Off Shored then Dead

The Frightening Correlation Between Unemployment, Off

Shoring Domestic Jobs, and Early Death.
By James A. Cunningham, Ph.D.
December, 2015

On finding work
The Left.
"There's one economics-driven thing that matters enormously to human
wellbeing...having a job. People who want to work, but can't find work, suffer
greatly. Not just from the loss of income, but from their diminished sense of selfworth. And that's a major reason why mass unemployment, which has now been
going on in America for four years, is such a tragedy."
Paul Krugman, 2012
Markets do indeed fail, and that if individuals or private enterprise cannot or will
not spend in the short term, then the government must act to boost employment.
John Maynard Keynes' 1936 book, The General Theory of Employment,
Interest and Money
The Right
I am hearing from manufacturers that people are not motivated to return to the
workforce because they are enjoying their unemployment insurance.
R. Illinois State Sen. Bill Brady
"The longer you pay people not to work, the longer they're not gonna try to work.
Rush Limbaugh
"Paying unemployment benefits to America's unemployed, only makes them lazy."
Newt Gingrich
the unemployed are spoiled".
.. Sharron Angle, Republican candidate for senator of Nevada
people who are unemployed right now are generally people with poor work
habits and poor personalities
Republican Ben Stein
"Unemployment benefits keeps people from going and finding jobs."
Former Republican Majority Leader Tom DeLay

1. The Plight of Middle-Aged White Americans

Political scientists have recently noticed a remarkable phenomenon. Unlike
anything seen in other industrialized countries, our white middle-aged population
is dying at alarming and accelerating rates. For example, white Americans aged 45
to 54 die at twice the rate of those in Sweden or Australia; they die 42% faster than
those in France, 50% faster than those in England. This may be a phenomenon
linked to our older people who are laid off, who then look for work, but cannot find
any, and so give up. Presumably they drop out, become discouraged or despondent
then OD on drugs or alcohol, commit suicide, destroy their livers with pills, or eat
themselves to death. The question addressed here is what on earth is really going
on. Why are other industrialized countries not seeing such a problem? Why is this
group in the US getting worse with time? Why is the same group in other countries
moving in the opposite direction, that is, living longer over the years? Lets first
consider how many deaths are involved.

In 2013, there were 34.1 million white people in the US age 45 to 54. With a death
rate of 413 per 100,000 in 2013 (above chart) about 141,000 of these Americans
would die in one year. According to the chart to right of the above graph, well over
one in four are dying from unnatural causes: drug or alcohol overdose, lung cancer
(smoking?), suicide, liver damage (pills) or diabetes (overweight?). But look at the
death rate in Sweden for example. If we had their death rate of about 200 in 2013,
we would be saving the lives of 72,000 people a year. Indeed, if we even had the
death rate we had in the year 2000 we would have 11,000 fewer deaths.
Middle aged blacks and Hispanics during this same time frame are not
experiencing this awful problem. Death rates for them declined at about 2.1% per
year.
Note that the death rate turned in the wrong direction for our group of older white
Americas in the late 1990s. This correlates well with our new direction in
manufacturingwhich briefly stated was, if making a product requires lots of
workers then find someone else to do it. Preferably someone in another
country who will work for almost nothing--how about the Chinese. Maybe the
Mexicans. Even the Vietnamese. Does it really matter?
But why do France, Germany, the U.K. Canada, Australia and Sweden appear
essentially free of this problem. Many of these countries have negative trade
balances. They also automate their factories and they all engage in some level of
off shoring jobs. None are free of racial intolerance.
Two factors may be mentioned which might explain the differences. First,
government support in other counties maybe more robust for the laid off worker,
This support can include retraining, subsidies for new jobs, and other services. See
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chart below. The US program is at the bottom. Spending roughly 10 times what we
do, Sweden is at the top. Another possible factor is discussed ahead, starting on
page 11.
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The BLS stated that in October 2015 we had about 1.9 million workers marginally
tied to work with about 670,000 who have given up looking, A sad situation.

