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America's middle class is in trouble. Here's what that fact means for the world's largest economy — and the rest of planet earth.
 

James Bond 'Skyfall' movie reclaims top box office slot

The new James Bond movie 'Skyfall' hits its fifth weekend, with $11 million in sales, bringing its worldwide total to $918 million. It ranks first place at the US box office.
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Daniel Craig attends a photocall with cast and filmmakers to mark the start of production on the 23rd Bond film "Skyfall" at Massimo Restaurant and Oyster Bar on November 3, 2011 in London, United Kingdom. The film was to open November 9, 2012. (Ben Pruchnie/AFP/Getty Images)
'Skyfall' hits its fifth weekend, with $11 million in sales, bringing its worldwide total to $918 million.
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Europe: The new Third World

Major US law firms look to open shop in Ireland or Poland.
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A flag with images of The Duke and Duchess of Cambridge flutters in East Belfast, Northern Ireland. (Peter Macdiarmid/Getty Images)
US corporations have been flocking to Asia in search of lower wages for quite some time.
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America the Gutted: A foolproof way to create US jobs

…and it won't cost taxpayers a dime.
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Mitt Romney challenged President Obama's economic policies on China, which he accused of manipulating their currency, the yuan, to keep values low and secure unfair trade advantages. (Frederic J. Brown/AFP/Getty Images)

BOSTON — The hardship from unemployment in the US is astounding. Twelve million people remain out of work — or more than 20 million counting the under-employed and those who have dropped out of the workforce.

The trend is devastating the middle class, as GlobalPost reported in our recent America the Gutted investigation.

What to do?

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America the Gutted: outsourcing comes full circle

Once upon a time, the bottom line drove companies overseas. Now, the fairytale has changed — and is helping some Americans.
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GERMANY - Man holding an attache case with the names of Marokko, Korea, HongKong, Poland, Japan, China, Jakarta. (Ulrich Baumgarten/AFP/Getty Images)

The question is: When outsourcing returns home, does it pass "Go" and collect $200?

Probably not in this economy.

Our "America the Gutted" series takes an in-depth look at how the American middle class is shrinking, while elsewhere, namely in Asia, the middle class has mushroomed.

One major reason for this reciprocal phenomenon is outsourcing. American jobs have up and moved, and not all of a sudden. What we're seeing now is the accumulated effect of a trend that has been ongoing for more than two decades.

But there are now signs that the outsourcing market has become saturated, or has fallen out of favor. Kinks in the system have been identified. Circumstances have changed at home and abroad. The flow of jobs overseas has, perhaps, reached an inflection point.

Now, outsourcing giants, like Bangalore-based Infosys Ltd., are expanding their operations — though not in India, where you might think. Bloomberg reports on Infosys' new office in Atlanta, Ga., staffed almost entirely by Americans.

Major American corporations — like GM and GE, both early adopters of outsourcing — have also decided it's time to come home. GM said it plans to bring 90 percent of its IT work in-country over the next three to five years, and GE is planning an 1,100-person facility outside of Detroit.

Big US law firms, as we coverd in "America the Gutted," are also taking to this trend reversal, opening huge back offices in lower cost American cities, like Nashville and Wheeling, W. Va., where they can save money without violating their comfort zone.

Many companies have become motivated by more than just the bottom line, especially for complex tasks — like human resources and software development — when quality is paramount.

“Companies are saying some jobs are best done closer to where they are, not cheap as possible somewhere else," Madhusudan Menon, who heads Infosys’s Atlanta center, told Bloomberg. "They’re rebalancing their onshore and offshore outsourcing.”

Moreover, Infosys used to have predominantly Indian employees working in the US, but that has gotten more difficult. Bloomberg reports:

Indian outsourcing companies are finding it tougher to get visas for workers brought from India, and some U.S. businesses want to outsource -- yet keep jobs in the country. State tax breaks also provide incentives to hire locally.

And for everyone, the political cache is undeniable. Just ask Romney and Obama, who continue to duke it out over who is "outsourcer in chief."

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America the Gutted: This terrifying graphic encapsulates America's middle class decline

If you're under 30, or if you have kids, this chart should make you shudder.
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America's middle class decline: this graphic will rock your world. (Jeff Haynes/AFP/Getty Images)
BOSTON – During GlobalPost's 10-month investigation into the gutting of the American middle class, there was one chart that repeatedly made our eyes pop. And if you're under 30, or if you have kids, it should horrify you.
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India: Gutted America's lessons for New Delhi

America's middle class is disappearing almost as quickly as India's is growing. At least one of the reasons should give New Delhi policy makers pause.
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The illuminated exterior of the Hindu Laxmi Narayan Temple is pictured in New Delhi on August 22, 2011. (SAJJAD HUSSAIN/AFP/Getty Images)

GlobalPost unveiled an ambitious, worldwide investigation into the ramifications of globalization for the US middle class on Wednesday.

But this America The Gutted project also offers at least one salutary lesson for policymakers in New Delhi.

In a compelling story outlining just how America's middle class became an endangered species, GlobalPost's David Case suggests that it wasn't outsourcing, or cheap labor in China, that did the damage--or at least not those things alone.

It was also a dramatic shift in US policy, which eroded the foundations of the consumer-based economy pioneered in the days of Henry Ford: You turn workers into consumers, so that they both build and buy your products.

Here's Case:

Experts increasingly date the financial gloom back to the 1970s, when globalization, technology and politics first started rewriting the social contract.

