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The Full Outsourcing Discussion
GileadGreene writes "Thomas Friedman of the New York Times recently did an interesting Op-Ed piece about the "silver lining of overseas outsourcing": the growth that it generates in the US job market as Indian companies outsource work that US workers are better at. Apparently total exports from US companies to India have grown from $2.5 billion in 1990 to $4.1 billion in 2002 as well. So maybe this outsourcing thing isn't so bad after all." Ultimately, free trade works out well; I think one of the issues is that white collar jobs are just beginning to feel the pinch, and are acting like manufacturers did in the 1970s and 1980s.
Hemos adds: Ultimately, free trade works out well
then I read this in the article:
"look around this office." All the computers are from Compaq. The basic software is from Microsoft. The phones are from Lucent. The air-conditioning is by Carrier, and even the bottled water is by Coke, because when it comes to drinking water in India, people want a trusted brand. On top of all this, Nagarajan said, 90 percent of the shares in 24/7 are owned by U.S. investors.
OK, so that's how Free Trade works out well: domestic workers are put out of jobs but the big multinationals reap the benefits. Where are the phones from Lucent and the the Carrier air conditioners manufacturered? Where does Coke bottle the water? They don't ship it over from the US. They probably have a filtering and bottling plant down the street.
The 90% of the shares owned by US investors aren't owned by your next door neighbours, they're owned by multimillionaire investment traders. They don't give a shit about the people making them the money, they're just cogs in their money-machine.
Saying Free Trade works out well because faceless corporation make billions is just plain wrong.
Trolling is a art,
The idea that America has an advantage in certain areas always comes up. But what jobs are Americans better at when the definition of doing a job well is increasingly based solely on the cost of labor?
sure.. it's good for the fat cats, but when is life not going to be? the points brought up in the article - All the computers are from Compaq. The basic software is from Microsoft. The phones are from Lucent. The air-conditioning is by Carrier, and even the bottled water is by Coke - wherever the offices are in the world these things will be provided by these companies or such like. The only people whose pockets are getting lined are the Fat Cat's, not Joe Geek who just got pushed out of a job.
tim
There are many Americans who must call my programming company in Tirupathi with software specifications, requirements, bug reports, and customer feedback. All of this information must be managed between the American company buying the software and our Indian engineers. Are the people who manage this information not employed?
I think customer satisfaction is a major issue in outsourcing. I remember a friend complaining non-stop about Dell's customer service being incomprehensible after Dell switched to outsourced call centers.
This must be some new economic theory. That a $1.6 billion dollar trade increase is somehow more beneficial than tens of thousands of good paying jobs.
Very interesting.
Casual Games/Downloads
Seriously though, if we continue (to allow our "representatives") export middle and upper-middle class jobs, we WILL see a depression, and I don't mean like the '80s, I mean a real depression. We're more than halfway there already. It's too bad we keep electing politicians that just sit back and allow the corporate wonks to masturbate them.
"Who are in control, they are not in control of anything - they don't even control themselves!" - Glen Beck
Now, could you please answer just one question? We in the US were told when we shipped all our manufacturing jobs, and most of our dirty work, to the Third World, that all would be OK, because we would retrain to do the work of the mind. Which supposedly has a higher value.
Now that all the work of the hands is gone, we are starting to ship the work of the mind elsewhere. When the work of the hands and the work of the mind is gone, what exactly is left?
Please be precise, specific, and complete in your answer. Thanks.
sPh
I'm a little confused by the article... It states that this is a plus for U.S because all of these outsource sites buy Compaq computers, drink Coca Cola, etc. So, are we to believe those same centers here would not?
One of the frequent jokes about outsourcing is that the one group that will never be outsourced is management. That's not exactly true. If you were a company that wanted to hire a firm to write software for you, who could do it cheaper? An American firm who hires Indian programmers or and Indian firm whose entire employee roster works in India, including its management? At some point down this slippery slope to the cheapest price, even the "fat cats" are going to feel the effects.
It seems that $4.1 billion is not quite as much money as is lost by the people in the US not being able to buy things HERE because they dont have jobs. All that money goes directly to the corporations, and their CEOs when they sell any product. Eventually they'll simply start producing the products in the countries they're selling them to. They can make compaq computers in India if they need to.
