How “Outsourcing” Has Killed the Middle Class

The twin demons destroying the American Middle Class are Offshoring, and “Outsourcing”. They call it the “Gig economy”, and to be honest it is pretty f’cked up for the employees.

Offshoring is responsible for the massive growth of the Chinese economy. Back during Clinton and Bushit American companies off shored all of the computer chip Foundries. This resulted in a massive growth in the Chinese economy, and left America without a foundry on American soil capable of producing the high density chips used in everything from TVs to our most advanced weapons systems. No wonder the Chinese Military has been able to upgrade their weapons systems and  launch Astronauts into space. We gave them the technology, all because of Wall Street greed and corporate avarice.

A sweatshop call center in Nicaragua.

Worse was the loss of American jobs, manufacturing through the movement of factories off shore, and high tech through a combination of H1b Visas enabling companies to bring cheap workers over from India and other countries to displace American Graduates, and second “Outsourcing” where either American jobs were shipped overseas, or to sweat shops on American soil. This is the driver behind Trump, and Sanders, Unfortunately in Trump’s supporter’s case they would rather cling to their racism and blame minorities – than blame who is actually screwing them. Stupid is and Stupid does.

Surge in outsourcing wipes out middle-class jobs

For nearly 20 years Alfredo Molena made a middle-class living repairing bank ATMs in Los Angeles, despite being a high school dropout and immigrant from El Salvador.

By 2000 he was earning about $45,000 a year, enough to support his wife and two children in a spacious apartment and take periodic vacations to El Salvador and Hawaii. He had health insurance, a matching 401(k) plan, and a company-supplied cellphone and vehicle. But it all unraveled in 2005 after his employer, Bank of America, subcontracted the work to Diebold Inc., a firm specializing in servicing ATMs.

Today Molena drives a truck long-haul for about $30,000 a year, putting him in the bottom third of household incomes. He has no medical insurance. “I cannot afford it,” he snapped.

Globalization and the offshoring of U.S. manufacturing jobs to China and other cheap-labor countries are commonly blamed for driving down the wages and living standards of ordinary American workers, but there is another, less-known factor behind the shrinking middle class: domestic outsourcing.

Many jobs have been farmed out by employers over the years. No one knows their total numbers, but rough estimates based on the growth of temporary-help and other business and professional service payrolls suggest that one in six jobs today are subcontracted, or almost 20 million positions, said Lynn Reaser, economist at Point Loma Nazarene University in San Diego.

Separate Labor Department data show that some of these occupations have seen a significant decline in inflation-adjusted, or real, wages over the last decade.

In 2005, there were 138,210 workers nationwide who repaired ATMs, computers and other office machines, earning a mean annual salary of $37,640.

Ten years later, the number of such jobs had shrunk to 106,100, with most of them subcontracted at annual pay of $38,990. But after accounting for inflation, that’s a drop of about 15 percent from 2005.

By contrast, real wages for all occupations rose 1.3 percent between 2005 and 2015 � itself a tiny gain over the last decade, but still significantly more than those hit by domestic outsourcing.

“If a firm wants to save labor costs, outsourcing is just a way of resetting wages and expectations,” said Susan Houseman, a senior economist at the W.E. Upjohn Institute for Employment Research in Kalamazoo, Mich.

Unlike the effect of offshoring, with its relocation of jobs and plants abroad, economists know relatively little about the extent and effects of decades of subcontracting production and services to third parties in the U.S. But what research has been done suggests the practice has played a significant role in the nation’s troubling trends of stagnating wages and rising inequality.

Rosemary Batt and other researchers at Cornell University found that large employers at subcontracted call centers, for instance, paid their workers about 40 percent less than comparable workers employed in-house at large firms, not including the value of health and retirement benefits…Read the Rest Here…