George Rebane
[This is the submitted form of my monthly column published in this morning’s (11 December 2010) print edition of The Union. The online version of it can be found here.]
This week another batch of economists got surprised. What they didn’t understand again, let alone predict, was the nation’s unemployment rate – it jumped to 9.8% from 9.6%. With all the stimulating that’s been going on, wasn’t it supposed to go the other way? Fortunately, readers of this column were not surprised by the news, and some may even have prepared.
Let me be specific. We have an ensconced government that has been and continues to be hostile to the creation of any jobs that do not involve government growth or subsidies. If that is not enough, our government monopoly schools have produced a workforce that is rapidly going downhill in the global competition department.
Illustrating these points we begin with last month’s Survey of Current Business put out by the U.S. Bureau of Economic Analysis. The report described “a dynamic group of companies that create high-paying American jobs based on significant capital investment and export prowess – precisely the kinds of jobs America desperately needs to build a sustainable recovery.” This group of international firms has doubled its US workforce through a process called ‘insourcing’.
Insourcing is nothing but effectively cannibalizing America’s talent by using capital investment, increasing R&D, and expanding exports to attract from other companies the smartest and most experienced workers the country has to offer. Such private-sector firms only hire from the top, and then spend enough empowering their workers to grow revenues and profits. As a result, on the average these workers earn over 30% more than the average American worker.
Insourcing companies see prospects for increasing their US employment and operations through similar tactics. But they are frustrated by our government which has constructed an extremely anti-business tax environment – at 35% it is one of the highest in the world. The government also has been slow on trade liberalization which impedes the amount of goods that the US can export. And finally, our feds have let the world know that these policies are not going to change any time soon.
Specifically, over 70% of the insourcing CFOs report to the Organization for International Investment that “the environment for doing business in America has deteriorated over the last year.” The big culprit in all this has been the ‘buy American’ dictates of the $787B 2009 American Recovery and Reinvestment Act.
On the workforce development end we received another jolt this week. Results of the latest Program for International Student Assessment tests were made public, and US teenagers were nowhere near the top. Worse than that, we wound up below average in PISA’s reading, science, and math categories. In reading, one out of five US students didn’t even achieve Proficiency Level 2 where "students can complete low-level reading tasks."
The top ranking students all came from Asian countries led by …, yes, China. Well not exactly, Finland managed to score up there also (google ‘PISA test scores’).
Even though American students are “inching in the right direction”, what do these results tell us? First we should realize that no one around the world cares about the talents of American lawyers and MBAs. They can handle their own legal affairs and manage their own companies, thank you very much. So what do we have left to sell that the world needs?
The obvious answer is technology development, and corporate processes involving high tech components. Unfortunately, our primary and secondary schools are not geared to motivate or produce many workers for these areas. Here’s a test I have been conducting for the last twenty years or so. When meeting young people I always ask them about their career plans. The overwhelming fraction (>70%) of responses name a career in government, or one that requires government subsidies. Try it yourself.
Combine all this with the fact that today most people don’t have the raw talent to educate themselves for jobs paying more than overseas wages, and you see the inescapable conclusion that very few of our young are prepared to compete. Instead they are taught to expect a lifetime of redistribution from someone else’s wealth – and to feel that this is their just due.
Meanwhile, we are being fed soothing pap that this federal stimulus or that one will fix things and return unemployment to the 5% ‘normal levels’. This is not even close. With no massive school upgrades, simplification of tax codes, and a sane regulatory environment, the new normal will be at the 10-15% level and rising.
George Rebane is a retired systems scientist and entrepreneur in Nevada County who regularly expands these and other themes on KVMR, NCTV, and Rebane’s Ruminations (www.georgerebane.com).
rebanesruminations.com 
Leave a comment