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PAN Discussion Group Wednesday February 23rd 2005
Subject: Displaced Workers, Technology and Society, etc

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Location: Details with RSVP

Time : 7pm to 10pm ish

This Month:

This months subject is really several. I think the original intention was to look at how technology was displacing American workers. It soon became apparent that technology is only one factor and the larger concept of ‘globalization”, generally technology assisted, is the bigger overall factor

 As if globalization wasn’t enough to handle in one session we also said we would look at the social impact of technology! That means a lot of possible material to read and talk about. I’ve selected some articles on the impact of globalization and the changes we can expect in the future. Then I’ve added some quick articles on the digital divide.

It’s more material than I would like but its reasonably light reading so I hope you’ll forgive me!

Thanks to everyone who contributed articles. Also we have some new faces at this meeting so you all had better be on your best behavior J

General:
The articles are the basis for the discussion and reading them helps give us some common ground and focus for the discussion, especially where we would otherwise be ignorant of the issues. The discussions are not intended as debates or arguments, rather they should be a chance to explore ideas and issues in a constructive forum Feel free to bring along other stuff you've read on this, related subjects or on topics the group might be interested in for future meetings.

GROUND RULES:
* Temper the urge to speak with the discipline to listen and leave space for others
* Balance the desire to teach with a passion to learn
* Hear what is said and listen for what is meant
* Marry your certainties with others' possibilities
* Reserve judgment until you can claim the understanding we seek


Well I guess that's all for now.
Colin
Any problems let me know.
847-963-1254

The Articles: 

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First a recent article from the Atlantic about what may lie ahead.

 No link for this but the HTML and pdf versions are on the PAN website

 Atlantic Monthly Jan/Feb 05

By Stephen S. Cohen and J. Bradford Belong

Shaken and Stirred

 The United States is about to experience economic upheaval on a scale unseen for generations. Will social harmony be a casualty?

It has become conventional wisdom that class politics has no legs in the United States today - and for good reason. Regardless of actual circumstance, an overwhelming majority of Americans view themselves as middle-class. Very few have any bone to pick with the rich, perhaps because most believe they will become rich - or at least richer - someday. To be sure, the issues of jobs and wages inevitably make their way into our political campaigns - to a greater or lesser extent depending on where we are in the business cycle. But they seldom divide us as much as simply circle in and out of our political life. Lately anxiety about the economy has been palpable, but for the most part it has not evolved into anger or found specific scapegoats.

 Economic insecurity could well divide us in the future, however. We are on the cusp of an economic era whose challenges will be unfamiliar to most Americans of working age. It is likely to erode the psychological pillars on which class unity has rested in this country: personal economic stability for the middle class, and the promise of at least some upward mobility for most Americans. The most likely division - besides that between the truly rich and the truly poor - will be between those in the middle class who are able (through agility or luck) to manage economic risk and those who find themselves helpless before the economic pressures of a new age.

Once upon a time, or so it is said, America was a place with lots of upward but little downward mobility. In the really old, pre-Civil War days you could start out splitting rails, head west, make a success of yourself on the frontier, and perhaps even wind up as president. In the relatively recent, post-World War II expansion you could do well by landing a blue-collar job in a unionized manufacturing industry or a white-collar job at a large, stable American corporation such as IBM, AT&T, or General Electric - which offered job security, high salaries, and long, steady career ladders.

There was always as much mythology as truth to this image of America. Lighting out for the West was expensive; covered wagons did not come cheap. More generally, although many terms could be used to describe economic life in the nineteenth and early twentieth centuries, "stable" and "secure" are not among them. 

But there was considerable truth to the image as well, particularly after World War II. Regardless of education level or family background, many Americans who valued stability and security really did have the chance to grasp it; jobs with "a future" - that is, with steadily rising wages and solid retirement plans - were plentiful. And even for many of those who were fired, the economic risks were fairly low: the unemployment rate for married men during the 1960s averaged 2.7 percent, and finding a new job was a relatively simple matter. During the first decades following World War II, to the astonishment of interviewing sociologists, a majority of Americans began to define themselves as middle-class.

 This post-World War II period stands as a reference point in our popular economic history - a gold standard for rapid growth and shared prosperity. It lingers in our national memory, and remains an important source of confidence in the unity of our culture and the awesome power of our economy. But although it engendered our current economic expectations, our sense of "the way things ought to be," in reality the postwar era was probably an aberration, a confluence of events never before seen in our history and unlikely to be seen again.

Most obviously, it was an era defined by the isolation of America's continental market from the devastation of World War II. In the early postwar decades foreign competition exerted virtually no pressure on our economy. (In 1965, for example, imports of automobiles and auto parts came to less than $1 billion - about a fortieth of what they are today, after adjusting for inflation.) At the same time, domestic manufacturers benefited from an enormous pent-up demand for mass-produced goods: cars, washing machines, commercial aircraft, refrigerators, lawn mowers, television sets, and so on. New highways gave rise to new suburbs, and to a resulting construction boom.

 These economic conditions, along with successful federal efforts to maintain full employment through loose monetary policy, created an environment exceptionally friendly to workers. With little foreign competition on the one hand and a very tight labor market on the other, American firms were willing and able to offer workers strong incentives - such as pensions and first-rate health insurance - in order to attract and retain them. (Generous tax breaks from the federal government encouraged the roll-out of these benefits.)

Meanwhile, the Great Depression had given rise to a system of government programs and policies that came into full force and maturity only after World War II - among them Social Security, unemployment insurance, welfare, and high marginal tax rates. The rise of communism abroad could only have strengthened commitment to workers' welfare, as a means of demonstrating that the American capitalist system offered a humane alternative. 

Thus favorable macroeconomic circumstances, the absence of foreign competition, and a historically unique political dynamic all combined to allow postwar America many of the benefits of social democracy without the costs. The economy did not stagger under the weight of ample benefits and high taxes. Americans - at least white male Americans - did not have to worry about tradeoffs between security and opportunity, because the United States offered both. And it seemed that this was the natural order of things.

 The threat of downward mobility first hit America in a big way in the 1980s, when the old-line, unionized mid-western manufacturing companies found themselves under enormous pressure from foreign competition, in particular from export-oriented Japanese companies such as Honda, Toyota, and Komatsu. The result was a hemorrhaging of unionized manufacturing jobs and the emergence of the Rust Belt.

 In addition, new technologies and consumption patterns were shifting the U.S. economy's center of gravity from skilled, unionized, mass-production industry - which fashions products from expensive materials and capital-intensive machinery - to services and retailing, where barriers to the entry of competitors are lower, labor costs more significant, and competitive advantage more reliant on squeezing those labor costs. The nation's largest private-sector employer today, of course, is not General Motors or Ford but Wal-Mart. Wal-Mart is in many ways a fine company, but its strategic goals and constraints are quite different from those of the manufacturers of the 1960s. Between them the automakers and the UAW offered workers a fairly robust "social contract": pensions, good health care, high wages, long-term job security. Wal-Mart makes no such offer.

 By the early 1990s the nature of unemployment had changed as well. As Erica Groshen and Simon Potter, of the New York Federal Reserve, point out, temporary layoffs have become less common. Instead companies under constant competitive pressure are more frequently making layoffs permanent - using advances in technology to eliminate some types of jobs altogether.

 At the same time, the rising cost of health care and the falling rate of health insurance have left families much more economically vulnerable in the event of a serious accident or illness. Many Americans today are one lost job and one medical emergency away from bankruptcy.

 We do not want to overstate how bad things are. Not even white males would be better off in the economy of the 1960s, when median real household incomes were only about two thirds of what they are today, and much of the medical care that we now fear we cannot afford was unavailable at any price. In a sense we've merely returned to a more natural economic state, in which jobs are not always secure and progress is not always assured. And we've done so while improving the opportunities and lifestyles available to most Americans. So far, in other words, we've adapted reasonably well to increased risk and reduced security. But we're not at the end of economic history - and the history that will be made in the coming decades is likely to be substantially more turbulent than what we've seen in recent years.

