Housing vs Tech

Posted by: Michael Mandel on May 05

Angry Bear observes, quite correctly,

that the non-service portion of the US economy has slowly been evolving from a goods-producing economy into a house-producing economy.

In the same vein, Brad Setser discusses the implications of the U.S. becoming an economy “specializing in the production of houses.”

In terms of my own views, I’m gradually coming to the belief that the long period of low interest rates, which has helped housing, has hurt rate-insensitive sectors such as technology. Low rates help construction workers, not engineers and programmers.

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Reader Comments

Tom Ferrier

May 8, 2005 02:31 AM

I disagree with the following statement from Michael Mandel: "I'm gradually coming to the belief that the long period of low interest rates, which has helped housing, has hurt rate-insensitive sectors such as technology. Low rates help construction workers, not engineers and programmers."

I first would like to discuss what I see as a huge problem in our economy that is being overlooked by many U.S. business leaders and U.S. leaders in our government. For forty years, the USA has allowed foreign engineers into the USA. I am not saying that allowing engineering into the USA is a bad thing. The problem is that these foreign engineers in the USA on an H1-B VISA are unable to start their own companies, because when they break away from the company that is sponsoring their H1-B VISA, that company will no longer sponsor that person. That foreign engineer without a H1-B sponsor is then required to leave the USA within a few months.

So if the foreign engineer wants to be an entrepreneur, he will have to go back to his homeland to start his company. THESE AMBITIOUS YOUNG FOREIGN ENGINEERS WHO GO HOME TO THEIR COUNTRIES TAKE WITH THEM ALL OF THE TECHNOLOGY THEY HAVE LEARNED AND ALL THE FUTURE TAX DOLLARS FROM THE COMPANIES THAT THEY COULD HAVE STARTED IN THE U.S.A. IF THE U.S. GOVERNMENT HAD ALLOWED THEM TO BE ENTREPRENEURS IN THE U.S.A.

Now magnify this problem by 10,000 foreign engineers who want to be entrepreneurs. These people will go home and start their companies. Since only 5% of all companies typically survive, 5% of these people will build successful companies, which is 500 new companies that could have been started in the USA. AS THEIR COMPANIES GROW FROM SMALL COMPANIES TO LARGE COMPANIES, THESE FOREIGN ENGINEERS WHO WERE EDUCATED IN THE USA AND WHO HAVE MOVED BACK TO THEIR COUNTRIES END UP COMPETING WITH U.S. COMPANIES AND ERODE A LARGE PORTION OF THE U.S. GOVERNMENT’S TAX REVENUE BASE.

THE ANSWER IS TO GIVE THE FOREIGN ENGINEERS WHO ARE EDUCATED IN THE U.S.A. A GREEN CARD UPON GRADUATION.

I even read an article from the Dean of USC’s Engineering School who also believes that foreign engineers should be given a green card upon graduation.

I imagine you are probably thinking that if we give these foreign engineers and scientists a green card, it could lead to possible homeland security issues. To that, I suggest that the US rigorously check the foreign engineers’ and scientists’ backgrounds to be sure they do not represent a threat.

Now why am I suggesting that we allow foreign engineers and scientists to have green cards? Engineers and scientists are a significant influence in a manufacturing economy and as you know, a manufacturing economy will always experience an increase in the standard of living.

Now why am I focusing on engineers to build a stronger manufacturing sector for the US economy? THIS IS BECAUE THEY HAVE THE TECHNICAL KNOW HOW TO START THESE SMALL ENGINEERING AND MANUFACTURING COMPANIES THAT WILL GROW INTO HUGE TAX GENERATING MACHINES.

Giving a green card to a foreign engineer will also improve the status of the field of engineering and make the field more desirable for young bright Americans. Up to now many of these foreign engineers and scientists have been nothing more than indentured servants to the companies that sponsor their H1-B VISAs. In some cases, companies feel they can take advantage of the foreign engineers who they have sponsored with H1-B VISAs and overwork and underpay these engineers. This adversely affects the status of the field of engineering and many young Americans choose to stay away from this field for that reason.

IF WE REALLY WANT TO BUILD A STRONGER U.S. ECONOMY,FOREIGN ENGINEERS AND SCIENTISTS STUDYING AT U.S. UNIVERSITIES NEED TO BE GRANTED A GREEN CARD UPON GRADUATION.

Tom Ferrier

May 9, 2005 12:17 PM

While I have elaborated on the forces influencing the engineering market, I believe the housing market is being influenced by the convergence of the four primary factors and a fifth factor that may be growing stronger:
1) Low interest rates for home loans
2) Money from the Stock Market that went into the Real Estate Market
3) Exchange rates make U.S. Real Estate affordable for Foreign Investors.
4) The increase in the population
5) To a lesser extent, inflation is affecting the housing market. However, inflation may be growing stronger.

All these factors have gotten the fence sitters off the fence and into the real estate market.

marie

May 27, 2006 01:58 PM

Why are we so concerned when there are many unemployed engineers in the US?
If we have such a large number of positions available that we need to hand out HB1-visas
why are engineers who are here legally can't find work?

Thank you for your interest. This blog is no longer active.

 

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Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.

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