2. The Free Market

Professional economists have always been adamant that the way to economic
prosperity was and still is through an unfettered free market. Drop those awful
tariffs and other barriers to foreign products, and open up trade. Open up those
markets and we will all prosper. Indeed, they insist the whole world will prosper.
By the mid-1970s most nations had recovered from the ravages of WW2 and were
ready. Ready to turn on manufacturing in their new factories. Ready to put their
people back to work. Ready to export to the wealthy West. Especially ready was
Japan, Taiwan, South Korea, Germany, Hong Kong, Singapore and France. The
Saudis tuned up their gusher oil wells. And so it began.
The acceptance of foreign made products and off shoring your own jobs, began
with a trickle in the late 1970s. The first venture of off shoring was a move by the
computer-chip makers who set up assembly plants in Malaysia and Singapore. A
trickle of foreign made autos began. And some apparel items appeared here.
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By 1995 the incoming trickle became a river, by 2000 a new Mississippi River was
born, by 2005 a tsunami had swept into our ports.
As the years went by, the US saw whole domestic industries disappear: down the
drain went all optics products such as binoculars and microscopes, domestic
production of cameras, telephones, and TV sets disappeared. We stopped making
writing tools. In decline or decimated were the making of bicycles, shoes, autos,
apparel, trucks, wooden furniture, hand tools, power tools, lawn mowers, tires,
cardboard boxes, lighting fixtures, light bulbs, ship building, integrated circuits,
copy machines, fasteners, metal plumbing, earth moving equipment, flooring,
kitchen appliances, washing machines, machine tools, leather, semiconductor
processing equipment, robots, batteries, table wear, silver ware, aircraft
manufacturing, steel forgings, foundries, book printing, home lighting fixtures,
computers, vacuum cleaners, battery chargers, calculators, paint brushes, monitors.
Workers making apparel fell from 900,000 in 1990 to 180,000 by 2011. From the
year 2000 to 2014 we shut down 60,000 factories.
We expanded our ports to handle the growing volume of imports. Vast container
ships dropped the cost of overseas shipping.
A measure of the extent of the new free market trend or structure is of course given
by the trade balance. In the late 1990s it feel off a mountain.

Recent numbers not on the above graph are;

2011.$548 billion
2012 $536 billion
2013 $478 billion
2014.$508 billion
These billions add gradually to the nations total debt, which is now around an
astonishing $60 trillion or about $200,000 per capita.
In reality, unfettered free trade is a great force of world economic-leveling. Rich
countries move down, while poor ones move up. Everyone becomes mediocre.
The soaring trade deficits hit US domestic manufacturing like a viral pandemic.
See chart below for the effects on manufacturing employment,

3. Reasons for the Decline in Manufacturing Employment

Prior to about 1990 the US off shored very few jobs. Yet employment feel sharply.
Close to 50% from its peak in the 1940s. Still, the real value of manufacturing
revenues rose 33% from 1949 to 1990. This was of course due to various forms of
automation. This rise in labor productivity may be seen in the chart below.

With the advent of off shoring strongly rising after 1990, the rate of rising
productivity of US manufacturing jumped. From 1945 to 1990 productivity
climbed about 1.7% per year, but after 1990 it rose to 3.1% per year. This was of
course due to off shoring virtually all labor intensive operations, This left behind
the domestic operation already automated, thus changing the domestic mix.

4. The Participation Rate

A more meaningful measure of employment is given by the so called participation
rate, which is the percent employed of the total civilian labor work force. This
work force is typically about the total population.
The participation rate is the percent of the civilian labor force who are employed,
The civilian labor force is all those over 16, not inmates of institutions (penal,
mental facilities, homes for the aged), and who are not on active duty in the Armed
Forces.

Below we see the participation rate of men between the ages of 45 to 54. Their
decline accelerating somewhat in the late 1990s. This negative trend is the most
serious of all age groups shown. This is the heart of their higher death rate.

See below the labor participation rate for males age 25-54 for several countries.
Note that the US is on the bottom for the seven industrialized countries shown.
Source: Jason Furman. VOX, February 20, 2015.

5. Again, why are White Men Dying?

The three great essentials to achieve anything worthwhile are: Hard
work, Stick-to-itiveness, and Common sense. Thomas A. Edison
It seems the harder I work, the more luck I have. Thomas
Jefferson
People want to know they matter and they want to be treated as
people. -----Pamela Stroko
Throw yourself into some work you believe in with all your heart, live
for it, die for it, and you will find happiness that you had thought could
never be yours. Dale Carnegie
Here is one theory. As is clear from the chart below showing incomes of various
racial and gender groups in the US, white males have been the top earners for as
far back as we can find data. Thus, white men have an expectation of high
economic performance. The level of disappointment and stress a person feels upon
failure is function of his expectations. It depends on how far we fall. When white
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men fail to find work at age 45 to 54, when they may be convinced they will never
work again, the level of agony must be maxed out. Some then essentially give up
and adopt a destructive life style and perish before their time. When the Hispanic
or Black person cannot fund work, the fall is not as deep.