 Although the impact of globalization on American jobs has been over-hyped in the past, its impact in the future will be hard to exaggerate. Last spring saw a short political boomlet of worry over the offshoring of white-collar jobs to India, China, and elsewhere. In the next few years these issues will be raised at the political level once again - and loudly.

 The basic storyline is simple enough: what formerly could not be imported now can be. A compelling parallel can be drawn to the latter half of the nineteenth century, when the steel-hulled oceangoing steamship and the submarine telegraph cable revolutionized international trade. Companies could now use the telegraph to tell their agents in distant ports what goods to ship; moreover, powerful steamships made it practical to export not only precious goods (such as rare porcelains, spices, and tobacco) but also staple agricultural and manufactured products: grain, hides, meat, wool, furniture, and machines (which would eventually include motor vehicles, computers, and consumer electronics). First in a great rush, and then at a somewhat more measured pace, industrial and agricultural workers the world over began to lose their jobs to more-efficient foreign competitors. Illinois could grow wheat more cheaply than Prussia could grow rye. Malaysia could grow rubber more cheaply than Brazil. Of course, displaced workers could generally find new jobs, sometimes better ones. And consumers benefited greatly from lower prices. But that did little to dim the spectacle of immediate dislocation. The expansion of international trade ushered in a century-long storm - though many Americans (perhaps owing to the anomalous calm following World War II) seem to remember only the recent gusts that have buffeted our heavy industries.

 The transformation taking place today will have just as great an effect on the world economy. The transoceanic fiber-optic cable, the communications satellite, and the Internet are making much white-collar service work as tradable as anything else. Broadband cables and satellites can connect India or China or Bulgaria to the United States instantly, seamlessly - and almost without cost. A huge new swath of American jobs is beginning to become vulnerable to foreign competition.

 When the offshoring of services truly hits (and it will stretch out over several decades), it is likely to deliver a much greater shock to the U.S. economy than the offshoring of manufacturing did. There are several reasons for this. First, in the 1970s Americans' incomes exceeded those of the Japanese by a ratio of about two to one. The ratio of American to Indian incomes today is more than ten to one. Economists will point out that the gains from trade will thereby be that much greater for the U.S. economy as a whole - and they'll be right. Indeed, more and greater openness will expand opportunities and raise incomes for some Americans, producing many highly visible winners. At the same time, the potential pay cuts for workers who lose out in rich countries will also be that much greater.

Second, the coming global trade in services will potentially affect a much larger proportion of the U.S. labor force. Even at its height manufacturing constituted only 28 percent of all non-farm employment, and large sectors of manufacturing (food processing, for example) are closely tied to sources of supply and thus immovable. Service jobs constitute 83 percent of non-farm employment in the U.S. economy today, and every job that is (or could be) defined largely by the use of computers and telephones will be vulnerable.

Third, the impact of foreign competition will be borne much more directly by American workers than by their employers. In the 1970s and 1980s foreign imports threatened U.S. companies and workers equally. The CEOs at GM and Ford were on the same "side" as the men and women who worked on the factory floor. The coming wave of economic dislocation will look very different: it will be something that American CEOs do to their own workers.

 Not that they'll necessarily have much choice; offshoring will in many cases be necessary if American businesses are to remain competitive. Remember H. Ross Perot's "giant sucking sound"? In the early 1990s no one spoke out more strongly against the prospect of job loss caused by foreign competition. Yet on February 7 of last year the Times of India reported that Perot Systems was going to double its employment in Asia from 3,500 to 7,000 - nearly half its total worldwide employment. If the economic logic of foreign outsourcing is so overwhelming that Ross Perot can't resist it, what American CEO will be able to?

None of this is to say that we face a future of permanent widespread unemployment. It is a truth universally acknowledged (except in campaign seasons) that the rate of employment in the United States is set not by levels of imports and exports but, primarily, by whether the Federal Reserve's monetary policy manages to settle aggregate demand in that sweet spot where neither unemployment nor inflation is too high.

 Moreover, during the course of any single year or business cycle the effects of globalization on the U.S. labor market are small. Forrester Research has estimated that by 2018 some 3.3 million jobs in business processes are likely to go offshore. That's a little more than 18,000 a month - not a huge number in an economy of 140 million jobs.

 But - and this is a very big "but" - even though imports and offshoring do not determine the number of U.S. jobs over time, they do powerfully influence the long-run level and distribution of real wages. Eventually the offshoring of service jobs will exert a strong downward pressure on wages and benefits in jobs that stay onshore, just as the offshoring of manufacturing jobs did in the 1980s. Essentially, the pool of workers competing for many service jobs will be increased by, say, several million English-speaking college graduates in India, who will work for a tenth to a fifth of a typical American salary.

In many cases the jobs in question are held by Americans unaccustomed to layoffs or reduced incomes. Often they are high-paying white-collar jobs. The people who hold them may believe that they are on top because they deserve to be: they are smart and industrious; they worked hard in school while others screwed around; they have been diligent and successful in their careers. These people are likely to become very angry when unexpectedly threatened by substantial downward mobility. 

How will the country respond when a broad new array of classes and professions are exposed to downward mobility - particularly as others benefit from new opportunities? Will existing class fissures be exacerbated? What new ones might be created? 

Winners and losers are unlikely to sort cleanly. People of similar background and training may see their fortunes diverge greatly depending on subspecialty, or on the presence or absence of some idiosyncratic ability that is hard to replicate. But one can make a few predictions. First, the new environment is likely to pit those who are most flexible - most able to shift jobs or careers, most able to absorb unexpected blows, best positioned to benefit from unforeseen opportunities - against those who are less so. The contours of such a divide seem predictable : young versus old, generalist versus specialist, people with savings versus those who depend on their next paycheck.

 A second (and overlapping) split might open between those who are highly educated and possess complex skills and those who are merely well educated and skilled. An MIT education may still be hard to imitate abroad. Can the same be said of a finance degree from a state college?

 Third, a divide may occur between those - whatever their education or income level - who by disposition can tolerate unexpected income swings across a lifetime and those who abhor uncertainty.

 The last group is probably large. The dissatisfaction resulting from falling wages is usually greater than the satisfaction resulting from rising wages. People are not wrong to be risk-averse; for middle-class Americans, just as for portfolio managers, life consists largely of trying to manage risk. This, the Yale political scientist Jacob Hacker thinks, is the source of middle-class Americans' unease with the current state of the economy - perhaps the primordial form of a sharper discontent to come. "Voters say the economy isn't getting better because, as far as they're concerned, it's not," Hacker writes. "And perhaps the best explanation for this perception is that Americans are facing rising economic insecurity even as basic economic statistics improve."

The median annual household income twenty years ago was about $38,000 in today's dollars. Today it is about $43,000 - 13 percent higher. Yet, at least in Hacker's analysis, Americans typically feel that increasing risk and rising inequality have hurt them at least as much as increasing income has helped. Yes, if they are middle-class, they have higher real incomes and living standards than their parents; but the incomes are known to be insecure, and the prosperity is felt to be fragile.

 From one viewpoint, economic risk is the flip side of flexibility, entrepreneurship, and innovation - the very things America does best. In the 1980s, when Americans worried about whether the social organization in Japan's export-manufacturing sector (morning calisthenics, the company song, consensus, lifetime employment, and so on) might offer a better way of doing business, The Atlantic's national correspondent James Fallows answered with a resounding no. What Americans needed, he argued, was to become "more like us" (the title of his book on the subject), not more like them: America's competitive advantage was rooted in disorder, constant change, flexibility, mobility, and entrepreneurial zeal. In 1991 Robert Reich, about to become Bill Clinton's first secretary of labor, looked at the tremendous expansion of manufacturing and other export-related employment elsewhere in the world and came to a similar conclusion. How, he wondered in his book The Work of Nations, could Americans preserve and accelerate economic growth if the market position and efficiency advantages of America's largest firms came under threat? He, too, concluded that we needed to shift our focus away from old-style stable mass-production employment to high-knowledge, high-tech, high-entrepreneurship fields. Workers, he argued, should expect to go back to school to learn new skills for new industries.

