Director's Viewpoint: Ever-swinging Pendulum

Our society is one in which the pendulum never ceases swinging, going from one extreme to the other. Today I would like to exam one swing in particular, the ever-greater outsourcing of aviation work overseas and its effects.

In general, while the current recession appears to be over, at least technically, the trauma suffered by the work force will have its effects in the years to follow. “Real unemployment,” (which includes people who want to work but have stopped looking, and those who want full-time work but can only fine part-time jobs), is more than 17 percent, the highest figure in this grouping since the ‘30s.

Long-term chronic unemployment affects the country’s economic growth, and it results in deep changes to our society, families, and the politics of the nation. It will leave a permanent scar on blue-collar workers; it could change the character of modern marriage; and it will most certainly plunge our inner cities into despair and dysfunction.

Most recessions end when people start spending again, but this is unlikely to happen following the most recent recession. At of the end of ‘09, one in seven mortgages were delinquent, up from one in 10 the year before. Housing statistics indicate one out of every four houses may be drowning in debt. Our economy currently languishes in a hole more than 10 million jobs deep, the number needed to return to a normal economy with a 5 percent unemployment rate. As a result 1 million new jobs need to be created each year, about 125,000 a month, just to keep us from going deeper into the hole. Please note this, as I will use it to make my case later in this editorial.

Normally, innovation is the stuff that provides the needed spark that reenergizes our economy and grows jobs. Innovation is present, as laid-off workers open new businesses. The problem for today’s economy is innovation and energy in U.S. businesses have actually been in decline the last decade, the result of the increased focus by businesses on quarterly results rather than long-term value and a financial industry that concentrates its efforts on proprietary trading, regulatory arbitrage, and arcane financial engineering. According to most economists this change results in a new tolerable floor for unemployment of 6.5 to 7 percent. That’s too high.

And then there are the sociological effects felt every day when there is high unemployment. Imagine being in your 40s, the breadwinner and losing your job due to a bad economy, restructuring or, even worse, the company outsourcing overseas. How badly can this feel? Demoralizing to say the least. Only a very strong family will survive, while many marriages will go down the tubes. In some cases even the mental health of the unemployed will deteriorate. Essentially, for most, unemployment will produce a crippling disorientation. I know I’ve been there and have been lucky enough to wind up on my feet.

All solutions must include ways to strengthen the economy in the short term and clear the way for long-term growth. Two ways to support the process are more aggressive support for the unemployed and employer tax credits for hiring the unemployed.

Most outsourcers argue that outsourcing is the ultimate method for practicing free trade. The current trend is to outsource the main functions of a business, in particular human capital in the form of brainpower. This may result in immediate gains for a company but has long-term negative implications for our economy. Companies will grow horizontally, not vertically thus relinquishing control of organizational processes. This weakens their prospects for long-term growth and job creation.

These are the reasons I do not think we should be sending jobs overseas, particularly at this highly sensitive time. Currently the FAA reauthorization bill is winding its way through Congress. The House has passed a bill that requires foreign repair stations working on U.S. registered aircraft to have the same drug and alcohol programs U.S. repair stations are required to have and to require the same FAA inspections of a station that U.S. stations undergo. This is good and fair. The Senate version of the bill does not include this. I think, to level the playing field, each of you should notify your senator that you would like to see the House rules incorporated in their bill.

I make my case.