OT: The free-trader's agenda

Ed,

I'm surprised to see the usage of "an historical..." by someone whose name begins with the glorious letter "H". Maybe I am just sensitive to that for some reason. When asked, do you say "untress" or "Huntress"? Myself I say "Horton" not "Orton". That was a guy named Dan that I worked with some years back. That lazy dropping the H thing reminds me of Howard Cosell. (shiver)

michael Horton

grinnin'.....

You're absolutely right, Michael, and, believe it or not, I thought for a moment before using "an." Then I made a mistake and used it anyway.

Ed Huntress

Well That sounds like a professor of economics talking who hasn't been in the real world. There's no (few) prescedent (s) because we've been one of the few major world mfg powers for over a century. The (real) wages here are declining as mfg jobs are lost (to foreign competition) and those folks find work in the service sector. The same job may not drop in wages but, of course, it's gone south. :o). How in the world do you think we can compete with the same goods at 4-8 times the labor rates of those selling them in the same markets??? That's economics 101 or common sense 001. And we can see it here & now. Greg Sefton

No, that's actually gramatically correct.

And despite Sue what's-er-names foot-stamping, diction is *not* defined in terms of spoken words exclusively.

It's a bit quaint to find somebody being so painfully correct in grammar use, but in light of it being Ed I think the ng should let it pass!

Jim

================================================== please reply to: JRR(zero) at yktvmv (dot) vnet (dot) ibm (dot) com ==================================================

Ed, thanks for posting the link. It's a subject that I've been thinking about quite a bit, especially since I'm now unemployed after nearly 30 years as a software engineer. It's only been 4 months for me so far; I know a lot of people who are going on their second or third year of unemployment and a couple of 2nd level managers who took entry-level jobs.

I particularly like the quote above where Miller argues that the cure for hi-tech unemployment is to train more hi-tech workers. Right now, I don't see any reason for any intelligent young person to go into software.

But he does make a points that I agree with. We imported a lot of programmers from the PRC, Russia, Taiwan and India into the U.S. in the 90's. If we hadn't, the work would have gone to India even faster. IMO, it would have been better without the "indentured servitude" aspects of the H1-B program but there was no way that the pool of programmers produced in India was going to go unused.

Once the Indian government targeted software, the die was cast. Software is labor intensive and India has lots of cheap labor; salaries run about one third of U.S. rates. I've heard the actual cost of developing software in India is about two-thirds of the cost of doing it in the U.S. The market also accepts software of low quality; most of the time quicker is better than better. That, combined with the breath-taking deflation in the cost of computing mean that inexperienced, lightly-motivated people can bang out something out that's good enough. India simply exploited its comparative advantage.

There's also the hangover from Y2K and the dot com boom that drew a lot of people into software development. In 2000, I was interviewing people who barely had a pulse for software engineering jobs.

Both the Y2K and dot com boom ended up greatly increasing productivity. Many companies scrapped a lot of their legacy systems because of Y2K issues and replaced them with PeopleSoft or SAP. The thousands of programmers at those companies probably replaced tens of thousands at individual companies. The internet and the rise of the web browser have reduced the need for support staff.

Increased productivity is good if you have a job or other income; bad otherwise :-)

I don't see anything major that will drive new software development. It looks like it's a maturing industry and it takes a lot fewer people to keep a system running than it takes to build one.

So, yes it's a hard truth that there are a lot more software engineers around than we need. And that means salaries will come down more than they have already.

It's a tough situation for some of us but I don't see how it could have turned out much differently.

Bob S

On 18 Nov 2003 01:52:07 GMT, snipped-for-privacy@aol.com (SMuel10363) brought forth from the murky depths:

C'mon, guys. WallyWorld employs one or two truck drivers, one or two American citizens (of all ethnicities), and one or two contractor crews. They sell thousands of American items, including food, toys, hardware, paint, fabric, and pharmaceuticals. It is NOT all imported product they're selling and not all illegal aliens they employ. Ol' Sam put up one heckuva store. I'm not too keen on their business practices, but I buy a lot of goods there. (It's the closest store to my home so I use less imported oil to shop there.)

--- - Friends don't let friends use FrontPage -

I'm afraid I have to agree. I don't give a damn that there are statistics that may document what Ed has said above, this is now, and now is demonstrating that wages are, indeed, dropping, just as there are companies that are doing their best to break the strangle hold unions have had over them, adding fuel to the fires of inflation. And that's as it should be. If the wages don't drop, the job disappears. Companies can't compete.

I understand, and feel the pain, of those that are losing in this situation. It's a damned shame that some of these folks are losing retirements, health care insurance and perhaps even their 12 weeks of vacation each year, but how realistic is it to expect all of this? Wouldn't all of them have been better off to have worked for realistic wages and tuned their life styles to realistic incomes, and still have what they were accustomed to earning instead of standing by watching as their jobs have gone to foreign countries? At what point do we say enough, that it's not realistic for an auto worker that may have little training, no particular skills beyond those of a trained monkey, and can barely sign his name, to make over $20/hr. I have no axe to grind with these people, but I sure as hell have been affected by their outrageous wages, just as the rest of you have. That's but one example. How many others can be cited?

