Published: 09.03.2006

Is globalization hurting U.S. workers? NO: Job creation has risen overall, and wages are up for many, too

Opinion by Mark J. Perry

Labor Day, the first Monday in September, honors the contributions of working men and women in building our country. On this Labor Day weekend, we explore the increasingly integrated global economy and its impact — pro and con — on the United States, as two experts answer "Is globalization hurting U.S. workers?" from their perspective.

FLINT, Mich.

Throughout human history, globalization and international trade have always destroyed some jobs in the short run. But in the process of destroying jobs, globalization has always created many more jobs than the number of jobs lost, and has significantly raised the standard of living of all workers in the long run.

For example, 1 million manufacturing jobs have been lost over the last decade, many having been outsourced overseas. That loss of manufacturing jobs reflects the downside of globalization for American workers, but fortunately that is not the end of the story. Over the last 10 years, 16 million new jobs have been created in the U.S. economy, and many of those are because of globalization.

In addition, although some manufacturing jobs have been outsourced overseas in industries like motor vehicles, clothing and furniture, employment in the nonmanufacturing side of those industries has risen due to increased production efficiencies and lower prices.

Since 1996, 200,000 jobs have been created in furniture sales, 133,000 jobs by auto dealers and more than 220,000 jobs in retail clothing, at the same time that some manufacturing jobs in those industries were lost due to globalization.

In the service sector of the economy, 17 jobs have been created during the last 10 years for every one job lost in manufacturing, resulting in 17 million new jobs for Americans, more than offsetting the million manufacturing jobs lost due to globalization.

Three million jobs have been created in health care, and more than 1 million jobs have been added in education. Almost 2.5 million jobs have been created in the financial services industry, and 2 million more jobs in the leisure and hospitality industry.

There are now 350,000 more architects and 600,000 more computer programmers than 10 years ago. In almost every industry except manufacturing, employment opportunities have exploded over the last decade of globalization.

And forget about the low-paying, hamburger-flipping nonsense you hear about service-sector jobs. Most new service jobs — engineers, nurses, professors, computer programmers, accountants, bankers — pay more than the manufacturing jobs they have replaced. Further, average pay for jobs in the service sector has increased by 42 percent since 1996, compared with only a 34 percent increase in manufacturing wages.

Much of the growth in the service sector of the American economy can be traced directly to globalization. U.S. firms operate more efficiently by outsourcing, which allows them to expand sales both here and abroad, supporting more jobs here and overseas.

For example, since Wal-Mart started expanding globally in the 1990s, it has added 1,500 service-sector jobs at its headquarters in Arkansas just to coordinate the distribution of products to stores in a dozen countries around the globe. Without globalization, none of those 1,500 jobs would exist today for American workers, and that is just one example of hundreds.

Several recent studies have analyzed exactly that type of increased employment at U.S. multinational corporations, which are often accused of "exporting" jobs overseas. The data show a very different story of globalization and the net effect on U.S. jobs. For every one job outsourced abroad by a U.S. multinational like Microsoft or General Electric over a recent 10-year period, at least two new jobs were created here, for a net increase of almost 3 million jobs for American workers during that period as a direct result of outsourcing and globalization.

Simply put, globalization has been a major force behind U.S. job creation in recent years, and payroll employment has now reached record levels. Globalization has helped our economy create so many jobs that seven states have set record low unemployment rates this year, and an additional 15 states are within 1 percent of their historical low jobless rate — and that is something to celebrate on Labor Day.

(Mark J. Perry is a professor of finance and economics at the Flint campus of the University of Michigan and he can be contacted by email at mjperry@umich.edu).