But embracing change and uncertainty in this way does not come naturally, in the United States or anywhere else, and the pollsters and media-affairs people of the Clinton administration soon told Robert Reich to be quiet: people did not like to hear their government telling them that their jobs were going to vanish.

Economists rightly say that the rising wave of trade-driven service globalization will, like the last waves of trade-driven manufacturing globalization, benefit Americans and foreigners alike. At home more will be won than lost. Fears that expanding trade will destroy jobs and disrupt the economy also need to be counterbalanced by the knowledge that reducing trade - or even failing to expand it - would reduce national wealth potential, destroy future jobs, and ultimately disrupt the economy even more. The social problems of a stagnant economy are far greater than those of a dynamic one.

 But economists too readily dismiss concerns about those who lose out, saying merely that they can be compensated. In practice they seldom are. The United States simply does not make the investments needed to turn economic change into a win-win process - investments in retraining and rebuilding that would transfer some of the gains from the winners to the losers (who've done nothing personally to merit their loss). In the late 1970s and the 1980s little money was spent on Flint and Detroit in particular, and Michigan in general, to cushion the economic impact as Toyotas and Hondas came to America's shores. Producers in Japan and car buyers in Boston and San Francisco pocketed the gains, while producers in the Midwest absorbed the losses. As the Princeton economist and New York Times columnist Paul Krugman puts it, free trade is a salable policy only if accompanied by a well-built social safety net and confidence in full employment. But our safety net is full of holes.

 Some companies have traditionally provided many of our social services, particularly in the form of health insurance and retirement support. Those companies will not continue to sustain that burden in the future. At the same time, our limited system of government benefits will not be adequate to the changes that we'll face - leaving aside the possibility that it may be weakened or removed completely, as some politicians propose. That system was designed to protect the poor and the aged, and to tide the rest of us over in case of (temporary) job loss. What we need now is far more career-transition assistance for the middle class, and perhaps more government funding and (surely) portability for the benefits - notably health care - that the private sector increasingly fails to provide. America's economy will need flexibility in order to compete, but we can provide this protection without sacrificing our flexibility.

 Because we are facing an economic transformation that will hit not over the course of a few years but over the course of the next generation, we have time to do what needs to be done. We will need all this time, because the approaching economic shock will be greater in magnitude than anything in recent historical memory.

 And it isn’t just white collar workers who are threatened by all this a critical industry is under threat…J

Add Porn Stars To List Of Outsourced U.S. Jobs

Douglas Chick

According to a report from The Associated Press, American X-rated film directors are packing up and heading for Brazil. Apparently the going rate for a Brazilian X-rated actress is about $175 per sex scene. This is a fraction of the cost to use an American porn actresses. Until now, U.S. politicians have turned a blind eye as jobs that are being outsourced to other countries and leaving Americans unemployed in a jobless economy. Perhaps now, with an issue that affects our government leaders with such a personal level, our leaders will rise up and unite a divided government and keep American jobs at home.

I thought this was interesting for its background on free trade, specialization etc and as the view from the Fed. Also I found it in a Mumbai/Bombay newspaper site. As one other end of the outsourcing deal Indians are obviously interested.

 http://mumbai.usconsulate.gov/wwwhwashnews2714.html

 October 7, 2004

 Federal Reserve Bank of the United States

Remarks by Vice Chairman Roger W. Ferguson, Jr.

 Conference on Trade and the Future of American Workers

Washington, D.C.

 October 7, 2004  

Free Trade: What Do Economists Really Know?

 The role of trade in the U.S. economy has moved well into the spotlight in recent years, and I am pleased to be here today to share my thoughts on this important topic with such distinguished and knowledgeable colleagues. Over the course of this day, you will be hearing from leading analysts, policymakers, and commentators about recent developments in the U.S. economy, past and prospective trends in job creation, the role of sourcing (both out- and in-), and the implications of trade for the coming elections. In my remarks this morning, I would like to put these issues into the broader context of the debate over free trade and its implications for the American economy.

 Though my focus will be on free trade, we must remember that prospects for the average American depend on many other factors as well, including technological progress, the education required to exploit this progress, a dynamic market-oriented economy, a framework of limited but effective regulation, healthy and well-governed financial institutions, and a stable macroeconomic environment. And free trade is not necessarily the most important item on this list. Even so, it has been a focus of interest and aspiration for economists dating back to Adam Smith and David Ricardo. As you know, finding overwhelming agreement on issues is difficult among economists, but free trade is an exception.1

 The supporters of free trade have not been ignored. In the past half-century, global trade has become freer and has expanded rapidly. The ratio of trade (exports plus imports) to worldwide gross domestic product rose from only 16 percent in 1960 to 40 percent by 2001. In 1960, the United States, Germany, and Japan had average tariff rates of around 7 percent; these rates were more than halved by 1993. The number of members of the World Trade Organization (WTO), or its predecessor, the General Agreement on Tariffs and Trade, rose from 18 in 1948 to 146 in 2003, and the number of regional trade agreements in the world ballooned from only 1 in 1958 to 161 in 2003.  

Although most economists welcome these trends, the public at large has been much more ambivalent about international trade. Attitudes toward free trade in principle remain generally positive, but a substantial--and, perhaps, growing--minority of Americans hold more negative views. According to a poll completed around the beginning of this year, 41 percent of respondents viewed the process of increasing international trade through reduction of barriers as proceeding too quickly; this number was up from 30 percent in 1999. And 43 percent of respondents believed that the government should try to slow or reverse the expansion of international trade, up from 39 percent in 1999.2  

What accounts for the apparent deterioration in public support for free trade over the past five years? The widening of the U.S. trade deficit may have exacerbated concerns about the country's international competitiveness. More important, some have blamed overseas competition for the job losses associated with the economic slowdown earlier in this decade.

 Without solid public support for free trade, achieving continued progress in reducing protectionist barriers, both at home and abroad, may become more difficult. In the remainder of my remarks, I'd like to review the arguments for and against free trade, explore why it has been difficult to muster more widespread public support for this goal, and address some of the consequences of trade protection as it has been implemented in practice.

 Arguments for Free Trade  

International trade contributes to prosperity and growth through several channels. These channels are not especially subtle or esoteric, and I would argue that the public at large understands them reasonably well. At the same time, however, quantifying the contributions of trade to national welfare is by no means straightforward.  

First, and most obviously, trade increases the variety of goods available to consumers. Trade provides some products that otherwise would be beyond the reach of most American households, such as roses for Valentine's Day, or peaches and nectarines during the winter. More generally, international trade allows us to choose from a wider array of goods than would otherwise be available: Japanese and German cars in addition to American, Chilean apples as well as Washington state, French and Australian wine as well as Californian. It is difficult to put a dollar figure on the value of this increased variety to the consumer, but estimates range as high as nearly 3 percent of GDP.3

 A second benefit of international trade is its role in reducing the cost of goods and hence in raising our standard of living. To anyone who has walked into a large discount store and surveyed the range of low-priced items produced in any number of distant economies, this benefit is abundantly clear. However, actually measuring the extent to which trade holds down consumer costs is tricky. Between 1990 and 2003, for example, the overall consumer price index rose 41 percent, whereas prices declined for many highly traded goods, including toys (whose prices fell 26 percent), televisions (53 percent), and clocks and lamps (15 percent); in just the past five years, the price of telephones, calculators, and other such items has fallen 42 percent. Yet, we do not know how much of the decline in these prices can be attributed to trade, as most traded products are manufactures and are subject to greater productivity growth (and hence steeper declines in costs) than nontraded products such as services.

 A more fruitful approach may be to compare the prices of goods that are protected from international competition with what they would be in the absence of such barriers. A recent study by the U.S. International Trade Commission indicates that sectoral trade liberalization would lower the price of sugar for U.S. consumers by 8 percent, of apparel by 5 percent, and of footwear and leather products by 4 percent.4 Clearly, if international trade were curtailed for a much broader range of goods, the cost of living for American workers would be higher and the standard of living correspondingly lower.  

