Re: The Harsh Truth About Outsourcing

Bob Bronson wrote:
> 
> Thanx, XXXXX.
> 
> We totally agree with Roberts, "The huge excess supplies
> of labor in India and China mean that American wages will
> fall a lot faster than Asian wages will rise for a long
> time."

Dear Bob,

I fully agree with this statement.  In today's Boston
Globe, we hear that India is being pushed by our
administration to buy more from us.

But, what if their people don't want what we sell?

Meanwhile, on the CPI side of things, Kuttner has
some very informative remarks:

["fair use," "teachable moment," "archival," Section 107(a), 1976
Copyright Act and 1998 Digital Millennium Act]


ROBERT KUTTNER

Statistics lie on the true cost of living

3/17/2004

HAT IS THE MATTER with the whiny American voters? They keep telling
pollsters that they think America is on the "wrong path." But don't
they read the statistics? Don't they know that unemployment is at a
comfortable 5.6 percent, that inflation is almost nonexistent, that
the economy is growing smartly at around 4 percent? 

These happy statistics, alas, don't accurately capture the economic
reality of ordinary people. Take inflation. It's true that measured
inflation is very low, but look at all that's left out.

In the case of health care, the government's consumer price index
tracks the cost of medical services. But it is less precise about
tracking who pays for them. If your employer's health plan is
increasing your share of premiums and cutting the company's
contribution or if the plan is increasing out-of-pocket charges or
reducing what drugs it will cover, this shift is accounted for
indirectly, after a lag of two years. But it hits your pocketbook
immediately. And if rising medical costs deter you from seeing the
doctor, that doesn't show up in the index at all.

Or consider housing. There are parts of the country where housing
prices have been declining for a decade because few people want to
move there. Statistically, these declines get averaged with
astronomical housing costs in major metropolitan areas to show only
modest average housing inflation. Around big cities, prices have
plateaued at very high levels that are plainly outstripping incomes.
Try telling a young person in Greater Boston or New York or LA that
there's no serious housing inflation or that rents have not increased
faster than earnings.

Another case of hidden inflation: A great many people in late middle
age find themselves subsidizing their newly launched young. The causes
of this trend are multiple: low starting salaries, skyrocketing rents,
and the high cost of college tuitions and health insurance. Is this a
dent in the cost of living for the middle aged? You bet. Does it show
up in government statistics? Nope.

The inflation numbers also fail to capture pocketbook realities for
retired Americans. A low official inflation rate plays a cruel trick
on seniors. For starters, it means that cost-of-living adjustments in
Security Security checks are mere pocket change. One new prescription
can more than eat up this year's Social Security increase.

Further, a low rate of inflation translates into a low interest rate
on savings accounts, Treasury securities, and other prudent
investments for the elderly. Moreover, older people on fixed incomes
who are not homeowners are also at the mercy of rising rents.

And the same deficiencies in the consumer price index that fail to
capture cost shifting in health care particularly affect the elderly,
who spend a disproportionate share of their income on doctor's bills,
hospital costs, and drugs.

Or take energy costs. Gasoline is near an all-time high. That doesn't
affect the overall index much because energy costs are a relatively
small share of average total consumer spending. But if you need your
car for your business, you certainly feel it.

Then we have the unemployment numbers. Nominally, unemployment is a
nice, manageable 5.6 percent -- about where it was during much of the
booming 1990s. But that statistic leaves out all the people who left
the labor force because they gave up on ever finding a job. If you
include those, the real unemployment number is more like 7.7 percent.
The proof of the soft job market is that earnings have not kept up
with inflation. In 2003, the official inflation rate was 2.3 percent.
The median wage increase was just 2 percent. And the 2004 statistics
are likely to be worse.

The "average" voter got a tax decrease that the administration likes
to put at around $1,000. But that artful statistic averages Joe
Sixpack with Bill Gates. The typical voter got a federal income tax
cut of more like $300, and in many cases that small federal tax cut
was overwhelmed by local property tax increases that were caused by
declining federal aid to states and cities.

President Bush may have gotten away with telling the voters things
about Iraq that just aren't true. But he'd better watch out when the
evidence against his rosy statistics is right in voters' pocketbooks.

Ordinary people may not be professional statisticians, but they are
not fools. America's voters know better than the experts whether their
own personal economy is thriving. Bogus economic optimism only
reinforces the growing sense that this president speaks with a forked
tongue.

Robert Kuttner is co-editor of The American Prospect. His column
appears regularly in the Globe.

c Copyright 2003 Globe Newspaper Company.

-- 


           W. Curtiss Priest, Director, CITS
   Research Affiliate, Comparative Media Studies, MIT
      Center for Information, Technology & Society
         466 Pleasant St., Melrose, MA  02176
   781-662-4044  BMSLIB@MIT.EDU http://Cybertrails.org