6. Free Trade. Positions from the Right

Free trade and globalization are supported by the political Right with near religious
fervor. They will seemingly never admit any of its negative aspects.
It is a common misperception that importing goods to America comes at the cost
of American jobs. In fact, imports contribute to job creation on a large scale.
Derek Scissors, Heritage Foundation, Sept. 2012
After four years of stasis on the trade front, the new environment is a welcome
change. Removing barriers to trade in both directions is essential to
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sustained economic recovery and long-term growth.Most Americans enjoy the

fruits of international trade and globalization every day
Daniel J. Ikenson and Scott Lincicome, Cato Institute, January 31, 2011

7. The Critical Importance of Employment

Well known is that viable employment is a critical factor in determining a
persons state of wellbeing, and feelings of self-worth, if not an overall quality
of life and happiness. In our society, males often feel responsible as the
primary bread winners in a family.
Societies with higher levels of income and employment have, of course, higher
per capita incomean economic parameter which measures overall economic
strength and tracks a nations life expectancy, life satisfaction, and general
quality of health. See charts below:

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8. The Number of Workers Off Shored

In the mid-1990s corporations discovered offshoring. It was like a gift of their own
personal high-yielding gold mine. Manufacturing costs went down, labor rates and
associated costs of benefits plunged, and sales grew with the expanded foreign
markets, and lower prices. Profits, stock prices and CEO compensation took off
like a Saturn rocket.
Most of the off shoring went to China, where in 2013 workers earned about $2.7
per hour. This compares to the US number of about $20.3 per hour. In 2005, the
Chinese worker made 65 cents an hour.
Below is a chart showing the number of jobs off shored by US multinational
companies. By 2008, 11.9 million jobs had gone off shore. Extrapolation of this
upward trend to 2013 gives 14.4 million by 2013

The number 14.4 million by 2013 correlates well with a value determined using an
alternative method of calculation. The value added dollar value of all products
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manufactured in China in 2013 was $2.6 trillion. This required about 100 million
factory workers. Thus the dollar productivity of Chinese manufacturing was
$2.6x1012/ / 100 x106 workers = $26,000 per worker. In the year 2013, according to
World Integrated Trade Solution, China exported to the US, goods valued at $369
billion
Dividing the 26,000 value into $369 billion gives 14.2 million workers making
products to be shipped to the US. This is remarkably close to the 14.4 million
number above. Since China has few name brands of its own, most of these workers
are doing contract manufacturing for US companies such as Apple and HP.

9. The Glorious New age of Off Shoring for Large

Multinational Companies
At the expense of domestic labor and inadvertently killing off a few thousand laidoff workers, large multinationals greatly benefited by off shoring which, again,
began its sharpened upward ramp in the mid to late-1990s. See chart below for
soaring corporate profits.

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At the same time our larger corporations begin building various divisions and
operations in foreign venues. See chart below.

By the year 2006, many multinational corporations had more people off shore than
at home. See graph below.

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Eventually these large corporation gained sufficient political clout to jaw-bone

their tax burden down. See graph below. From the late 1940s, corporate tax rates
fell by about 70%.

10. The Price of Corporate Greed

Greed is good
Gordon Gekko, In the Film Wall Street, 1987
US based corporations are not actually killing older white men on purpose of
course. But if I may speak for them, it is nice to get rid of these old farts. They
make more money than the younger ones. And they probably know less. For
example, they may not be up to speed in the latest computer and smart phone
technologies and products which have become body parts for the young.
Corporation
Pfizer
Merck
Hewlett Packard
Honeywell
Ford
Colgate-Palmolive
Non-farm US

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Layoffs in 2005-2006 (before the Great Recession)

10,000
7,000
14, 500
2,000
30,000
4,000
1,800,000

And we are sorry about dropping all those pension plans we offered years ago.
They were just too expensive. How about a nice 401K in the stock market that you
mostly pay for?
And its a shame about the demise of the American middle class. But that is not our
fault either. We serve world markets now, not just the US.

11. Solutions to the Problem

We could list political solutions to these problems, such as tax incentives to
increase domestic manufacturing? We could. But why bother?
Ask Bernie Sanders where the political power lies.
The greater irony might be that although the present assemblage of Republican
candidates for President tend to blame virtually all problems on Obama, the size of
government, or excessive tax rates, the problems discussed above were created
primarily by American private enterprise. Pretty much, all by themselves.

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