Thursday, December 1, 2011

Do High Unemployment Rates in U.S and Europe Refute the Arguments For Outsourcing Blue Collar Jobs to Asia?

There have been lots of commentators defending outsourcing of jobs arguing that "the creation of new jobs overseas will eventually lead to more jobs and higher incomes in the United States". However, the U.S. and Europe may have finally reached the tipping point where so many jobs have been outsourced to Asia that there simply are not enough jobs left to bring down unemployment rates.

Countries in the developed world have been flooding their economies with fiscal stimulus and holding interest rates artificially low. Despite these efforts to prime the pump, unemployment rates remain high. The pump priming can not go on much longer because deficits have reached levels that already endanger the world's financial system. The failure of the pump priming to stimulate employment is in part due to not enough of the of the funds making their way to the hollowed out core of domestic manufacturers.

Unemployment Rates By Country

22%   Spain
18%   Greece
12%   Portugal
10%   France
9%     United States
8%     Italy
8%     United Kingdom

Source: Trading Economics

Unfortunately, the genie is out of the bottle. The "developed" economies have all become debtor nations, and policies that would restrict imports and recapture jobs would also lead to a disastrous trade war with the Asian countries that are their creditors.

The United States and Europe are between a rock and a hard place. The massive debts require job killing austerity measures. The high unemployment rates require job stimulating deficit spending. However, debt levels are already so high that deficit spending at current levels is only viable for a few more years at best..

The debt load in Greece finally became so high that their creditors have forced the country to impose austerity measures. The impact of the austerity measures has been a primary factor in the unemployment rate doubling from 9% to 18% in little more than a year.

Americans seem to be oblivious to the danger of the increasing debt load. However, within a few years the U.S. will have to turn off the fiscal stimulus pump. At that point, double digit unemployment may become the new norm.

The irony of the situation is that the softening economies in Europe may lead to unemployment problems for Asian exporting nations.

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