A third key benefit of free trade is that it allows economies to specialize in the activities they do best. This notion was at the core of the classical economists' defense of free trade. By allowing England to specialize in cloth production and Portugal in wine, for example, international commerce leads to a higher income for both countries than if each tried to produce both goods for themselves. By the same token, no American today would object to trade between Massachusetts and Montana, or between Alaska and Alabama--the various U.S. states obviously have their own comparative advantages in producing a variety of different products, and trade among them makes such specialization possible. Extending the example of trade among states to trade among countries is not much of a stretch.

 Can we measure the extent to which the specialization associated with free trade may boost incomes and welfare? Such an estimate is obviously no simple thing to calculate. Economists frequently use so-called computable general equilibrium models, often consisting of hundreds of equations, to address this issue. A recent analysis of the effects of past trade liberalizations on the U.S. economy puts the gains to U.S. welfare at about 1/2 percent of GDP. A separate analysis of a hypothetical 33 percent reduction in trade barriers around the world suggests it would raise welfare by 1-1/2 percent of global GDP.

 In addition to promoting specialization, trade boosts productivity through a fourth channel of influence: opening the economy to heightened competition. This effect could occur either as firms are spurred by foreign competitors to become more efficient, or as the least productive firms are forced to close, thus raising the average level of productivity for the economy as a whole. Again, most Americans likely recognize the importance of competition in boosting performance--the ascendancy of Japanese automobiles, for example, has been cited as a factor that has spurred Detroit to greater innovation and better quality. By heightening competitive forces and thus incentives for productivity and innovation, international trade has likely accelerated the process of "creative destruction" by which outdated and less productive activities are replaced by new technologies and more dynamic enterprises.

 Academic research supports the view that import competition has led U.S. manufacturing firms to become more capital intensive; trade liberalization apparently has enhanced productivity in some import-competing firms in foreign countries as well. Producing for export markets may also yield dividends: Research suggests that exporters are more productive than non-exporters in the same industry and that they grow more rapidly as well. Finally, many studies suggest that countries that are more open to international trade have enjoyed higher rates of economic growth. Our sad experience after adoption of the Smoot-Hawley tariff of 1930, as well as the record of Latin America, India, and other regions that experimented with "import-substituting industrialization," point to the deterioration in economic performance that occurs when countries erect barriers to trade.  

Arguments against Free Trade  

If the benefits conferred by international trade are reasonably straightforward, how can we explain the apparent ambivalence toward trade picked up by recent surveys? Clearly, many people view the benefits of free trade as being outweighed by its perceived costs.

 One concern about free trade may be that it has given rise to large trade and current account deficits, thereby adding to the nation's debt and putting future prosperity at risk. Now at more than 5 percent of GDP, the current account deficit is in record territory, it is growing, and it cannot be sustained indefinitely. We cannot foresee when the deficit will stop growing and return to more-sustainable levels, through what mechanisms this adjustment will occur, or whether this adjustment will be smooth or disruptive for financial markets and the economy more generally. No matter how a correction of the external imbalance proceeds, however, it will involve a range of adjustments to investment, saving, and asset prices, both for the U.S. economy and for our trading partners. Research suggests that past corrections of large external imbalances in industrial countries generally have occurred without crisis. Whether or not this will remain the case, I am confident that protectionism is not the appropriate response to our growing current account deficit. The amount of current account adjustment that would be gained from a given tightening of import controls is questionable. Yet, it is certain that such actions would impose costs on the economy that would persist long after concerns about the deficit dissipated.  

A second concern about free trade that is frequently voiced, and probably a more important one to many people, is that trade destroys American jobs and creates unemployment. The same survey I mentioned earlier, showing a deterioration in general attitudes toward trade, also indicated that 40 percent of respondents believed that trade barriers should be maintained because of the threat to U.S. jobs, up from 31 percent in 1999.

 It is worth distinguishing among several variants of the concern about trade and jobs. The first variant holds that the rise in imports lowers employment and raises the unemployment rate by shifting jobs overseas. This claim is strongly contradicted both by theory and by experience. Make no mistake: Import competition clearly has cost some American workers their jobs and has caused them considerable hardship as a result. However, economy-wide equilibrating forces, including monetary policy, ensure that over time such employment losses are offset by gains elsewhere in the economy, so that the nationwide unemployment rate averages around its equilibrium level. In fact, the inflow of foreign capital that finances our trade deficit provides the funding for investment projects that employ U.S. workers just as surely as does any other productive activity in the economy. Between 1960 and 2003, the trade balance moved from a slight surplus to a deficit of 4-1/2 percent of GDP, and nominal imports rose from about 4 percent of GDP to 14 percent -- yet, the current unemployment rate of about 5-1/2 percent is little changed from its 1960 level, while nonfarm private employment has grown by more than 60 million jobs.

 It has also been suggested that import competition has caused a significant portion of the decline in employment since the recession of 2001. Yet, the ratio of the nominal trade deficit to GDP widened less than 1 percentage point between 2000 and 2003. Moreover, this deterioration came entirely from a decline in the ratio of exports to GDP, from 11.2 percent in 2000 to 9.5 percent in 2003; the ratio of imports to GDP actually declined about 1 percentage point over this period.  

A second variant of the concern over trade and jobs is certainly valid: Import competition can be highly disruptive and cause considerable pain for those who lose their jobs. One study of worker displacement indicates that only about two-thirds of displaced workers found another job within three years, and even when they were successful in finding full-time work, the earnings of these workers on average declined 8 percent. Another study found that job losers in industries facing heavy import competition were slightly less likely to be reemployed, and suffered greater earnings losses, than workers who lost their jobs in industries facing less import competition.

 We cannot and should not minimize the hardships of workers displaced by imports. However, we must also keep in mind that their numbers are relatively small compared with either the total labor force or even the total number of jobs lost in the United States. Estimates of the gross number of jobs lost to imports vary, but one representative estimate puts them at a bit more than 300,000 per year during the 1980s and 1990s. This number, while hardly negligible, is dwarfed by the roughly 15 million job losses estimated to occur each year in the United States. As our dynamic market economy evolves, it generates substantial churning in labor markets as jobs are gained in some sectors and lost in others; jobs gained and lost because of trade are only a small part of that process.

 It is understandable that concerns about job losses from import competition may extend far beyond their actual incidence in the labor market, given more general anxieties about employment security among American workers. However, to echo a point that has been made before, the proper response to the disruptions associated with trade is not to reduce trade, but rather to ameliorate the pain associated with those disruptions through enhanced assistance and retraining for displaced workers.

 A final concern about trade that I would like to discuss is that import competition, whether or not it affects the number of jobs, shifts the employment mix from high-quality jobs to low-quality jobs. For example, critics have long held that international trade pushes workers out of manufacturing jobs and into less desirable service-sector jobs. However, no conclusive evidence has shown that, over the long haul, the service jobs being created pay less or are otherwise less desirable than manufactured jobs being displaced. Moreover, the declining share of manufacturing in U.S. employment most likely stems less from import competition than it does from the rapid pace of productivity growth in manufacturing; this growth outpaced the productivity growth of the overall economy by about 1-1/4 percentage points annually from 1973 to 1994 and by 1-1/2 percentage points from 1994 to 2000. The higher rate of productivity growth in manufacturing has restrained both price increases and employment in the sector, thus leading the services area of the economy to expand its share of spending and jobs. This phenomenon is hardly unique to the United States--the share of manufacturing has declined in most of our major foreign trading partners as well.  

More recently, the outsourcing of service jobs to developing countries has come under the spotlight. The increasing use of computer programming talent in India and other low-wage countries has, understandably, struck a chord of anxiety among American workers. For years, the response of pro-trade advocates to the loss of low-wage jobs in manufacturing has been that they are being made up by the creation of higher-paid, higher-skilled jobs in the service sector. The loss of highly paid programming jobs to lower-paid workers abroad now appears to suggest that there is no place where American workers can hold their own.

 Yet, as in the case of import competition more generally, we must not exaggerate the importance of outsourcing to the nation's overall employment picture. There are no conclusive data, but a prominent study puts the number of jobs displaced through services outsourcing over the next decade or so at fewer than 300,000 annually, or less than 2 percent of the 15 million in total gross job losses I noted earlier. Moreover, only a fraction of those jobs represent high-skilled, high-wage jobs; these numbers are quite difficult to pin down, but one study puts the number of software jobs lost to India since 2000 at fewer than 50,000 annually. Finally, we should remember that the United States gains jobs through what is often referred to as "insourcing," that is, performing service jobs for other countries. In fact, the United States has consistently run a surplus in those categories of the balance-of-payments associated with trade in business services.  