In the long run, outsourcing will create some jobs, but it will be a fraction of the jobs that we currently have. Sure, people can retrain and new industries will develop, but the rapid loss of jobs puts a damper on the economy, one which can be tough to bounce back from.
The corporations are not worried about this, because they can still export products to other countries. Everyone else will have trouble.
http://github.com/gbook/nidb
All it is is hiring workers who do the job best, without regards to where the worker is. No big deal. There is nothing wrong with hiring the best worker.
How is this insightful? It's just plain incorrect. It has nothing to do with the best worker, otherwise you'd have call-centers filled with highly paid experts.
It's about hiring someone who can still do a decent job and saving money, with a heavy emphasis on saving money.
Casual Games/Downloads
> I think one of the issues is that white collar jobs are just beginning to feel the pinch,
Ask anyone who has lost their job if it felt like a "pinch".
The surprise isn't how often we make bad choices; the surprise is how seldom they defeat us.
(start -1 Flamebait rant now)
- Manufacturing in the US (save automotives) is all but dead as those get outsourced to other nations where labor is cheaper
- Information management (programming) is outsourced off to India
- Cultural production is stifled and held in the hands of the Hollywood few
- Creativity production is stifled and bound by the overworked USPTO and overbearing DMCA
When the nation is nothing but accountants, lawyers, and doctors, whose primary role is to redistribute, rather than create, wealth, don't go crying when suddenly people realize you add nothing to the table.
(Well, this explains an awful lot of why US laws are like that. When you create woefully little, you must defend that little with all your might. Think: if the US can actually compete despite their higher costs because they add more value, what'd be the point of the tight-fisted IP laws?)
Doing the Right Thing should not be preempted by making a buck.
the thing that he doesn't mention in the article is that those microsoft and compaq products he mentions are increasingly being produced by foreign workers.
microsoft is outsourcing.
i would be flabbergasted if those compaqs are made in america.
i realize that things are changing. it is inevitable. perhaps, if customer service improves due to actual customer support being economically feasible, that is a good thing.
however, what is the end game here? first, the manufacturing jobs left- but don't worry, there are going to be plenty of high-tech and knowledge worker jobs available.
now, those jobs are disappearing- both tech and knowledge. there are only going to be a limited number of those creative positions that he mentions that are available. if you don't believe that, try getting a director's job in hollywood.
i thought that maybe certain things would be immune- like washing machines, etc., that are too large to be shipped from asia- but mexico just got another manufacturing plant from maytag the other day.
and now that manufacturing barriers for media (tv, films) are declining, i don't see america maintaining its dominance there indefinitely.
what is the end game, again? what are we going to do to survive? what will pay enough to enable a family to own a house and a car?
competition is good. trade is good. but the next twenty years in america are going to be rough if we don't start thinking about these things, to avoid having a nation of burger flippers or anointed creative types and ceo's. and if the numbers get more skewed, we may yet wind up with a democracy instead of a republic.
stored on computers from birth to the grave
"The 90% of the shares owned by US investors aren't owned by your next door neighbours"
Guess who are the people driving the relentless spread and tyrannical globalisation of free markets?
Little old grannies. No kidding.
See all that money their now deceased men folk paid into pension schemes for decades? They want it back... With interest...
Government of the people, by corporate executives, for corporate profits.
However, this example also illustrates a very important caveat to this whole situation: the competition can only be productive if there is an equal baseline established. As a country, we have decided that certain qualities are important to us, such as a clean environment, worker's rights, education, health care, etc. These are national policies, enshrined in institutions from the EPA to the FDA, and thus every state is subject to the same requirements. And it is here that the comparison with international Free Trade breaks down. If companies in India are not subject to the same requirements, if they are not required to care about the environment etc., then it is not really free trade. American companies can't ever hope to compete, burdened by costs they can't control. Instead, we merely subsidize a temporary exploitation of a less developed country. Once India and other countries develop to a similar level, they will likely begin to care about more of the same things, and at that point competition can begin to truly flourish without a need for restrictions. But in the mean time, I don't see how true Free Trade can exist without unfairly undermining important values we hold.
