Job Cuts in the U.S. or "The Large Emigration"

August 1, 2011

"Job Cuts in the U.S. or The Large Emigration"

The job cuts announced by Merck during its earnings call at the end of last week hurt, but are clearly just a symptom of a much larger trend that has been going on for several years. Pharma companies have scaled back headcount dramatically, but other industries are equally adding to the economic challenge and high unemployment rates. Of the 13,000 incremental Merck positions that will be eliminated  through 2015, 35% to 40% are U.S. positions, according to the WSJ.

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The company stated continued investment in infrastructure and headcount development in emerging (growth) markets, such as China. And Merck is not alone. Most industries are cutting back, attempting to operate lean in developed markets. Meanwhile investments in emerging markets continue in the hope of positioning for strong growth in emerging markets with ever increasing populations and promises of strong economic growth.

	U.S.	Germany	China	India
Population	311 million	82 million (World Bank, 2009)	1.3 billion (World Bank, 2009)	1.55 billion (World Bank, 2009)
Birth Rate (www.indexmundi.com)	13.83 births/1000	8.3 births/1000	12.29 births/1000	21 births/1000
GDP Growth	+1.3% Q2:11	+3.5% FY:10	+10.3% FY:10	+10.4% FY:10
Unemployment Rate (CIA World Fact Book)	9.2% (6/11) (U.S. Bureau of Labor Statistics)	7.4% (2010 estimate) ! Seems low!	4.3% (2009)	10.8% (2010 estimate)
2015 CAGR GDP Growth	+2% (Bureau of Economic Analysis)	+1.7% (economicsnewspaper.com)	+7% (newsxinhuanet.com)	+6.12% (www.tradingeconomics.com)

In the U.S., job eliminations have impacted all functions and positions: R&D, sales, corporate positions, all in the name of "more flexible and low-cost operations". According to Challenger, Gray & Christmas, the pharmaceutical industry announced plans for over 53,000 U.S. job cuts in 2010. The U.S. unemployment rate was stated as 9.2% in June 2011. With the volatility in the financial markets and large global economies, I don't see good reasons why this rate should show dramatic improvements in the near future.

The trend seems to tell us that professional opportunities lie ex-U.S. and ex-developed markets in general. Manufacturing plants continue to move east to benefit from lower labor cost, favorable taxes, and foreign government relationships that may facilitate faster market penetration. What will be left in the U.S. if the trend continues? Customer service has long been outsourced.

Already, growing numbers of young U.S. professionals seek business education internationally and attend the top Business Schools in London, Spain, etc. Without question, they will be open to taking on international opportunities rather than returning to the U.S. The true global (professional) citizen. So, does that mean a serious talent drain for the U.S.? I could not find any recent data, but according to a 2008-poll conducted by Zogby International "10% of all U.S. households [were] looking to leave the country at the time, while another 11% [were] considering living outside the U.S. at least part time."

I guess there is something to be said about the emergence of Chinese as a foreign language option at elementary and high schools in this country. We have truly become a "global world" [yes, yes, another brilliant quote]. Boundaries and barriers are becoming smaller and less challenging, which will lead to continued immigration and emigration. So far, the U.S. still has a strong appeal as the country where one can pursue dreams and obtain financial freedom. However, economic crises are real and with people willing to move and relocate at the snap of a finger, we ought to think and focus on how this country remains attractive to the innovators, entrepreneurs, go-getters, hard workers, and families that make it what it is today.

Clearly, the U.S. is not the only developed nation in fear of talent drain and its future economic health. Across the "big pond", nations seem to crumble and a nationalist movement – undoubtedly related – appears to show its evil horns, … all driven by fear, frustration, and uncertainty. Strong leadership is needed everywhere.

In the meantime, learn Chinese and don't be caught off guard by downsizing…