Misdirected ire

 

 

 

 

 

 

Jobs, jobs and jobs. That was the central theme of U.S. President Barack Obama's State of the Union address this year. Not surprising at all because there are 13.5 million Americans who are unemployed today, and the jobless rate, though on the decline in the last three months, is still at an uncomfortable 8.5 per cent. And then, of course, there is the small matter that this is election year in America and the State of the Union address is one of the few opportunities Mr. Obama has to grandstand in the remaining period of his Presidency. It is, therefore, natural that he hit out at the outsourcing of jobs, yet again, though this time his ire was directed mostly against manufacturing companies. The President proposed that companies which outsource jobs should be denied tax benefits just as those that create them in the U.S. should be rewarded.

 

While Mr. Obama's electoral compulsions are defensible, what is not is his understanding of why American companies, especially in the high-tech manufacturing sector, are moving jobs overseas. The simple fact is that it is not just cheap labour that is driving American companies overseas; it is also the availability of trained labour per se, in the required numbers, and the existence of efficient supply chains for high-tech gadgetry. The withdrawal of tax breaks might work if it were just the first reason; unfortunately for the President, this is not the case.

 

Apple is one of America's most admired companies but almost all its products are manufactured overseas. And cheap labour is not the only reason. As a recent article in the New York Times points out, Apple was forced abroad by the availability of talent, and in the huge numbers that it required. That such talent came relatively cheap was a bonus. While America leads in innovation, the fact is that it lags in producing the kind of trained workforce that high-tech companies need. This is something Mr. Obama has conceded in his address, saying that these companies have twice as many openings as the availability of such workers. Investing in education and training as the President promised will help but that will only be in the long-term.

 

American corporations are competing in a global market and national commitments mean little to them. What is important is efficiency and these corporations will migrate to wherever they can find it in the world. Impeding them in their quest will not help but boomerang on Mr. Obama and the U.S. Preventing outsourcing is protectionism and as the Great Depression of the 1930s showed, protectionism worsens an economic recession. It can only be hoped that such populist rhetoric does not get sanctified as legislation in the run-up to the election.