julian, Abiola and I have all pointed out that unless you have specific proof that people like Prof. DeLong opposed a ban on outsourcing before they had tenure and now support a ban on outsourcing then the argument that his opposition to a ban is hypocritical is wrong.

Tenure is not legally mandated unlike a ban on oursourcing. Tenure has nothing to do with outsourcing.

The movement to ban outsourcing, while couched in noble language of national security, raising all boats, higher wages etc. is nothing other than xenophobic protectionist selfishness aimed at busting the kneecaps of productive, educated people in China and India trying to make a better living and asking American taxpayers and consumers to pass on their money to IT workers.

America no longer produces cheap soft toys, TV's, VCRs, cheap electronics. There is no reason why we should produce menial IT when someone else can do the job for a lot cheaper.

There are lots of arguments one can raise about whether this administration (or the prior one) was willing to help out those disrupted. But on net I personally have no desire to pay higher prices to protect the likes of some who have posted here.

Schweik: Dear shall we pay attention to strawman?

Ms. Schweik: No dear, he is poaching nicely. The children only lasted so long. It is good that we will have something to eat after you gave up your tenured spot at U Jelinku. On the otherhand it would also be good if workers had some rights to their jobs beyond that of quitting or being fired.

Strawman
Sorry to have offended you with my ignorance of what the top 1000 schools offer. I'm more familiar (but not much) with the Fortune 500 companies and their CEO compensation levels. OK I confess: I really don't know beans about Beauty Pagents either. (Maybe The Runner-Up does get something.) But that's it. My Genius starts here:

It seems to me that there are connections and similarities here.
1.Many(more and better qualified) candidates chasing few(er) ( artificial? over-paid?) jobs.
2. Are we (who?) getting a better product/service with these higher compensation levels?
3.The tenure issue is introduced in this thread to discredit those ( Brad et al) who are opposing the protectionist policies.
This is a distraction. But not compared to Leopold.

“America no longer produces cheap soft toys, TV's, VCRs, cheap electronics. There is no reason why we should produce menial IT when someone else can do the job for a lot cheaper.”

Actually the issue is not menial IT, it’s advanced IT as well. Only a small amount of IT is shipped offshore (currently). The real displacement of American IT workers both menial and advanced comes from visa workers. This has allowed the IT industry to practice invidious age discrimination where they can hire young cheap foreigners instead of “older” (meaning above 30) Americans. Would you be upset if the industry replaced Black workers with H1b visa holders? Or is somehow age discrimination ok?

Calmo, the tenure issue is not as much of a distraction as you might think. Because faculty are not employed at will, they cannot be replaced in a nanosecond and the jobs moved offshore. Instead of promising workers retraining, perhaps it would be better to give then some job security (not total). Say rolling two or three year contracts?

Eli
The introduction of the tenure issue here, in this vey long and heated thread, was a distraction in that our host and his tenured colleagues were asked to defend themselves against a charge of hypocracy for taking a anti-protectionist stand.
So the topic took an abrupt and ad hominen turn here. If Brad or any other (tenured) economist took an anti-protectionist stand, it was dismissed not on any merits the argument might have, but on it coming from a tainted source. No?
Strawman refers to the tenure issue as a "red-herring" which has the same direction as my remark. He stresses the difference between Voluntary rules and Mandatory regulations which for some of us ( I mean me) clouds the issue(s). IMO, Taj makes a very convincing case with the protectionist consequences.

I am not unfamiliar with the plight of lecturers, assist Profs, assoc Profs and visiting Profs. Academia is not a democracy. Brad could address this issue but I guess the mud is too thick now. The nanosecond job transfers are out of the question? Glad you think so --a growing amount of secondary education is happening with computers. The rolling 3-4 yr teaching contracts are I believe already in place in some institutions. Strawman would know.

Calmo, I was suggesting rolling contracts for everyone, not just academics. Point being that the system needs some friction thrown in, otherwise it is underdamped and swings wildly.

A while ago Paul Sarbanes had a chart which showed how the Breton Woods system damped out wild swings in the world economy. That was capital, IMHO we need a similar system for labor now.

At will employment is a dangerous remnant of the past.

letter sent to the editor of the NY Times, about the Virginia Postrel article:

Dear Sir,

What a comfort it must be, to be a professional economist in a Panglossian world where the beneficient powers of globalization cast a rosy glow over every prospect. Unfortunately for those of us who have to live and seek employment in the real world, Dr Mann's conjectures do not withstand scrutiny very well.

To take one of the more egregious examples from this article: Dr. Mann says "There is no question that the downside anecdote - the well-trained person losing their job - is a story that people identify with. They simply don't identify with the story of the person who changed their job and does three times better. Most of the stories are about downside loss, not about upside gain, and there is a lot of upside gain." This is very nice, but I'd rather see some data. I surely would like to hear the upside stories - I have yet to hear one, and I spend the day talking to computer professionals. Perhaps the reason that "most of the stories are about downside loss" is because most of the events, down here in the mud, are about loss.

In the interests of brevity, only one more comment. Dr. Mann appears to believe that the programming and R&D jobs will be replaced with integration jobs. If I have it right, the theory is that cheaper software packages will allow more companies to implement them, and thus create highly-paid system integration jobs. There are several things wrong with this theory. First, are the packages really going to get cheaper, or are CEO salaries and company profits going to increase ? Recent experience suggests the latter. Second, those companies that could previously not afford the software packages will be, by definition, unable to pay high salaries to system integration specialists. This looks like faith-based economics. Those of us who are not believers are not yet persuaded.

Sincerely,

Douglas Kaye

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