Nearly all workers ask the question, at least to themselves.
Can my job be shipped overseas?
Janitors, waiters, sales clerks, food preparers and many others at the low end of the pay scales don’t have to worry. Nor do many of those at the high end, including surgeons and other skilled medical, legal and corporate professionals.
It’s the middle class, studies have shown, that appears especially vulnerable to outsourcing or offshoring – and the ripple effects, which range from job losses to lower wages.
A 2008 Harvard Business School study concluded that as many as 2 out of every 5 U.S. jobs could conceivably be sent abroad.
The effects of globalization are as vast as the world’s new economy. Former aerospace engineers, IT programmers and call-center representatives in Arizona who saw their jobs move overseas can attest to that. And so can the radiologist in India reading X-rays for local hospitals, as well as other foreign workers who have gained jobs at the expense of Americans.
Arizona has not suffered as much from offshoring as factory-centric states such as Michigan, California and New York. But the loss of high-paying manufacturing positions can reduce U.S. wages and stunt overall job growth. Given the burgeoning of technology and the potential of the Internet, the list of jobs that might be offshored in the future could continue to grow.
“I call it the twilight of economics because we really don’t know where we are going,” said Ioanna Morfessis, a Phoenix-based economic-development consultant.
Yet she and others believe globalization holds the potential for middle-class economic growth as well – through foreign companies investing in Arizona, and in Arizona-based companies looking outside the U.S. to grow their businesses.
Arizona economic-development officials have already begun to fight for – and win – international jobs.
Global growth
A shared global economy has been decades in the making, with the growth accelerating in recent years. First, cheap consumer goods, clothing, cars and electronic goods flooded the U.S. market. Companies in other countries, particularly Japan and then China, learned how to grow their economies by catering to American consumers, especially its middle class. Americans helped by buying Toyotas, Hondas, Sonys and other products.
In the 1980s, American companies began relocating factories to other countries to take advantage of lower wage and production costs abroad. The U.S. lost about 2.2 million manufacturing jobs between 1990 and 2008, particularly in the electronics, aerospace and auto industries, according to the U.S. Bureau of Labor Statistics. Offshoring, as well as more-efficient manufacturing, contributed.
Robert Mittelstaedt, dean and professor of management at Arizona State University’s W.P. Carey School of Business, said earlier this month at an Economic Club of Phoenix event that outsourcing is driven by the simple desire for lower expenses and higher profit.
“The thing that drives me crazy is the average person thinks it’s some giant conspiracy that businesspeople are trying to push jobs outside the United States,” he said. “It’s nothing more than an economic decision. It’s no different than when you drive down the street and there are four gas stations and you say, ‘Which one has the lowest price? I am going to shop there.’ ”
The trend that has sucked away middle-class jobs in America has, ironically, fostered the growth of middle-class lifestyles in China, Brazil, India and other emerging economies. Demand for goods on other continents has begun to outstrip demand in the U.S. and Western Europe.
Just about every major American company has recognized the value of these growing markets; as they began selling more of their products abroad, they had to move some operations overseas to be closer to customers.
Some of Arizona’s largest employers have operations and employees in dozens of countries so they can both make and sell products abroad.
Intel Corp. – the state’s 11th-largest private employer, with about 9,700 workers in Chandler – gets at least 80 percent of its revenue from outside the U.S. About 55 percent of its 82,500 workers are in the U.S. (Arizona and three other states); the rest are in Ireland, Israel and China.
Phoenix-based Avnet Inc., an international seller of electronic components, has operations in more than 70 countries. Of its 17,000 employees, about 2,400 are in Arizona.
Goodrich Corp., a Charlotte, N.C.-based Fortune 500 company that provides products and services to aerospace, defense and other industries around the world, has more than 80 facilities in 18 countries, and about 25,000 employees worldwide, including about 500 in metro Phoenix.
In an ultracompetitive aerospace arena, the company needs employees around the world to help customers around the clock and every day of the year, said spokeswoman Laura Neel.
“Other competitors in the industry are doing the same thing – that is, hiring the right talent globally to best serve customers, who include original-equipment manufacturers like Airbus and Boeing and the airlines themselves,” she said.