Yes outsourcing is putting thousands of people out of work. Duly noted.
Yes outsourcing is driving down wages. Duly noted.
Everything you would ever want to carp about regarding outsourcing has been stated, you do not need to retransmit. The issue is now what are you going to do about reality. Are you going to bellyache about it and hope your low-grade tech skills will somehow merit $80k again? Or are you going to find those spaces where outsourcing won't or can't go and pursue ruthlessly?
The US has spent a quarter century ramming free trade down the world's throat and gleefully telling everyone else to "deal with change!". Well now that goes for you too. Outsourcing is reality. Route around it or be a victim. EOM.
Except it has absolutely nothing to do with who is best, rather it has everything to do with who is cheaper. You really don't see any outsourcing of US IT jobs to England, Germany, Japan, etc... You see them going to India, China, Lithuania, etc... (no offense to residents of those countries) because people will simply work for less income than in the US.
Saying Android is a family of phones is akin to saying Linux is a family of PCs.
That is as BAD a generalization as any one an American makes.
Owing to hundreds of years of immigration, the US is one of the most diverse nations on Earth, despite the effort of the likes of WalMart and McDonalds to homogenize us.
"does the same job" can be a diffuse and difficult thing to measure. Witness the return of Dell support to America - because Indian workers weren't well-rooted in American culture. The same would happen if the tables were turned. Last I heard, American workers were incredibly productive.
As for overpriced, it goes with the cost of living. But that same cost of living sells lots of products for the very same companies that want to outsource. The article says that Indian companies buy US goods, but do Indian consumers? If an American company shifts an American job to India, does it also shift that purchase of its product? Will an Indian consumer base arise as fast as the American consumer base is destroyed?
The living have better things to do than to continue hating the dead.
Free trade does work out well, but the problem is that it does involve both winners and losers, in the short term. The short-term losers know exactly what to blame: free trade. The winners, by and large, are diffused through the entire economy and over the course of many years: they benefit enormously from free trade, but they don't know it.
For centuries, protectionists have traded on this asymmetry. They point to the real, obvious, and acute problems caused by trade, and deny any theoretical 'ivory-tower' benefits because they are in the unknown future. This is the thinking that resulted in the Smoot-Hawley Act in the US, and similar measures throughout the world, contributing to the profound and lasting slump through all of the 1930's.
Today's protectionists, of course, say that they aren't like that, and that they only want to stop 'bad' trade. But what is 'bad' trade? In the end it still boils down to what it has always been: 'bad' trade is trade that adversely impacts politically powerful groups (such as farmers, steelworkers, perhaps now programmers), regardless of the damage such trade restrictions cause to the economy as a whole.
What was true 200 years ago is still true today: protectionism ends up leaving us all poorer.
You bet! Regulations about chemical safety, for instance, (like methyl-iso-cyanate) are completely unnecessary. Just ask the people of Bhopal.
The living have better things to do than to continue hating the dead.
I don't get conservatives. They espouse the merits of capitalism and the free market(one of their few good ideas), yet when it comes to actually breaking down trade barriers to free the market, they do a 180 to bend over for their base --- few of which actually understand capitalism.
A deep unwavering belief is a sure sign you're missing something...
What you are saying is correct, but unless you own enough stock to live off dividends, that doesn't do 90% of the people any good. Who cares if the stock I own is doing great, IF I DON'T HAVE A FRICKIN JOB AND CAN'T PAY MY BILLS............... That is the boat that increasing numbers of Americans find themselves in. It's great if my investment is doing well because all the big multinationals have shipped jobs and manufacturing and accounting overseas, but my investment alone won't provide me a living....
This is a concept the young replublican, right wing, econ-nazis' need to learn to deal with, or as Dlyan said these times will be a changin'
So Long and Thanks for all the Fish.
Drill baby drill - on Mars
It isn't as though the number of manufacturing jobs in the US has shrunk, or real manufacturing wages have fallen, since the 1980s. No, that has not happened at-all.