I am told that UPS drivers are making something like $28/hr. While I don't know the name of the guy that delivers to me, I will confess he's a nice guy and I enjoy talking to him briefly when he drops off a package, but couldn't any of us with reasonable eye sight and hand to eye coordination take over his job with a single day's training? What the hell makes a delivery truck driver worth that kind of money? Every time you ship a package you're being ripped off so someone can be paid unearned money, in my opinion. It's no different from sports "heroes", who so heroically take their unearned millions to the bank. And the source of the money? Your pocket and mine, and, for the most part, we're stupid enough to pay the price instead of saying to the sports industry, "Enough! We won't pay the price. When players can be happy to make $100,000/year doing something they enjoy, perhaps we can be supportive."

Rant off.

Harold

This sounds like a good analogy to the oft-discussed machine shop and manufacturing trades. Except it's been quite some time since folks flocked (in droves) to manufacturing or machining - so the bow out is more graceful, the folks exiting the field are at retirement age more or less, and there's not such a glut of existing labor.

Software of course is even more sensitive to being outsources overseas, as there is no shipping cost to import a physical item. It all happens over the network.

And here, as well as in manufacturing, productivity improvements are more or less equal to job elimination.

Best of luck on your job search - keep the faith.

Jim

================================================== please reply to: JRR(zero) at yktvmv (dot) vnet (dot) ibm (dot) com ==================================================

I am NOT going to get into this, but the "h" in "historical" is pronounced, so it doesn't deserve an "an."

Yes, the grammar rule on this changed once or twice. But that's the way most writers do it today, as a practical matter.

Ed Huntress

The last is a good question, made good by the fact that there is an enormous and accelerating volume of it today. The volume and the velocity are unprecedented. My non-professional but data-loaded study of it suggests to me that there is no way our economy can grow fast enough to take up the slack. A number of highly regarded economists are beginning to say the same thing.

Your suggestion that there isn't enough evidence about the effect of trade on wages simply isn't borne out by history. Trade usually has resulted in increased economic activity and an increase in wages at both ends.

Ed Huntress

intellectual

No, and nothing like the speed with which technologies are packaged, wholesale, and sent to low-wage countries, where they make the same advanced products that are made in the country from which the technology is shipped.

It seems that way to me, too, especially where the volumes are very large, as from China.

If you want to make a project of it, you can graph the average wages versus the median wages over a period of time. Because the very high-end wages go to a small number of people, that *may* show you the picture -- but possibly not, depending upon how the ends of the dumbell are weighted.

The data is available from the US Census, possibly re-organized by the Bureau of Labor Statistics, but I've never taken the time to do it.

Ed Huntress

From their current income statement and other sources:

Annual sales: $245 billion Cost of goods: 192 billion Goods from China: 12 billion

Walmart's imports from China are 10% of total US imports from that country, and 4% of China's total worldwide exports.

Big numbers, but the amount they're sourcing from China is only around 6% of their total.

However, the wages they pay are something like 30% lower than the average retail wages in the US.

Ed Huntress

Let's hope it is just a passing fad. When I was in school any word preceeded by "a" or "an" got the "a" if the first letter was a consonant. But then, when I was in school we had neighborhood BBQs and served up some of the last decent dinosaur steaks.

michael

Hey, that's the ticket, Harold. Don't let the facts stand in the way of a good rant.

That's reality. That's what's been happening in our economy, and, absent the recession we just went through and some trade problems that we shouldn't be allowing to happen, that's the way it is right now. The reason you think that incomes are declining is because the proportions of our average income going to the richest quintile of people in the country has mushroomed and the middle- and lower quintiles are taking a hit. (The Cato Institute says that even *they* aren't taking a hit, but the Cato institute doesn't seem to have noticed that our percentage of working adults has gone from 51% to 63% over the last half-century, which means that more middle-class women are working.) You have a policy problem, not a fundamental economics problem.

But please carry on. Don't let the facts get in your way, please.

What you're advocating is a general suppression of our economy for no visible reason. What's your reason, Harold? How have you determined what "realistic" wages are? In other words, what's the basis of your judgment?

Another way to look at it is, where the hell do you think YOUR money came from? If people made less, they couldn't have afforded to pay you what YOU made. That's the way it works. If they're overpaid, then you were overpaid.

So long as it's providing a grin, how can I miss?

That, or an accounting system that sucks, much like Great Western Chemical had when they told me they had to raise the price of a drum of HCL by 350% because it cost them $109 to write an invoice. Sure as hell, you can make paper say anything, but how does it square with the facts? Here they are amortizing their entire overhead and dividing it by the number of invoices written as if it really cost them that much to write the invoice I wonder how much it would have cost Great Western to write invoices if they chased away all but three clients? Seems to me that when you have people on the clock, you're better off to have them make a small sale at a reasonable price than no sale . From your statement, I should assume that the folks talking about not being able to find employment in the computer related fields at wages to which they have become accustomed are just not able to perform, that the jobs aren't really going to India where they do the work for far less? I have it wrong?

