Hibernation Economy

The Book of Sean

A letter to David Kirkpatric, as a rebuttal for this article ( local copy)


Mr. Kirkpatrick,
   
I realize that the feedback from column is probably repetitive, and if someone else   
has presented this angle already, I apologize.
   
I trained as an Electrical Engineer. It was supposed to be a field of great demand. It   
is of great demand. Just the demand for workers isn't in this country. You see, many   
of graduates in the class of 1999, are still looking for work. Those that did find work   
have been subsequently laid off. This isn't an education from a po-dunk U, or a   
mail-order university, this is Drexel University. This isn't a degree in Accounting, or   
Journalism, it is Engineering.   
   
Yes, yes, this sounds like a sob story. But I have a point. You compared the   
bickering of farmers at the end of the 19th century to the plight of white-collar   
workers today. Well, if a freshly minted 5-year degree in the latest emerging   
technologies, with 18months of job training as part of the curriculum, is not   
competitive enough, is not keeping up to date, what on earth would qualify in your   
book?   
   
There is a great demand for Engineers. Just not in this country. Wage pressure is   
find for day-laborers, but an Engineer requires years of training at great personal   
expense. (My school loans combined with my ex-wife's, also and Engineer, are more   
than the mortgage on our house.) We can't just "compete". We aren't given   
state-sponsored education. We can't buy houses for the prices available in the   
developing world. For god's sake, my textbooks per term cost more than my rent.   

I don't know how India can produce Engineers as cheaply as they do. Many of my  
classmates were African, Indian, Russian, Korean, and Pakistani, so equivalent  
training was not available in their home country. They paid the same amount I 
did to go to the same schools. They had the added expense of living in another 
country, so in the end it costs them more to train an engineer.  
  
So eliminating the cost of education we are left with three possible explanations for  
why costs are so much less for offshore labor:  
1) The cost of living is radically less in these countries 
2) companies aren't replacing engineers with people of equal qualifications 
3) there is a deliberate move to depress wages in this country 
 
Number 1 is self correcting. All of the advantages of off-shoring will disappear as 
boom economies in these countries causes a worker shortage. Companies will have 
a few years of competitive advantage at best. Far too risky for far to little return, 
especially considering that offshoring for all it's "cost savings" is dreadfully 
expensive and disruptive to operations. 
 
Number 2 is self correcting. Experienced engineers are cheap at twice the price. An 
engineering mistake can cost a company billions in liability, product recalls, or fines 
from regulatory agencies. If your product kills someone, and the defect can be 
traced to using unqualified personell to design it, and your market valuation is in the 
billions, juries tend to tack on 6 or 7 zeros on damage awards. 
 
Number 3 ... well I don't want to touch evil conspiracy theories with a 10 foot pole. I 
for one don't attribute to malice what is better explained by stupidity. Would I be 
surprised to find a few smoking gun memos in the drawers of CEO's? No. If it is true, 
then the joke is on them. Soon they will be the most expensive part of a company, and 
shareholders will offshore their jobs too.

If I had to wager a guess, number 2 is probably right on the money, judging by the 
extent to which business is lobbying to cap liability awards. How far that gets is 
anyone's guess. Politics is about as good to read as the weather. Tommarrow you can 
guess pretty well, but next week anything can happen.

So despite my pangs of humanity, and labor sympathies, I actually find myself agreeing 
with you. While painful, this is just a temporary part of the business cycle. I will 
say though that I do see definite signs of deflation in my tea leaves. With the current 
debt level in this country that will not be a good thing.

Sean Woods
Armchair Economist

All content copyright 2017, Sean Woods | email: yoda@etoyoc.com | phone: 703-342-2662