Turning from the sectoral job mix to the impact of import competition on wages, the evidence is particularly unclear. Some studies have suggested that import competition from low-wage countries has depressed wages for low-skilled workers relative to those for higher-skilled workers in recent decades. However, other studies have argued that the rise in skill premiums is attributable to technological developments that have raised relative demands for educated workers. Focusing on the past few years, we see no consensus on how the mix of low- and high-wage jobs in the economy has evolved; estimates are extremely sensitive to the definition of job classes, the source of data, the time period, and method of calculation. In any event, it is doubtful that changes in the pattern of wages in the U.S. economy can be explained by any single factor--trends in trade, in population and immigration, in unionization and labor market competition, in minimum wage policy, in the skill mix of the labor force, and in technology all play a role.

 Drawbacks of Protectionism

 To sum up the discussion so far, the public likely has a reasonably good grasp of the benefits of free trade. It is the perceived drawbacks to international trade that probably account for the ambivalence indicated in opinion surveys. Some of these fears may be overstated -- for example, the claim that imports lower aggregate employment. But other concerns cannot be dismissed out of hand -- especially the claim that trade leads to disruptions for some workers. Balancing the pain for a few against the lasting gains for the economy as a whole, economists generally view the latter as outweighing the former, but it is admittedly difficult for many individuals in American society to share this assessment.

 Rather than arguing the merits of international trade in the abstract, advocates of free trade might gain more traction by arguing against concrete examples of protectionism. Each year brings new actions by the U.S. government to protect individual sectors from imports. Antidumping duties are imposed when domestic industry is believed to be injured by the sale of imported goods at less than "fair value." Countervailing duties are intended to counteract subsidies to foreign producers. Safeguard actions are intended to protect a domestic industry that has been seriously injured by a surge in imports.20 As of August 2004, 359 antidumping and countervailing duty orders were in place in the United States against imports from 51 countries.

 By discouraging unfair commercial practices, such actions, in principle, promote a more stable and competitive environment for international trade. In practice, identifying anticompetitive practices is a murky process. For example, in antidumping cases, determining the "fair value" of a good may involve a degree of discretion, thereby complicating the assessment of whether foreign goods are being sold below their appropriate price. Domestic producers have a strong incentive to lobby for trade actions regardless of whether such actions are merited.

 Because they inhibit free trade, protectionist actions have an array of adverse consequences that one would expect: They reduce variety and raise costs for consumers; they distort the allocation of resources in the economy by encouraging excessive resources to flow into protected sectors; and they foster inefficiency by reducing the extent of competition. Perhaps more important in the eyes of the public, however, may be several related and highly egregious consequences of protectionist actions.  

First, by raising the cost of goods that are inputs for other producers, import barriers may destroy more jobs in so-called "downstream" sectors than they save in protected sectors. According to one study, the 2002 steel safeguard program contributed to higher steel prices that eliminated about 200,000 jobs in steel-using industries, whereas only 187,500 workers were employed by U.S. steel-producers in December 2002.  

Second, trade protection may lead to very large payouts to a small number of producers and hence is often inequitable. Any time a product receives import protection, of course, a relatively small number of domestic producers receive benefits -- through higher prices -- at the cost of all domestic consumers in the economy. On top of this, a disproportionately small number of sectors, and often a disproportionately small number of firms within a sector, tend to enjoy the gains from protection. For example, more than one-half of the antidumping and countervailing duty orders in place as of August were on iron and steel-related products alone; by contrast, less than one-half of 1 percent of total private nonfarm employment is accounted for by iron and steel producers. As another example, according to a 1993 General Accounting Office study, 42 percent of the benefits to growers from sugar protection went to just 1 percent of growers. Although Americans favor policies designed to help the small farmer, much larger enterprises are also benefiting from agricultural trade protection.  

This disturbingly inequitable distribution of the benefits of protectionism is exacerbated under current law by provisions allowing antidumping and countervailing duties to be disbursed to the companies that petitioned for the duties. These provisions, which have been ruled illegal by the WTO, lead to protected producers being rewarded twice: Once through the higher prices stemming from the trade protection and again through the disbursal of the higher duties paid by importers. The distribution of these payouts has been extremely skewed: For fiscal year 2003, a single firm received more than one-fourth of the $190 million in countervailing and antidumping duties that were distributed to U.S. firms.

 Import quotas (as opposed to tariffs) raise a third concern about trade protection. By restricting the supply of certain types of imports within the United States, quotas may benefit those foreign producers who retain the right to sell to U.S. markets by raising the prices of their goods. For example, one study found that, of the $8.6 billion in net welfare costs induced by the Multi-Fiber Agreement, which restricts textile and apparel imports, about $6 billion accrued to those foreign producers who were allotted shares of the import quotas. Surely, many Americans would cease to support certain types of import protections if they knew that such actions were serving to prop up the profits of foreign producers.  

Finally, we must not forget that trade actions, while sometimes protecting some American workers in import-competing industries, often invite the threat of foreign retaliation that would hurt American workers in export industries. For example, after the imposition of steel safeguard duties in March 2002, eight of our trading partners initiated safeguard investigations of their own on steel imports. Given the importance of export markets to the most dynamic areas of U.S. manufacturing, we cannot afford to jeopardize them by inviting foreign barriers to our products.

 Conclusion

 In conclusion, I think it unlikely that we will see a marked global reversal of trade liberalization on the order of the restrictions enacted in the 1930s. Policymakers have generally learned the lessons of that destructive episode. Nevertheless, it is not inconceivable that progress in dismantling trade barriers could stall. Many of the easiest negotiations--such as on lowering tariffs -- have already taken place. More ambitious and intrusive trade liberalizations, which often involve dismantling barriers to internal competition or cherished systems of domestic subsidies, may not have the necessary public support. It is also possible that a multiplicity of narrow, targeted trade actions -- such as antidumping or safeguard actions--could lead to a de facto rollback in the overall degree of free trade even without a concerted shift in national policies.

 Thus, it is crucial to maintain public pressure for free trade. First, it is important to continue to educate the public and create a political environment supportive of free trade. In this respect, targeted criticisms of protectionist actions may be more effective than general paeans to free trade. In a recent speech, my colleague, William Poole, urged journalists describing trade restrictions to ask who gains, who loses, and what is the net gain or loss for the economy as a whole? I very much support that sentiment. Second, it is crucial to implement policies that foster stability and economic growth. Reducing unemployment and diminishing economic insecurity will likely be more effective against protectionism than a thousand speeches like this one. Toward that end, the Federal Reserve will do its part by working to promote stable financial conditions and sustainable, noninflationary growth.

 http://www.prospect.org/web/printfriendly-view.ww?id=7674

 The American Prospect has had several special on outsourcing and globalization this is a piece on their remedies

 Outsmarting Outsourcing: Time-tested policies can keep the American middle class strong in the new global economy.       By Robert Kuttner

 Last week I addressed the dilemma of job outsourcing. I promised some remedies in this column.

In truth, the outsourcing of American jobs is one relatively small facet of the larger problem -- the steady erosion of jobs that pay middle-class wages. A global economy makes this challenge more difficult because it puts many American workers into direct competition with foreigners who are happy to work for less.

Most of the solution to the outsourcing problem, however, is domestic. In recent decades, institutions that once produced a more equal society have been dismantled or weakened. These included government regulation of wages and working conditions, of industry practices, of a worker's right to choose a union (or not), as well as various social investments that once contributed good jobs. If we can rebuild these, the loss of some jobs overseas will continue to be a problem, but a manageable one.  

The majority of jobs in the economy today are in the service sector, and many of these need to be close to the customer. A job in a hotel, a nursing home, a restaurant, a university, or a public school cannot easily be outsourced overseas.