After stripping out factors that artificially elevate earnings — such as health care inflation and additional hours worked — “middle-class incomes grew just 4.9 percent across the 28 years from 1979 to 2007, with most of that growth occurring just in the late 1990s,” according to a recent Economic Policy Institute study. That means despite the advent of computers, the 24/7 work week and all the productivity gains achieved over the past third of a century, when adjusted for inflation, a family earning $50,000 under President Carter could be expected to earn $52,450 today — and the bulk of that gain actually came in a few prosperous years in the late 1990s.

So even though the real economy expanded by an average of more than 2.6 percent annually over the past three decades, middle class earnings benefited from essentially none of this.

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India: Rosy unemployment data belies grim reality

India's unemployment rate is lower than America's. So why do you see so many guys hanging around on street corners?
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Staff work behind the counter of India's first newly-inaugurated Starbucks outlet in Mumbai on October 19, 2012. Starbucks, the world's biggest coffee chain, launched its first Indian outlet on October 19 in an upscale part of Mumbai, becoming the latest global firm to tap the urban youth's growing taste for caffeine. (PUNIT PARANJPE/AFP/Getty Images)

India's rosy unemployment figures -- which show that only a measly 6.6 percent of Indian workers are out of a job -- belies the grim reality of the job market here, suggests a statistics-rich article in the Times of India.

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India: Please, let us join the race to the bottom!

India's labor laws should be loosened to spur industrialization and create jobs for unskilled workers, argues Rajeev Dehejia
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Graphic. (Kyle Kim/GlobalPost)

India has achieved its impressive annual growth of 8.2 per cent over the last nine years despite a largely moribund manufacturing sector,  argues Rajeev Dehejia, a professor of public policy at New York University.  But if the country wants to employ its legions of unskilled workers, that has to change.

As GlobalPost reported last November, India's labor unions are again flexing their muscles. But in calling for strict application of the country's tough labor laws -- now skirted by companies who employ so-called "contract workers" and outsource jobs to the informal sector -- they may well be hurting the masses of workers they purport to represent.

"Looking just at 2006, we find that formal urban service enterprises accounted for 71.9 per cent of total output, whereas they accounted only for 29 per cent of employment," Dehejia writes in the Indian Express, describing research he conducted in collaboration with Arvind Panagariya. "In other words, urban, formal service firms and the workers they employ are at least three times as productive as informal and rural firms, yet the latter categories employ more than 70 per cent of the service sector workforce."

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India: US should learn from Chile when it comes to visas

As America works hard to keep out entrepreneurs, Start-Up Chile has attracted some 500 companies from 37 countries to so-called "Chilecon Valley."
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Graphic. (Kyle Kim/GlobalPost)

Earlier in this space, I wrote about how immigrants — especially immigrants from India — encourage job growth in the US by starting new firms. But this week's Economist noses out a telling tidbit amid the figures I quoted that most other outlets missed:

Yes, some 44 percent of Silicon Valley start-ups include at least one immigrant among their founders (and a third of that group hails from India). But that number is actually DOWN from 52 percent in 2005, the magazine points out.

The reason is not that native born Americans have suddenly become bolder, smarter, or more inclined to write software. Rather, it's that the US has become increasingly unfriendly to immigrants, while countries like Australia, Canada, Singapore, and, yes, Chile, have been actively encouraging them — by making it easy for "brainy foreigners to obtain visas to work or set up companies," the Economist writes.

The US has reduced the number of visas it issues to skilled foreign workers to 65,000 from more than 100,000 in 1999, and the process of applying for foreign residency is "slow and unpredictable." 

When India's Vivek Wadhwa came to the US in the 1980s, it took him 18 months to get a Green Card. But as he writes in his new book, "The Immigrant Exodus," it now takes 10 years. Moreover, during that period, the applicant cannot switch jobs for fear of being bumped to the bottom of the pile — so some of the world's most talented people are essentially marking time rather than getting on with the business of inventing the next Google.

Worse still, even after they start US-based companies, immigrant entrepreneurs still get the shaft. The Economist tells of Anand and Shikha Chhatpar, two Indian engineers who founded Fame Express — which makes Facebook games — after attending university in the US. But even though they created US jobs and paid some $250,000 in taxes over two years, their visa application was denied.

What did they do?  They moved their company to India.

Contrast that story to the curious tale of "Chilecon Valley." It's closer to Anarctica than it is to California, but it has lured some 500 start-ups led by "whiz kids from 37 countries," according to the Economist, basically because the guys stamping visas in Santiago are a little more friendly.

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America the Gutted: Wisconsin Public Radio interview

GlobalPost Editor Thomas Mucha and Senior Correspondent for Southeast Asia Patrick Winn spend an hour with Public Radio discussing our 10-month reporting project on the middle class.
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Graphic. (Kyle Kim/GlobalPost)

As we put the finishing touches on GlobalPost's America the Gutted reporting project, Senior Correspondent Patrick Winn and I had the opportunity today to speak with Kathleen Dunn of Wisconsin Public Radio.

Over an hour we talked about the scope of our 10-month investigation, what we learned along the way, and how the decline of the US middle class is affecting life across America, as well as the lives of millions throughout the developing world.

We're grateful for the chance to talk at length about this critically important subject, and we thank Wisconsin Public Radio for the opportunity.

As it was a call-in show, Patrick and I were also both moved to speak with so many Americans who have been affected by the trend.

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