I don't doubt that free trade will generate a great deal of wealth. The question is - who will get it? In the example of the Coca Cola-brand bottled water sold in the Indian corporate park - how much of that wealth ends up in the hands of white collar workers?
Obviously - those who have power will use it to secure for themselves a share of that wealth. Duh.
This is not even about workers in India and the United States "competing" with eachother.
Let's take an instructive look at the case of caterpillar. Caterpillar (they make tractors) maintains factories both in the United States, and in Germany, and in third world countries. They have, in fact, more factories than they need to build enough tractors to meet demand.
So, when American workers went on strike, they simply increased production in their German (and Mexican, IIRC) factories. The German workers make slightly more than their american counterparts would-have but that doesn't enter into it. With the additional power provided by their international organization, caterpillar was able to break the strike.
So, yes, free trade does generate wealth. But, as with other aspects of trade and commerce (slashdotters are most familiar with the effects of intellectual property law) it will also tend to concentrate existing wealth in the hands of those with the power to take advantage of it.
Pretending, in the case of so-called "free trade" for which ample data is now available, that this is a net benefit for the relatively powerless general population is utterly facetious.
To put it another way - there are all sorts of events, dependent on free trade, might generate wealth for the general population. However, that has no input into the process by which events are made to occur. Events are made to occur because they benefit a particular group of individuals, powerful enough to actualize them. This may or may not have some benefits (lower commodity prices, in this case) for the general population which may or may not outweigh the costs (lower wages, lower employment level) to the general population. Theory can take us this far and from here we should rely on the evidenciary record.
I think it is abundantly clear from the past ten years that the movement of jobs overseas harms the general population more that it benefits the general population.
The good and new comes from no quarter where it is looked for, and is always something different from what is expected.
> > fund managers make zillions based on return. they don't care.
> Fund managers don't own the funds they manage.
Parent's parent had the reasoning wrong, but he's right in his conclusion. Fund managers don't care because their remuneration is obscenely high, even though hardly any of them even match the performance of the simple index.
Incompetent as they are, I doubt most managers are quite stupid enough to buy their own funds.
Look I used to be a tried and true replublican till I saw my friends jobs being outsourced overseas, and the suffering they went through. Then I was laid off and out of work for 9 months ( which is apparently minimal from what some folks have told me), found a new job that pays 20,000 less a year, thats a pinch, being out of work for 2+ years and having to take an $9.00 job is a punch. Basically Bush and the Fox-News crowd don't care, they have thier millions and could care less if the rest of us starve.
Then in the name of religion, they use issues like Gays, abortion, prayer in public schools... ( all issues they have used since Reagan and done extactly nothing about in the last 20 yrs) to suck in the voters from the religious right, that they would otherwise never get, to vote for them and continue looting the US, and throw the evangelicals a bone every now and then.
I have had enough, I plan to use the Reagan formula 'Are you better off than you were 4 years ago???' No, bye bye Repubs... it's that easy.
I don't care if there is Gay marrige, cats and dogs living together, whatever as long as I can provide for my family. Thats the bottom line, the rest of it is window dressing.
So Long and Thanks for all the Fish.
I read Tom's comments on how he saw Pepsi and other companies expanding into South Asian markets and I think he missed at least one important point. How can he compare Pepsi's (and other low-tech companies and functions) expansion into South Asia to technology jobs outsourcing? It seems a little under-educated. Here's what I mean.
For Pepsi to move into India probably required the construction of new manufacturing and distribution facilities. Production continued in Pepsi's traditional markets and probably had little impact on peoples jobs in places such as the US. There was probably little or no job "outsourcing" required to add carmel coloring and sugar to filtered water and CO2. Pepsi's overall headcount probably increased and the net effect on the US economy was job stability (unless or until the colored fizzy sugar water is imported from overseas).
Now let's take a look at our favorite industry, computer technology. IBM, Microsoft, HP, Motorola, municipal governments, and many other groups are moving (notice I did not say expanding) jobs to India. The jobs here in the US are replaced by (perhaps several) jobs in South Asia. The net effect on the US economy is job loss.