 So the first remedy is to make these good jobs. We can do this with higher minimum wages, local living wage ordinances, by enforcing the right of workers to join unions, and structuring these jobs to encourage and reward higher skills and career paths.

 Enforcement of the Wagner Act, which allows American workers a free choice to vote in a union, has become a joke. Employers find it cheaper to fire pro-union workers, hire fancy law firms to conduct union-busting campaigns, and pay the very infrequent fine.

 One happy exception speaks volumes -- the successful struggle by the Hotel Employees and Restaurant Employees to turn Las Vegas into a union town. Today, the most humble workers in Vegas's hotels -- those who clean the rooms -- are paid middle-class salaries with health benefits and have career opportunities. They are becoming homeowners and starting to live the American dream. The higher labor costs are a drop in the casino bucket.

After all, no inherent economic logic required semi-skilled factory workers to earn middle-class wages. What made the difference was strong unions and federal enforcement of the right to organize. Blue-collar service jobs could pay decently, too.

 Second, we need more human service jobs that pay professional salaries by addressing unmet social needs. At many hospitals, nursing staffs are spread thin. Residents in nursing homes are cared for mainly by inadequately trained people earning barely above minimum wage with very high turnover rates. Budget cuts have decimated mental health services. America's children need a whole new set of professionally trained child development workers.

 These social needs should be met in the time-tested way -- by taxing those who can afford to pay and using the proceeds for social investments. America's social outlays have been reduced to the level of the 1950s. Let's have a new marriage between necessary services and good jobs.

 Third, while manufacturing jobs may never employ the work force they once did, public policy can help stimulate an advanced manufacturing economy. Al Gore didn't invent the Internet, but the U.S. government did -- as a byproduct of defense spending. A lot of very good jobs were created as high-tech industries took off. Government subsidy of biotech research, likewise, has helped incubate an industry with good jobs both in research and manufacturing.

Government could work alongside private industry to invest in new technologies for energy independence. We could make a national commitment to bring broadband cable service to every home, which would create a huge new market for jobs. These strategies would both create millions of good jobs in research, services, and manufacturing.

 Trade and outsourcing do need to be addressed, too. If workers in countries that trade with the United States are assured the right to form unions, wage competition will be less of a problem. Repealing tax incentives to outsource jobs would also help. If we enforce fair trade, the United States could have more export opportunities to balance our increased imports.

One approach to creating good jobs, however, is a proven failure: George Bush's strategy of cutting taxes, gutting regulation, and trusting private industry to do the rest. This path has led to a few astronomically compensated executive jobs, a bonanza for a few fortunate investors, and a slow slide for the working middle class. Ultimately, many roads are available in the new economy. How to reconcile globalism with good American jobs remains a political choice.  

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And of course some people believe its all hype and nothing to worry about..

 http://www.heritage.org/Research/TradeandForeignAid/wm467.cfm

 Ten Myths about Jobs and Outsourcing

The American economy never rests-at this moment, in fact, economic growth is vigorous. Yet every time there is a slight dip in the acceleration of output, jobs, or incomes, the undying myths of a sputtering, backfiring economy rise again. Today, many of those myths concern the ills of outsourcing.

 The plain facts, however, lay all of today's myths about outsourcing to rest. But there is still a real danger that politicians working with incomplete or incorrect information will hobble American competitiveness. Scapegoating poor Third World countries, "Benedict Arnold CEOs," and free trade will not improve the U.S. economy or labor market, but would likely cause great harm. Robert McTeer of the Federal Reserve Bank of Dallas summed up the promise of government action on outsourcing well: "If we are lucky, we can get through the year without doing something really, really stupid."[1]

 Myth #1: America is losing jobs.

Fact: More Americans are employed than ever before.

The household employment survey of Americans indicates that there are 1.9 million more Americans employed since the recession ended in November 2001. There are 138.3 million workers in the U.S. economy today-more than ever before.[2]

 Myth #2: The low unemployment rate excludes many discouraged workers.

Fact: Unemployment is dropping, despite a surging labor force.

Not only is the unemployment rate low in historical terms at 5.6 percent, but the workforce has been growing-there are now 2.03 million more people in the labor force than in late 2001. Without a higher rate of unemployment or a shrinking workforce, there is no evidence of growing discouragement.[3]             

Myth #3: Outsourcing will cause a net loss of 3.3 million jobs.

Fact: Outsourcing has little net impact, and represents less than 1 percent of gross job turnover.

Over the past decade, America has lost an average of 7.71 million jobs every quarter.[4] The most alarmist prediction of jobs lost to outsourcing, by Forrester Research, estimates that 3.3 million service jobs will be outsourced between 2000 and 2015-an average of 55,000 jobs outsourced per quarter, or only 0.71 percent of all jobs lost per quarter.

 Myth #4: Free trade, free labor, and free capital harm the U.S. economy.

Fact: Economic freedom is necessary for economic growth, new jobs, and higher living standards.

A study conducted for the 2004 Index of Economic Freedom confirms a strong, positive relationship between economic freedom and per capita GDP. Countries that adopt policies antithetical to economic freedom, including trying to protect jobs of a few from outsourcing, tend to retard economic growth, which leads to fewer jobs.

 Myth #5: A job outsourced is a job lost.

Fact: Outsourcing means efficiency.

Outsourcing is a means of getting more final output with lower cost inputs, which leads to lower prices for all U.S. firms and families. Lower prices lead directly to higher standards of living and more jobs in a growing economy.

 Myth #6: Outsourcing is a one-way street.

Fact: Outsourcing works both ways.

The number of jobs coming from other countries to the U.S. (jobs "insourced") is growing at a faster rate than jobs lost overseas. According to the Organization for International Investment, the numbers of manufacturing jobs insourced to the United States grew by 82 percent, while the number outsourced overseas grew by only 23 percent.[5] Moreover, these insourced jobs are often higher-paying than those outsourced.[6]

 Myth #7: American manufacturing jobs are moving to poor nations, especially China.

Fact: Nations are losing manufacturing jobs worldwide, even China.

America is not alone in experiencing declines in manufacturing jobs. U.S. manufacturing employment declined 11 percent between 1995 and 2002, which is identical to the average world decline.[7] China has seen a sharper decline, losing 15 percent of its industrial jobs over the same period.

 Myth #8: Only greedy corporations benefit from outsourcing.

Fact: Everyone benefits from outsourcing.

Outsourcing is about efficiency. As costs decline, every consumer benefits, including those who lose their jobs to outsourcing. A 2003 study by Michael W. Klein, Scott Schuh, and Robert K. Triest, which includes dislocation costs in its calculations, shows the benefits of trade outweighing its costs by 100 percent.[8] 

Myth #9: The government can protect American workers from outsourcing.

Fact: Protectionism is isolationism and has a history of failure.

Proposals to punish businesses that outsource jobs, institute tariffs, or change tax rules will carry unintended consequences if enacted. Such measures would injure U.S. firms that export goods and services and erode U.S. competitiveness, often in unexpected ways. Recent steel tariffs, for example, cost jobs in dozens of industries while raising prices for consumers.[9]

Myth #10: Unemployment benefits should be extended beyond 26 weeks.

Fact: Jobless benefits are already working

The median duration of unemployment is now 10.9 weeks; most workers are covered by existing benefits, which last for 26 weeks. Extending today's coverage to 39 weeks would cost billions of dollars and have little impact.

 Conclusion

America's workers deserve a more informative, less partisan debate on outsourcing. The negative impact of outsourcing on the economy and American employment has been greatly exaggerated, and the benefits of outsourcing almost entirely ignored.

 Tim Kane, Ph.D., is Research Fellow in Macroeconomics in the Center for Data Analysis, Brett Schaefer is Jay Kingham Fellow in the Center for International Trade and Economics (CITE), and Alison Acosta Fraser is Director of the Thomas A. Roe Institute for Economic Policy Studies, at The Heritage Foundation.

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If you want the facts from the governement check out this site:

 Displaced Workers Summary

http://www.bls.gov/news.release/disp.nr0.htm

 A piece on the impact of the net and technology on family life

 http://www.eclectechs.com/netimpact.html

Gauging Net's impact on society

 Monday, February 28, 2000

By SUZANNE WILSON, Staff Writer

We know it's huge. We know it's historic. But damned if we have any idea whether it's good or bad. The "it" is the Internet's impact on American life.

