From White Collars to Pink Slips

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At first glance, Kingston Technology doesn’t appear to have much in common with big auto manufacturers like General Motors (GM). Based in sunny Southern California, the computer-technology company makes small memory products and primarily employs white-collar programmers and designers. But Kingston and GM have at least one thing in common: They ship jobs overseas. Kingston recently handed out pink slips to 80 employees and moved its RAM and flash-memory production operation to China. “Our company has been, and continues to shift primarily production work from the U.S. to China,” Kingston wrote in a disclosure to the Department of Labor. But the company is also letting go of "finance, engineering, and IT positions."

Outsourcing is usually associated with blue-collar jobs that require a high-school education or less. But an increasing number of workers in the technology industry with a bachelor’s degree or more—electrical engineers, computer designers, and audio and visual engineers—are also seeing their positions go offshore. A new study from the Economic Policy Institute (EPI), a left-leaning think tank based in Washington, D.C., found that from 2001 to 2011, the United States eliminated more than a million manufacturing jobs requiring a college education because of the growing trade deficit with China. 

As these positions disappear, many workers are left taking jobs for which they are overqualified. “You have a lot of workers with college degrees who are taking jobs that don’t require a college degree, especially young graduates who have had falling wages for a decade or more in this economy,” says Robert E. Scott, director of trade and manufacturing policy research at EPI and the report’s author. “The problem is that most of the growth in the economy is in low-wage industries like retail trade and home health care.”

Since the practice of shifting low-skilled work overseas took off in the 1970s, Americans have been told that a college education was the key to a successful career. A bachelor’s degree might be expensive and require student loans, but a higher salary and job security were worth the investment. EPI’s report pours cold water on this argument. The think tank estimates that in 2011 alone, trade with China cost college-educated workers $19 billion in lost wages.

This is not to say that workers with a bachelor’s degree are not better off than those without one. “[Outsourcing] is much more of a concern for workers with low education,” says David Autor, a professor of economics at the Massachusetts Institute of Technology (MIT). Out of 2.7 million workers who lost their jobs because of outsourcing to China, one million were college graduates. “Non-college-educated workers are going to have a harder time readjusting to these things,” Autor says. “They are less re-employable.”

Doug, who asked that his last name not be used because he is currently facing a layoff, graduated from the University of Maryland with a degree in electrical engineering in 2008 and has worked for the same employer for five years. Last week, he received an e-mail saying the company would be letting people go at the start of the new year. College-educated workers like Doug are finding that they have to be more entrepreneurial as their companies lay off employees. “My friends and I had this idea that we might try home brewing and turn that in to a company, but that didn’t really pan out,” Doug says. ”Now I’m back on track to go somewhere else.”

To increase his chances of landing a new job, Doug is pursuing a master’s degree in electrical engineering part time at Johns Hopkins University. He fears for his older colleagues. “I’m pretty worried about them,” he says. “Most of them have kids and a mortgage.” 

Some economists say that manufacturing jobs requiring a college degree are more plentiful than they seem. Teresa Fort and Andrew Bernard of the National Bureau of Economic Research estimate that the Department of Labor undercounts between 431,000 and 1,934,000 workers—primarily design and management positions—in the manufacturing sector. Fort and Bernard say that the Department does not include employees at companies that produce “factory-less goods” in its tally; production takes place abroad, but the engineering work takes place in America. “We design electronics,” MIT’s Autor says. “But integrated circuit boards, computers, and disc drives—they are assembled in Asia and that has gone on for a very long time.”

Scott says that while design facilities and headquarters at "factory-less goods" producers indeed get counted as service jobs, this has been the case for decades and does not negate the overall effect his study documents. "We are properly counting those today," he says. "‘Factory-less’ accounting does not, and should not change, the way we measure manufacturing employment.”

Quibbling about numbers aside, what is there to do about it? Workers in Shanghai can work cheaper and longer than workers in Detroit, and America has been hemorrhaging manufacturing jobs to China for decades. 

Scott’s proposal is one championed by Mitt Romney’s presidential campaign last year. At present, the U.S. Treasury Department maintains that the Yuan is "significantly undervalued" but has so far declined to label China a currency manipulator. The president could declare the country a currency manipulator and outlaw Chinese purchases of U.S. assets, which would cause the value of the Yuan to rise and increase the cost of imports. Alternatively, the U.S. could buy up Chinese currency, artificially strengthening the Yuan just as China artificially strengthens the dollar.

Other proposals exist. “There’s a lot we can do,” Autor says, “including investing in a skilled work force, improving primary and secondary education, improving infrastructure, continuing to modernize the electric grid.”

Scott at EPI agrees that investing in infrastructure and green technology could help offset overseas job losses for college-educated workers: “This could provide millions of jobs for workers with college degrees at market wages ... rather than paying them to work as coffee baristas or jobs that don’t require the skills that they have spent four years getting.”

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