Commentary

Exporting Tech Jobs to India?

This article originally appeared in Town Hall.com on January 4, 2004.
Those afflicted with an irrational phobia about international trade used to confine their raving to manufactured goods, not services. But the United States is now said to be exporting high-paying service jobs to India, particularly in information technology. Worrying about U.S. companies importing services from India is a classic example of the journalistic inclination to ignore the forest and focus on a few twigs. The United States is by far the world’s biggest exporter of services, just as the United States is by far the leading exporter of goods.

The United States accounted for 18.1 percent of worldwide service exports in 2001, according to the WTO, up from 17 percent in 1990. India accounts for only 1.4 percent of world service exports. India is in 21st place among world exporters of services and in 30th place for goods. India is running a trade deficit of about $8 billion, and that country’s imports rose 20 percent in 2003. China ranks fifth among world exporters of goods (although China accounts for 11 percent of U.S. imported goods), and it has a small and dwindling trade surplus. China’s imports rose 40 percent in 2003. Hong Kong is a significant exporter of services, but it has a trade deficit with the United States.

The United States had a $64.8 billion trade BEG ITAL) surplus in services in 2002, despite economic stagnation in Europe and Japan. Services accounted for 30 percent of all U.S. exports and 43 percent ($3.1 billion) of U.S. exports to India.

Worrying about job changes among computer professionals is yet another example of the journalistic inclination to totally ignore any facts about the big picture and instead generalize from small and local anecdotes. The Bureau of Labor Statistics categorizes these allegedly vanishing jobs among “computer and mathematical science occupations” — i.e., computer programmers, software engineers, systems analysts, support specialists, network administrators, etc. These jobs exploded with the tech boom, rising 11.9 percent in 2000 alone, but such panicky hoarding of computer geeks was no more sustainable than 5,000 on NASDAQ. Even in 2002, however, employment in these computer-related occupations was nonetheless higher than in 1999, and so were salaries.

In 1999, there were 2,620,080 jobs in these computer-related professions at an average wage of $26.41. In 2002, there were 2,772,620 such jobs at $29.63 an hour ($61,630 a year). Figures on that specific job group are not available for 2003, but professional business service payrolls were up 2.3 percent by November, when compared with the year 2000, and jobs in information industries were up 4.9 percent. Jobs in the subgroup of “computer systems design and related services” are down slightly from last year but have risen steadily for the past three months.

The notion that service jobs are being lost to India is paradoxical because similar complaints about China or Japan invariably involved disparaging U.S. service jobs as “McJobs” — inferior to working with a sewing machine or wrench. In the case of India, however, even the most menial computer service chores — such as tech support and handling health insurance claims — are now being glorified as “high-wage” jobs. Past stories about “exporting jobs” also assumed those jobs had moved to countries with trade surpluses, such as Japan and Germany. But India has a sizable trade deficit, and it even had a deficit in services until 2002. This is not to suggest, however, that previous stories about trade surpluses being a sign of economic strength made sense. On the contrary, from 1990 to 2001, employment grew by 1.2 percent a year in the United States, but by only 0.3 percent in Japan and 0.1 percent in Germany.

Trade phobia has lost any sense of direction. The United States is now said to lose jobs to countries with trade deficits as well as to countries with trade surpluses, and to lose jobs in services as well as manufacturing. Some even suggest the United States will lose most service jobs to India and most manufacturing jobs to China. But without jobs, how could Americans keep buying all those imports?

A New York Times report claimed India is attracting a lot of direct investment from multinational corporations. Yet Morgan Stanley reports: “Private corporate investment (in India) is estimated to have declined to 4.7 percent of GDP in 2003 from 9.6 percent in 1996. … In April to September 2003, FDI investments have declined by 63 percent compared to the same period last year.”

The United States has always imported and exported services as well as goods. So what? Even if we ignore this country’s huge and growing dominance of world service exports, it would still be delusional to speak of importing services as equivalent to exporting jobs. The notion that “exports create jobs” (every commerce secretary’s favorite slogan) is neither more nor less true than the idea that imports create jobs. Work is involved in all creation and marketing of goods, services and financial assets. Work is also involved with the extra investment resulting from a net inflow of foreign capital, otherwise known as a “current account deficit.” Growth of employment is related to growth of the economy, not to imports or exports or the gap between them.

If the United States was really losing more jobs than it was gaining, then employment would be falling. But employment is rising. There were 138.6 million civilians with jobs in November, up from 136.5 million a year earlier. The number of U.S. jobs doubled in fewer than 40 years. If the rapidly expanding number of jobs were inferior to the ones that preceded them, then incomes would be falling. But incomes, too, are rising. Real hourly compensation kept rising even in the recent recession and is now up more than 26 percent since 1980. Real disposable income (which excludes stock market gains) rose at a brisk 3.9 percent annual rate cent from April to November.

The media blitz about imported goods or services resulting in the best jobs being relocated to some variable list of countries — first Japan and Germany, now India and China — has never been anything more than unadulterated hogwash.

Alan Reynolds is a senior fellow at the Cato Institute.