"It's a revolution like we've never seen before," says Leslie Ball, associate dean of the School of Management at the University of Massachusetts.

"I'd put it right up there with fire and the printing press," says Robin Raskin, editor in chief of FamilyPC magazine in New York.

 Because the Internet is still in its infancy, we are only just beginning to grapple with its impact on our lives, say those who have followed its rapid development.

Some of those changes are clearly national in scope. Like the steam engine before it, says Ball, the Internet is profoundly changing the economy, in this case moving the country from an industrial o to an information-based economy.

But its effect on our day to day lives, he adds, will be equally dramatic. Very soon, Ball says, the image most of us conjure up when we think of someone using the Internet o an individual sitting at a screen and keyboard alone in a den or office o will be hopelessly antiquated. By next year, to cite just one example, some cars will feature voice-activated e-mail capability, allowing drivers to listen to and respond to messages as they tool along the highway.

Already, says Raskin, the Internet has brought many families closer through e-mail. But it has also blurred the lines between work and home. Home is no longer necessarily a place apart, a refuge, but a place where you can make purchases, trade stocks, and write up the memo you didn't get to at work.

The challenge for families, she says, increasingly will be to know when enough is enough, to know when it's time "to shut it all off."

 Instant access

Shutting it off may sound appealing, but the louder message these days seems to be just the opposite: let it in.

In an ad now running on television, we see Dad, dressed in pajamas and a bathrobe, padding into the kitchen in the late night darkness. The computer beckons. He walks over to the counter and clicks on. In an instant, he checks out the game score and heads back upstairs to bed.

The point is to sell the benefits of around the clock, instant access to the Web.

But as the Internet steadily seeps into more American homes - about 40 percent of households are now on-line, and that figure may double by 2004, according to one congressional study - we're hearing more about this encroaching technology's downside.

 Earlier this month, a widely publicized and highly controversial study out of Stanford University concluded that the more time people spend on the Internet, the less time they spend with family and friends. The heaviest Internet users also reported spending less time shopping, less time reading newspapers and watching television, and more time working at home.

The study's author, Norman Nie, was quoted describing his worries about his findings this way: "When you spend your time on the Internet, you don't hear a human voice and you never get a hug."

 But not everyone was swayed by the study's thesis that use of the Internet is potentially creating lonelier people and more fragmented families.

Joseph Kayany, a communication professor at Western Michigan University who was contacted with the aid of a query sent over the Internet, says his research suggests otherwise.

 "All families are not the same," said Kayany, who studied about 70 families in his area. Use of home computers and Internet access had no negative impact in families where open discussion and close communication were the norm, Kayany found. In fact, those families tended to use the Internet to bolster family ties with far-flung relatives by e-mail. In more closed families, he found more people tended to use the Internet "as a way to escape, to flee the domestic space."

And so, to get back to that ad, it's not clear whether we should worry that Dad is isolating himself from Mom and the kids. Or just checking the score.

Making connections

There are, to be sure, plenty of Internet users who don't see themselves in the rather grim, hug-deprived picture painted by the Stanford study.

 "In our family, I think it goes the other way," says Peg Larson of Shutesbury.

Larson, 41, runs Wintergreen Associates, a business designing commercial Web sites from her home, where she lives with her husband, Bill Nadeau. There are six children in the family, ages 18 to 5. "They're all Internet wizards," says Larson. "I've inundated them with technology."

Three computers occupy a corner of the family living room. "That way you can see what the kids are doing," says Larson. Keeping computers out of the bedrooms and in a shared space, she adds, also means her family members, far from sitting in silent isolation, talk to each other frequently as they use the machines.

And use them they do. Emily, 9, used it to search for a toy she wanted for Christmas that her mother was able to buy at Media Play. Larson's 7-year-old has discovered Barbie.com. The 9- and 11-year-olds send messages to their school friends. The older children research homework assignments.

None of those activities, in Larson's view, has made her family any less close or communicative than it used to be.

 "I think the problems are over-hyped," she says, but adds the caveat that parents should monitor how their children are using the Internet o something she realizes is a problem for many technologically-challenged adults.

Adults who do master the new technology, however, often find it a boon to their family connections. When his children studied abroad during college, Leslie Ball says the regular e-mails he exchanged with them were an invaluable addition to letters and phone calls. Via e-mail, for example, he kept his son abreast of the Red Sox season almost daily. Because of the immediacy of the exchange, he recalls, "I didn't feel a sense that they were that far away."  

Victoria White, the owner of eclecTechs(tm) in Northampton, believes that one of the best uses of the Internet is the swift exchange of electronic mail. 

When her mother, Julie Hill Alger, was living at an Amherst nursing home and battling breast cancer, Victoria White gave her a laptop computer. Alger began using it to write poetry, and to keep in touch with people every day. In that case, White, owner of eclecTechs(tm) in Northampton, says the Internet "did what it does best," by freeing her mother from her physical and geographical limitations.

"That experience shaped a lot of what I feel about this," she says. "I'm of the opinion that electronic mail is the best application of the Internet," she says - and certainly, she argues, a far more personal and positive experience than watching television.

On-line research

Valle Dwight, a freelance writer who lives in Northampton, says the Internet's effect on her family has been nothing but positive. As the mother of a child with Down syndrome, Dwight has gone on-line to research medical and educational issues, and to correspond with a doctor in Texas who has worked extensively with patients with Down syndrome.

Dwight has also exchanged e-mail with other parents of children with special needs, some of whom she eventually met in person at a conference.

"I was nervous about it," she recalls, realizing that real-life contact would bring a whole new dimension to those relationships. Her apprehension, though, quickly passed. The friendships begun on-line deepened and broadened into other areas beyond the common ground they already shared.

Those who worry about the Internet's long reach into our personal and family lives see nothing but good in the ways people like Dwight are using it. The danger, says Northampton family therapist Mary Beth Averill, lies in excessively relying on it to meet and develop social relationships. Though an on-line connection may ease the way for someone who is very shy, Averill cautions that those anonymous connections inevitably involve "a lot of projections." The skills we need to develop healthy relationships, she says, "do need to be used in real life."  

Douglas David, a psychology professor at Haverford College in Pennsylvania who studies use of the Internet, says there isn't one answer to whether it will help or hurt families, or our ability to form sustaining relationships.

Someone looking for help with depression on-line, for example, will be "deluged with support" that may be very helpful, he said. On the other hand, "If you are substituting short, anonymous relationships for learning to deal with your parents, then you're at risk."

It could be, David suggests, that the Internet will prove to be the innovation that reverses the damage brought on by the automobile. The car, he says, helped create a segmented society by making it far easier for families to live in different parts of the country. Now, the Internet may bring them closer.

Work and home

 Robert Hanna, the technology specialist for the Northampton school department, uses computers and works around computers all day long. At home, he sometimes logs on again, and works some more.

"When I go home, I do things I couldn't get to during the day," he says. He might work on some budget issues, or answer some messages. "And then I'll look up and it's 11 o'clock."

Hanna says the fact that he does not have immediate family in this area is part of the reason he can work at night. "I'm free to be a workaholic," he says with a laugh.

But Hanna's situation isn't unique, family or no family. As Internet technology comes home, so to speak, more and more Americans find the line between two previously distinct parts of their lives isn't as clear as it used to be.

"You can be accessible 24 hours a day, seven days a week, and I don't want to be," says Leslie Ball at UMass.

 Nonetheless, Hanna says, the availability and the ease of using the Internet make it possible to work at home, almost without realizing it. There have been times, he says, when he's gone on-line at home to e-mail his grown children, or to pay a couple of bills. Then he'll decide to check out a couple of Web sites that relate to something at work: "And then I'm back in work mode." It gets "harder and harder and harder," he says, to keep the office at bay.

Nor do vacations necessarily provide a clean break. While many people are aghast at the notion of staying in touch with the office electronically during a sojourn at the beach, others aren't so sure it's all bad.