Some of these multinationals continue to add jobs in Arizona. Intel plans to add at least 1,000 jobs in Chandler in 2013. And Goodrich is hiring up to 200 this year.
Countless smaller companies, such as Cutters Gloves, a Phoenix-based company that makes baseball mitts and football, golf and soccer gloves under the Cutters and Nokona brands, are also working to capitalize on global opportunities. The company wants to tap into the popularity of American sports to increase sales overseas, especially in Japan, South Korea and China.
The dark side
Though globalization has helped corporations grow, it has a dark side. Cost considerations and cutthroat competition prompt companies to close American factories and send jobs overseas to manufacture products more cheaply. Or, at a minimum, market forces make it harder to add jobs in the U.S. when it costs less to add the same jobs overseas.
But Barry Broome, president and CEO of the Greater Phoenix Economic Council, said Arizona is one of a handful of states that have been spared the worst of offshoring.
“I think we are one of two or three markets least impacted by offshoring. That’s a backhanded compliment. It’s primarily because we don’t have mature industries and high-tech manufacturing,” he said.
But metro Phoenix has seen high-profile losses.
Swiss semiconductor company STMicroelectronics announced in 2007 that it would shut down its semiconductor manufacturing operations in the Phoenix area – with as many as 900 jobs – over the next few years and move the work to Asia and Europe. And it did.
Honeywell International Inc. is battling to maintain its stronghold as one of the world’s largest suppliers of aircraft products amid steep declines in the aviation industry and increasing global competition. Honeywell and its competitors face intense pressure from customers and shareholders to reduce operating costs.
In recent years, the pressures have prompted Honeywell to move some manufacturing to Mexico, the Czech Republic, Malaysia and other locations, resulting in job losses in metro Phoenix.
In October, the AFL-CIO unveiled an online Job Tracker to disclose which companies have sent jobs abroad. The labor organization tracks the statistics by identifying companies that have been certified to receive federal Trade Adjustment Assistance training dollars that are used to retrain workers who lose jobs to international trade. Although it does not identify all of the offshored jobs, the data provides some perspective.
In the federal fiscal year that ended Sept. 30, 43 Arizona companies were certified to receive $4.1 million from the program. That represented about 4,500 workers and included not just manufacturing and industrial companies such as Honeywell, Intel, Freescale Semiconductor and Dolphin Inc., but some service firms, including Hartford Financial Services Group, American Express Travel Related Services, Dex One Corp. and the Jones Lang LaSalle real-estate company.
The number of companies doubled over the past two years because the funds were extended to service workers. In the past, the retraining money was available only for manufacturing employees.
Middle-class impact
Thousands of Arizonans who lost their jobs to offshoring several years ago haven’t been able to find work.
In early 2009, Mesa resident and Vietnam veteran Bill Mikanovich was laid off after working steadily for 37 years in manufacturing and engineering. He had worked his way up from a draftsman trainee to a product-support manufacturing engineer, attending night classes for 12 years while working full time to get a degree in industrial-technology manufacturing in the early 1990s.
After working for various major Phoenix-area manufacturers, he ended up in 2006 with Motorola’s Embedded Communications Computing Unit, earning a solid middle-class salary of about $65,000 a year. Motorola sold the unit in 2008 to St. Louis-based Emerson Network Power, which has sales or manufacturing operations in more than 150 countries.
Mikanovich was laid off in February 2009, after being told his job was being outsourced to China or the Philippines. Now 62, he has been unable to land a job.
“The word ‘outsourcing’ does not sit well with me. When they start outsourcing, they (multinationals) lose control of the process, and you have to deal with different cultures and stuff like that,” Mikanovich said.
Henry Inocencio, 56, a Tucson father of three children, in 2008 lost his job as a forklift operator for Hart & Cooley Inc., a Grand Rapids, Mich., company that makes heating and cooling products. He worked at various jobs with the company for about 18 years.
The company laid off hundreds and opened a plant in Mexicali, Mexico.
