In the overall world economy there are two distinct types of countries; those with high numbers of cheap laborers (labor-intensive countries) and those with high levels of technology, education and finance (capital-intensive countries). One of the basic concepts of modern economics is that world commerce is more profitable when labor-intensive countries manufacture goods and ship them to capital-intensive countries, while capital-intensive countries export their technology and provide financing and expertise.
As a result of this process, many American jobs have moved overseas because American companies can pay workers in Mexico, Pakistan, India and other countries much less than they have to pay American workers. From a global perspective, in a capital-intensive country like the United States, it can be unprofitable to manufacture many products. It is often better for America to provide the technology, finances, education and expertise for research and development. The future therefore looks very bleak (if not dangerous) for Americans who do not intend to aggressively pursue higher education.
Indeed, in the 1960s, there were only about 7,000 global companies, 60 percent of which were based in the United States. Today, that number has grown to above 63,000, but only about 37 perce nt are American-based, while 21 percent are now based in Japan and 25 percent in Europe. In addition, while the United States does remain the world's largest and strongest economy, in recent years China has surpassed Great Britain to become the world's second largest. As many parts of China's economy are still developing, the opportunity certainly exists for that country to surpass the United States and become the world's largest economy.
With this in mind, the concept of "outsourcing" becomes critical. Outsourcing is the process by which organizations use an outside company to assemble part of their product or perform portions of overall services. Companies use outsourcing because a separate organization or another set of workers can often perform the services cheaper. For many countries, the most recent examples of outsourcing have been the purchasing of "services" overseas. An example would be the moving of IT (information technology) jobs to Asia.
Another area of interest is that managers may increasingly be looking to hire employees who are able to speak more than one language. As Americans, we often forget that when we are speaking to a representative of our credit card company on the telephone, it is very likely that we are actually speaking to someone in India or Pakistan, not New York or Chicago. We forget that most people around the world can speak two or more languages, while most Americans speak English-only. As American companies continue to "go global" and operate in more and more countries overseas, Americans who speak English-only may find it difficult to compete in the global marketplace.
Unfortunately, because U.S. companies are competing against low wages overseas, unskilled workers in the U.S. are unable to demand decent wages. What we often fail to recognize is that as U.S. workers demand things like minimum wage, health insurance, vacation time, etc., more and more technological advances are occurring within U.S. companies. The primary purpose for those technological advances is to reduce the need for unskilled labor. Here's an interesting point to consider -- about $5,000 of the total cost of an American-made car doesn't even go towards parts, labor or development. That $5,000 is to cover employee benefits and high wages that have been demanded by autoworkers unions. The translation here is that American-made cars are, on average, over-priced by some $5,000. This gives foreign auto companies (and foreign autoworkers) a competitive advantage in the marketplace.
For the very reason that overseas companies provide an abundance of cheap labor, an ultimate goal of technologically advanced U.S. companies is to reorganize operations so they don't need labor at all. Indeed, while there has been much adieu about the concept of economic "globalization" and how many U.S. jobs are and will continue to move overseas, we should also acknowledge that globalization guarantees that many new jobs will inevitably be created in the U.S. But, because the U.S. is a capital-intensive country, it is most likely that those new jobs will require higher levels of education.
While many studies show that globalization contributes to the inequality of wages, those same studies acknowledge that globalization is not the only factor. Much of the inequality in pay is because of our increasing technological environment and that increasing levels of education are now needed to compete in the global economy.
In considering all of this information, educators in particular should acknowledge how important their efforts are in preparing our future American workforce. But at the same time, today's educators shouldn't neglect continuing their own education in anticipation of how the global environment may affect them as well.
Keith Pounds is a Lebanon/Grenada-era military veteran having served as a combat medic in the U.S. Navy and with the Marine Corps. He holds a bachelor's degree in human resource management and an MBA with a concentration in organizational psychology. He currently serves as the science specialist assistant for Orangeburg Consolidated School District 5.