Robin Raskin of FamilyPC magazine, for one, says she doesn't mind spending a little time each day responding to her e-mail on vacation. "I'd rather do that,"

she says, "than come back to 7,000 messages."

Raskin's "each to her own" approach may sum up where things are right now, at a time when no one seems quite sure what changes are in store, and how they'll affect us.  

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And some government statistics in a summary of a report on the digital divide..

 http://www.ntia.doc.gov/ntiahome/digitaldivide/execsumfttn00.htm 

NTIA Report  Falling Through the Net, Toward Digital Inclusion 

EXECUTIVE SUMMARY

The Internet is becoming an increasingly vital tool in our information society. More Americans are going online to conduct such day-to-day activities as business transactions, personal correspondence, research and information-gathering, and shopping. Each year, being digitally connected becomes ever more critical to economic, educational, and social advancement. Now that a large number of Americans regularly use the Internet to conduct daily activities, people who lack access to those tools are at a growing disadvantage. Therefore, raising the level of digital inclusion -- by increasing the number of Americans using the technology tools of the digital age -- is a vitally important national goal.

This report, Falling Through the Net: Toward Digital Inclusion, is the fourth in the Falling Through the Net series. In this report, we measure the extent of digital inclusion by looking at households and individuals that have a computer and an Internet connection. We measure the digital divide, as we have before, by looking at the differences in the shares of each group that is digitally connected. For the first time, we also provide data on high-speed access to the Internet, as well as access to the Internet and computers by people with disabilities.

The data show that the overall level of U.S. digital inclusion is rapidly increasing:

* The share of households with Internet access soared by 58%, rising from 26.2% in December 1998 to 41.5% in August 2000.

* More than half of all households (51.0%) have computers, up from 42.1% in December 1998.

* There were 116.5 million Americans online at some location in August 2000, 31.9 million more than there were only 20 months earlier.

  * The share of individuals using the Internet rose by 35.8%, from 32.7% in December 1998 to 44.4% in August 2000. If growth continues at that rate, more than half of all Americans will be using the Internet by the middle of 2001.

The rapid uptake of new technologies is occurring among most groups of Americans, regardless of income, education, race or ethnicity, location, age, or gender, suggesting that digital inclusion is a realizable goal. Groups that have traditionally been digital "have nots" are now making dramatic gains:

* The gap between households in rural areas and households nationwide that access the Internet has narrowed from 4.0 percentage points in 1998 to 2.6 percentage points in 2000. Rural households are much closer to the nationwide Internet penetration rate of 41.5%. In rural areas this year, 38.9% of the households had Internet access, a 75% increase from 22.2% in December 1998.

* Americans at every income level are connecting at far higher rates from their homes, particularly at the middle income levels. Internet access among households earning $35,000 to $49,000 rose from 29.0% in December 1998 to 46.1% in August 2000. Today, more than two-thirds of all households earning more than $50,000 have Internet connections (60.9% for households earning $50,000 to $74,999 and 77.7% for households earning above $75,000).

  * Access to the Internet is also expanding across every education level, particularly for those with some high school or college education. Households headed by someone with "some college experience" showed the greatest expansion in Internet penetration of all education levels, rising from 30.2% in December 1998 to 49.0% in August 2000.

  * Blacks and Hispanics, while they still lag behind other groups, have shown impressive gains in Internet access. Black households are now more than twice as likely to have home access than they were 20 months ago, rising from 11.2% to 23.5%. Hispanic households have also experienced a tremendous growth rate during this period, rising from 12.6% to 23.6%.

  * The disparity in Internet usage between men and women has largely disappeared. In December 1998, 34.2% of men and 31.4% of women were using the Internet. By August 2000, 44.6% of men and a statistically indistinguishable 44.2% of women were Internet users.

* Individuals 50 years of age and older -- while still less likely than younger Americans to use the Internet -- experienced the highest rates of growth in Internet usage of all age groups: 53% from December 1998 to August 2000, compared to a 35% growth rate for individual Internet usage nationwide.

 Nonetheless, a digital divide remains or has expanded slightly in some cases, even while Internet access and computer ownership are rising rapidly for almost all groups. For example, the August 2000 data show that noticeable divides still exist between those with different levels of income and education, different racial and ethnic groups, old and young, single and dual-parent families, and those with and without disabilities.

* Persons with a disability are only half as likely to have access to the Internet as those without a disability: 21.6% compared to 42.1%. And while just under 25% of those without a disability have never used a personal computer, close to 60% of those with a disability fall into that category.

  * Among those with a disability, people who have impaired vision and problems with manual dexterity have even lower rates of Internet access and are less likely to use a computer regularly than people with hearing and mobility problems. This difference holds in the aggregate, as well as across age groups.

* Large gaps also remain regarding Internet penetration rates among households of different races and ethnic origins. Asian Americans and Pacific Islanders have maintained the highest level of home Internet access at 56.8%. Blacks and Hispanics, at the other end of the spectrum, continue to experience the lowest household Internet penetration rates at 23.5% and 23.6%, respectively.

  * Large gaps for Blacks and Hispanics remain when measured against the national average Internet penetration rate.

 -- The divide between Internet access rates for Black households and the national average rate was 18.0 percentage points in August 2000 (a 23.5% penetration rate for Black households, compared to 41.5% for households nationally). That gap is 3.0 percentage points wider than the 15.0 percentage point gap that existed in December 1998.

  -- The Internet divide between Hispanic households and the national average rate was 17.9 percentage points in August 2000 (a 23.6% penetration rate for Hispanic households, compared to 41.5% for households nationally). That gap is 4.3 percentage points wider than the 13.6 percentage point gap that existed in December 1998.

  -- With respect to individuals, while about a third of the U.S. population uses the Internet at home, only 16.1% of Hispanics and 18.9% of Blacks use the Internet at home.  

-- Differences in income and education do not fully account for this facet of the digital divide. Estimates of what Internet access rates for Blacks and Hispanic households would have been if they had incomes and education levels as high as the nation as a whole show that these two factors account for about one-half of the differences.

 * With regard to computer ownership, the divide appears to have stabilized, although it remains large.

 -- The August 2000 divide between Black households and the national average rate with regard to computer ownership was 18.4 percentage points (a 32.6% penetration rate for Black households, compared to 51.0% for households nationally). That gap is statistically no different from the gap that existed in December1998.

  -- Similarly, the 17.3 percentage point difference between the share of Hispanic households with a computer (33.7%) and the national average (51.%) did not register a statistically significant change from the December 1998 computer divide.

* Individuals 50 years of age and older are among the least likely to be Internet users. The Internet use rate for this group was only 29.6% in 2000. However, individuals in this age group were almost three times as likely to be Internet users if they were in the labor force than if they were not.

  * Two-parent households are nearly twice as likely to have Internet access as single-parent households (60.6% for dual-parent, compared to 35.7% for male-headed households and 30.0% for female-headed households). In central cities, only 22.8% of female-headed households have Internet access.

  * Even with broadband services, a relatively new technology used by only 10.7% of online households, there are disparities. Rural areas, for example, are now lagging behind central cities and urban areas in broadband penetration at 7.3%, compared to 12.2% and 11.8%, respectively.

 Americans are using the Internet in the following ways:

  * E-mail remains the Internet's 'killer application'-79.9% of Internet users reported using e-mail.

  * Online shopping and bill paying are seeing the fastest growth.

  * Low income users were the most likely to report using the Internet to look for jobs.

 * The August 2000 data show that schools, libraries, and other public access points continue to serve those groups that do not have access at home. For example, certain groups are far more likely to use public libraries to access the Internet, such as the unemployed, Blacks, and Asian Americans and Pacific Islanders.

 Internet access is no longer a luxury item, but a resource used by many. Overall, the findings in this report show that there has been tremendous progress in just 20 months, but much work remains to be done. Computer ownership and Internet access rates are rapidly rising nationwide and for almost all groups. Nonetheless, there are still sectors of Americans that are not adequately digitally connected. Until everyone has access to new technology tools, we must continue to take steps to expand access to these information resources.

  Thats all Folks!

  Colin

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