Posts Tagged ‘U.S. jobs’

Richard Florida
by Richard Florida
Wed Jun 17th 2009 at 11:30am UTC

In-Sourcing

Wednesday, June 17th, 2009

Globalization skeptics have long complained about the alleged out-sourcing of good, high-paying American jobs. But even globo-optimists, like Tom Friedman, have conceded that U.S. jobs are vulnerable with the rise of a flat world. In a 2006 essay in Foreign Affairs, Princeton economist and Obama adviser Alan Blinder argued that globalization would likely bring about a mass off-shoring of American jobs. Blinder later used Bureau of Labor Statistics data to estimate that some 30 to 40 million U.S. jobs, 22 to 29 percent of all, including significant numbers of jobs in knowledge work and high end services were “potentially off-shoreable.”

International economist Richard Baldwin takes a close look at the actual figures and finds a very different trend. Examining IMF data on the dollar volume of trade in services originally compiled by economists, Mary Amiti and Shang-Jin Wei, Baldwin plots the dollar volume of out-sourced U.S. service work against the dollar-volume of service work that has been attracted to or in-sourced by the United States.

insourcing.JPG

As the chart shows, the U.S. is a net in-sourcer of service jobs, with the U.S. in-sourcing gap actually increasing over time. Based on this, Baldwin concludes that:

The US, as it turns out, is a net “insourcer.” That is, the world sends more service sector jobs to the US than the US sends to the world, where the jobs under discussion involve trade in services of computing (which includes computer software designs) and other business services (which include accounting and other back-office operations. … Blinder is right in that the US importing an ever-growing range of commercial services – or as he would say, the third industrial revolution has resulted in the offshoring of ever more service sector jobs. However, the US is also “insourcing” an ever-growing number of service sector jobs via its growing service exports. The startling fact is that not only is the trade not a one-way ticket to job destruction, the US is actually running a surplus.

The data only cover the period 1980 to 2003, so it is certainly possible that the trend-line has changed since then, but Baldwin argues that the logic of trade in services suggests this basic trend will continue.

Since services are highly differentiated products, and indivisibilities limit head-to-head competition, my guess is that we shall see a continuation of the trends in the chart. Lots more service jobs “offshored” and lots more “onshored”. What governments should be doing is helping their service exporters to compete, not wringing their hands about one-way competition from low-wage nations.

Richard Florida
by Richard Florida
Thu Feb 12th 2009 at 8:00am UTC

Looming Talent Protectionism

Thursday, February 12th, 2009

On top of Buy American provisions, certain U.S. political actors are now trying to restrict immigration on the grounds of protecting American jobs. The Grassley-Sanders bill in the Senate is the product of the strange politics of our times – a Republican and a socialist-leaning independent – is a veritable Smoot-Hawley for the talent-based economy. A very big mistake, for reasons this Business Week report points out.

But placing limits on this mechanism for bringing foreign workers to the U.S. is not the answer to the country’s rising unemployment rate and may undermine efforts to spur technological innovation…

Increased numbers of H-1B visas strongly correlate with increased numbers of patents applied for in the U.S. by immigrant inventors …The researchers also found no evidence that increasing H-1B visa awards decreased innovation by U.S.-born researchers in the form of patent applications, a decrease that is often described as “crowding out.” To the contrary, their analysis identified a weak but still positive impact (often called “crowding in”) on the numbers of patents filed by non-immigrants in regions where the number of H-1B visas awarded were highest.   Even more telling … in periods when H-1B visa numbers went down, so did patent applications filed by immigrants. And when H-1B visa numbers went up, patent applications followed suit. …

When American workers who have the skills to file patents and develop new technologies get laid off, they often start new companies. And these companies generate employment and help the economy recover. When workers on H-1B visas get laid off, they usually have no choice but to return home and start their companies abroad. So they are planting the seeds for future economic growth in their home countries, seeds that could easily have been planted in the U.S.

So the critics of skilled immigration may get their wish. We will scare away the world’s best and brightest who have always flocked to our shores. But the next Silicon Valley won’t be in located the U.S. It will likely be in Hyderabad or Shanghai.

Or say Vancouver, Toronto, or Waterloo.