“When I first got laid off, I applied almost non-stop and nothing came out. I couldn’t find anything,” he said. He finally gave up and, with his wife supporting the family, took advantage of government aid to study at Pima Community College for an associate degree in applied science that will enable him to work in the heating, cooling and ventilation trade.
Continuing trend?
A variety of business research offers ominous signs for workers who hope they won’t see their jobs go overseas.
Princeton University economist Alan Blinder in 2007 studied about 800 job classifications with an eye to determining which ones included tasks that, in theory, could be done easily offshore. Binder estimated that 22 percent to 29 percent of all U.S. jobs “are or will be potentially offshorable within a decade or two.”
A year later, Harvard Business School students followed up with a study using similar techniques and concluded that up to 42 percent of jobs – a minimum of 20 million jobs – could be sent abroad.
Those include radiology, computer and information scientists and researchers, electronics engineers, food-science technicians, financial analysts and architectural drafters. The Harvard study also examined the annual median wages for jobs most likely to be offshored and found some evidence that showed medium-wage jobs were the most conducive to offshoring.
“One cannot dismiss offshoring by saying that it threatens only ‘jobs that Americans don’t want anyhow.’ There is modest evidence that medium-wage occupations are the most at risk, suggesting particular vulnerability for the middle class,” the Harvard study said.
New opportunities
Foreign companies have recently begun setting up operations in Arizona, suggesting the start of another phase of globalization and perhaps the start of a countertrend that will create U.S. jobs. Adding more good jobs remains the key to a healthy middle class.
While national politicians try to loosen foreign-trade barriers, local groups, politicians and businesses aim to attract more direct foreign investment and increase exports. Entrepreneurs continue to look abroad for customers.
Economists also hope to see more “back-shoring,” in which companies close down foreign factories and move jobs back to the U.S.
Last week, Volkswagen began producing cars again in the U.S. after closing its last American plant about 25 years ago. The new $1 billion facility in Chattanooga, Tenn., will produce a special Passat sedan designed for the American market.
GPEC, the new Arizona Commerce Authority and other economic-development groups have been seeking out more foreign companies to invest in Arizona – not just to buy property but to build factories here to create jobs.
Economic developers have persuasive arguments. Foreign companies setting up shop here will be closer to a large base of American customers, including the large California and Texas markets. They can avoid the cost of shipping products overseas. Arizona has a relative absence of natural disasters, lots of inexpensive real estate and a ready pool of workers skilled in a variety of fields.
Recent successes include Rioglass Solar and Gestamp Solar Steel Co., both from Spain. Together they are investing about $60 million and creating at least 150 new jobs in Surprise. Suntech Power Holdings, a Chinese company that is the world’s largest maker of solar panels, expects to have about 150 workers at its new plant in Goodyear.
Increasing exports, already worth $14 billion annually in Arizona, is another way to reduce the impact of offshoring because exporting provides jobs to Arizonans.
About 95 percent of the world’s consumers live outside the U.S., according to a report prepared for the U.S. government’s new National Export Initiative.
Aram Chavez, a co-owner of Phoenix-area consulting company 24×7global.com, said there is a rising market for U.S. products in India. The company helps firms introduce products there, including a local company that makes vitamins and health supplements.
“There is a very large demand for U.S. products in India,” he said. “It’s primarily driven by the quality expected and trust factor of ‘Made in the U.S.’ ”
ASU economist Lee McPheters said that as salaries rise around the world, companies may decide it’s no longer as cheap to manufacture abroad, especially considering the costs of transporting parts and products across oceans. They may bring the jobs back. But his best guess: That could be 20 to 30 years away.
Patrick Burkhart, assistant director of Maricopa County’s Human Services Department, who oversees Maricopa Workforce Connections, said he is seeing evidence that companies shutting down plants are just consolidating and moving the jobs elsewhere in the U.S., not overseas. Workforce Connections provides outplacement services for laid-off workers.
“I don’t think it (offshoring) is entirely over yet, but we’re not seeing it nearly the way it was,” he said.
Source:http://www.azcentral.com/arizonarepublic/news/articles/2011/05/29/20110529middle-class-jobs-shipped-overseas.html
