2008, employment declined by 22% or 3.8 million jobs. This occurred despite an increase of 7 million jobs in all private employment—excluding manufacturing.50 The decline in employment can be traced to increases in labor productivity and import competition but also is related to the focus on core competencies in global supply chains and the outsourcing of noncore functions (such as accounting, security, shipping, and janitorial services provided by companies in the service sector). Increases in productivity and technological change are part of the normal development of an economy. Most workers displaced by technology find employment elsewhere, although some may be negatively affected (lower wages, fewer benefits) for some period of time.
Those displaced by imports, however, may find it difficult to transfer their skills to other industries because they tend to be in traditional industries, such as apparel, leather, textile mills, and primary metals.51 In apparel, for example, the global supply chains include producers (such as brand name clothing manufacturers) who may contract with overseas suppliers to manufacture garments according to their specifications with their brand labels. Apparel supply chains also include big box retailers who may source and sell product both from U.S. brand name suppliers and from non-U.S. manufacturers located in markets around the world. While the lower prices enabled by the various supply chains may benefit the consumer, and the wholesale and retail sectors in the United States claim much of the revenue from sales of the imported product, the import-competing industries may turn to the government for help through programs such as Trade Adjustment Assistance in retaining workers52 or for assistance in retooling factories or in pursuing innovations or through trade remedy laws.
In the United States, much of health care is provided by employers, so health care costs have become an integral part of labor costs. The costs for health care in the United States are the highest in the world. The Congressional Budget Office (CBO) estimates that spending on health care and related activities will account for about 17% of gross domestic product in 2009 ($2.6 trillion or $8,300 per capita) and under current law CBO projected that share to reach nearly 20% ($13,000 per capita) by 2017. 53
Business interests have claimed that these costs are hurting the ability of U.S.-based businesses to compete in world markets and are causing firms to move production to other countries.54 General Motors, for example cites health care costs as a major burden when compared with manufacturers in Japan and Europe.55 This issue is complex, and reform to improve the competitiveness of the
U.S. Bureau of Labor Statistics. Congressional Budget Office, Factors Underlying the Decline in Manufacturing, December 23, 2008, p. 6.
52 U.S. Department of Labor, Employment and Training Administration, Trade Adjustment Assistance, Fact Sheet, c.2008.
53 Congressional Budget Office, Key Issues in Analyzing Major Health Insurance Proposals, A CBO Study, Washington, DC, December 2008, p. 13.
54 Lee Hudson Teslik and Toni Johnson, Healthcare Costs and U.S. Competitiveness, Council on Foreign Relations, Backgrounder, Publication 13325, December 30, 2008.
55 General Motors. “About Us, Competitive Challenges, Health Care,” GM 2006 Corporate Responsibility Report, 2006.