OK, I'll continue to vent, but I think some of your answers sound a lot more like something from the mouth of a politician, as if you're buying into their diatribe. Big difference is you're able to provide statistics, I'm venting my thoughts. I know my thoughts are clean and pure, even if slightly misguided. I'm not sure, not sure at all, about the statistics you quote. Could be they're there for all the wrong reasons and have little, if anything, to do with reality. Not blaming you, Ed. You may simply be a victim of the bullshit handed out by those hoping to be re-elected. Once again, you can probably find statistics to support almost anything.

Maybe I don't understand economics well, but it appears to me that when everyone in the world (almost, anyway) can provide goods and services at prices well below those that we are accustomed to receiving, one of us is doing it wrong. I sort of get the idea that the American worker is making one hell of a lot more than most other workers, so which one is out of line, and which one is most likely to be changed to get in line with those of other nations? Do you really see wages rising in other countries until the advantage of sending work out of our country is gone? I realize that foreign don't have to be the same, but surely they would have to be similar before any advantage disappeared.

I know from personal experience that when I was in business, it was important to be able to compete with others if I intended to keep the shop busy. I did that by bidding at a price that I hoped was lower than the competitor, and if I was, I got the job, the only exception being when my deliver may have been better than an opponent, and I'd get the job based on rapid delivery, in spite of a higher price.

How have you determined what

Not in hard figures, I'm not capable of that, and I'm not sure you or anyone else is, either. For sure, wages in China are not reasonable, at least they don't appear to be, and wages in Japan, which got way out of control, have already put that nation on its knees. Their economy has been suffering for what, ten years now? Of course, I may not understand the real reason, and it may not be related. Wages here are too high as compared to other nations, that's my point. Whether they raise theirs and come near ours, or we lower ours and come near theirs, until one or the other happens, industry is going to continue to leave our country to take advantage of the savings. Even Boeing is sending work to foreign countries, although perhaps they always have. One thing for sure, they're looking for ways to get around the unreasonable wages they have to pay for workers that seem to never be satisfied.

First off, I did not do business with People". My entire operation was industry based, I never dealt with anyone off the street. It's a shame you couldn't have been by my side through the years I worked, Ed, because you'd have witnessed something you couldn't have imagined. My rate was low, and I insisted on ONLY a fair wage. I commented to Jim yesterday that I earned the money. If you feel $35/hr for a journeyman toolmaker, including providing machinery and liability, was being overpaid, then I agree with you. I was overpaid. Please bear in mind that my rates were far and away lower than those around me. As I said to Jim, I put my money where my mouth is. I never tried to skin the lamb, I chose to shear it. You can do that time and again, but you skin it only once.

Harold

A minor point here, but we've been using a lot of economics terms lately, and what you're describing, to an economist, is not comparative advantage, which is a more complex concept. It may be *absolute* advantage, which is an advantage in productivity in relation to labor hours and other resources, or maybe not -- neither one necessarily means "lower cost."

For example, there probably is not a single product or service for which China has an absolute advantage over the US. Its comparative advantage is in whatever products it makes most efficiently relative to others, in comparison with those relative efficiencies in the US (that's what I mean by a more complex concept). But it does make many things at lower cost. Likewise India, although it's possible that India has an absolute advantage in software, which is not the same thing as lower-cost software.

Sorry, but it's worth understanding those terms to help understand what's going on here. I only mention this because misunderstanding "comparative advantage" is one of the biggest sources of misunderstanding the situations we face with low-wage countries. These explanations I gave aren't very good but you get the point. You can find more thorough definitions of these terms online.

Probably not, although it isn't foreordained. It's purely a choice. Trade doctrines aren't natural forces, they're political choices, even though various US administrations have tried to convince the rest of the world, with mixed success, that they are as immutable as the rising and setting of the sun.

But the justification for resisting the force, in this case, is pretty slight. Writing software is a relatively new industry that exists because of a technological circumstance, and, as you say, it could be a transient circumstance anyway, even without low-wage competition.

You're what the free-trade folks call a "displacement." Displacement sounds pretty mild, doesn't it? It sounds like being nudged out of your seat at a football game, and having to sit in the next seat over.

So, when you're listening to them tell you how inevitable it all is, consider that your unemployment is something that they really think is trivial. That's the problem with free trade. Human beings are trivial; the smooth functioning of abstractions, like "the market" and "comparative advantage," are their real goals. That's usually because the market poses no threat to them, either because they work for government, or because they're tenured at a university.

That's right, mostly those ideas came from the Republican Congress, following Newt's Contract with America concepts. The only really big economic proposal Clinton initiated was his wife's socialized medicine scheme, and that went down in flames before it ever got to the point of legislation.

Gary

No, police wages would be cut too, so you wouldn't have to fire any of them. Some might quit, if better paying jobs were available, but the brunt of the argument is that the better paying jobs are going away, so the only real options for the policeman, fireman, city clerk, etc are to continue to work for less money, or not work, and earn no money at all.

Gary

Thank God!