Don't apply for med school just yet

It's a little wonkish, but this post about outsourcing is a great one (hat tip, once again, to Yglesias).

Basically, the famed economist Alan Blinder has argued that the rise of outsourcing means that people who work in outsourceable jobs - like computer programming - will eventually lose their jobs to low-cost countries like India. Blinder says we should therefore shift our education system to train people for jobs that can't be moved offshore, like computer repair.

Blogger KNZN points out that this doesn't follow. When some jobs move offshore, that doesn't necessarily increase demand for jobs that can't be moved. The fact that computer programming jobs move to India doesn't mean there will be more work for computer repairmen here in America.

To see this gaping flaw in Blinder's argument, consider its logical conclusion: If we allow outsourcing AND immigration, by Blinder's logic, Americans would have no jobs left at all! This, of course, is obviously not the case.

(What IS the case is that outsourcing creates a little bit of uncertainty for everyone. Now a lot of jobs that seemed "safe" are safe no longer, and nobody knows which will be the next to be outsourced. The little bit of anxiety that this adds to most people's lives is, in fact, a net minus of outsourcing. The hassle of people switching jobs more rapidly is another net minus. But the pluses of outsourcing will (probably) be much bigger.)

So jobs like doctor, computer repairman, and teacher might seem like a surer bet for those who are afraid of changing careers. But then more risk-averse people will cram the markets for those jobs, and wages for computer repairmen and the like will go down. Possibly outsourceable jobs will be higher-paid, but riskier. Bam, end of Blinder's anti-outsourcing argument.

But there's a more important point to be made here, and KNZN makes it. In recent years, America has been losing some outsourceable jobs (mostly in manufacturing and low-end services) and gaining a lot of non-outsourceable jobs - specifically, construction and real estate-related jobs. Blinder's argument, although it shouldn't be right, has looked right recently.

How did this happen? Well, the U.S. has a massive current account deficit, meaning we borrow a hell of a lot from other countries. This is both because the government, under Bush, runs huge deficits, and because Americans spend a lot and don't save very much. And most of this money is now being borrowed from the governments of China and other countries. Put simply, over the last 6 years, China has specialized in selling us manufactured goods, India has specialized in selling us services, and America has specialized in writing IOUs.

Jobs like doctor or construction worker look pretty darn good when the only thing your country exports is IOUs.

Why is this happening? Brad Setser blames China's currency, and he's smart enough that I worry he's right. But Bush's massive deficits can't be helping, nor can Americans' tendency to max out their credit cards and mortgages. To some extent, the current situation is our fault, for electing irresponsible leaders and for spending too much. If outsourcing worries us, we've only brought it down on our own head.