I think this gets to the nub of why Tom is wrong. Just like with textile, steel, glass, and automobile manufacturing, jobs lost to overseas labor remain jobs lost. BushCo likes to talk about the "freeing up" of the US economy to "do other things". Nice theory. In practice the gap between the have's and the have-not's (investors/boardmembers/managers and labor) in this country is ever widening.
We keep talking about how a crisis came in the 1970s and 1980s as manufacturing jobs were destroyed in the United States, as if it were in the past tense.
r oit
But, last time I checked, all the previous centers of manufacturing that were once booming cities are still teetering impoverished ghost towns.
A small list of the casualties of the last big free trade expansion:
Akron
Boston
Buffalo
Chicago
Cleveland
Det
Erie
New York City
Philadelphia
Shall we add to the list these IT cities?
Austin
San Diego
Phoenix
Redmond
Maybe we should just trash all of our cities?
This is my sig.
If the Roman empire is anything to go by the USA will end up as a country of the jobless and destitute, ruled by the super rich, who hire the dispossessed citizen masses as what amounts to mercenaries in a state army who's cheif role it is secure resources and to make sure the overseas possessions that secure the good life of the super rich do not get taken over by the restless local natives of said overseas territories. But of course we will learn from history won't we?
Only to idiots, are orders laws.
-- Henning von Tresckow
The problem isn't outsourcing per-se. We all know free trade is Good Thing(tm) and putting up trade barriers will only make things worse in the long run but crap man, could you at least give the programmers a second to find a new vocation.
That's what's got us all pissed off. We spent thousands, often tens of thousands of dollars on a top notch education in a field that everyone said was the wave of the future only to lose our jobs a few years later. At least when manufacturing and textile jobs started to slide America bucked up and tried ebb the flow. Now there's a 'well, it's happened before and it turned out ok... so fuck off' attitude.
I'm not so worried about myself. I'm stable and satisified enough in my career but there are still a ton of college kids that got into the field either because it was still decently hot a few years ago or because of *gasp* a sincere interest in computers who are going to be quite screwed come graduation day. It would be nice for those fellas to have something to look forward to and hopefully the generation below them won't be stupid enough to go into something as unimportant to America as technology.
LilMikey.com... I'll stop doing it when you sto
Hmm. If by a few years ago you mean before 1989? I seem to remember people were starving because they couldn't grow enough food. In the US, people call in to radio shows on their cell phones while driving their SUV's to complain about losing a job and at the same time our unemployment rate has been dropping steadily for the lat 8 months:
2003 06 6.3
2003 07 6.2
2003 08 6.1
2003 09 6.1
2003 10 6.0
2003 11 5.9
2003 12 5.7
2004 01 5.6
Absolutely agree with the long-term benefits and even a few of the short-term ones.
That said, no one on either side of the issue seems to have a plan for how to ease the displacement and transition those affected people into these new "better" jobs.
Pro-multinationals expound benefits and the broad horizon of "better" jobs for Americans. Great, and I'm all for that--but what are those jobs? Not a whole lot of speculation or identification of these. If this isn't dealt with, these are going to turn into the economic equivalents of Iraq WMD--everyone knows they're there, but no one seems to be able to find them when it would most benefit them. Worse still, absolutely no one promoting multi-national work has any sort of plan for how to deal with the real disruption of real lives, with real consequences. C'mon folks, someone tell me something about training, support during displacement, the things those affected by this need to hear.
The anti-multinationals are even worse--blind, reflexive resistance to an economic force that, better or worse, is going to run it's course regardless of whether we like it or not. What are these people doing to lobby and advocate for the training, support and assistance the displaced are going to need?
Hey, I'm all for better, sustainable work and a career that builds on what I've already done, rather than locking me into a single competency. So somebody start defining what that is, how I get there, and, if the cost is my immediate employment, what support I have to get there.
Right now the answer to the above seems to be: "You're on your own, because no one has a clue." If that's the best the pro-multinationals can come up with, is it any wonder so many people are knee-jerk opposed to this?
Think about it. If the entire employment of the US is outsourced (other than politicians, lawyers, doctors, nurses, hair dressers, and food preparation workers), there isn't going to be much of a market for stocks among the peons.
Yes, do as you say _think_ about it! But try to take it a step further. The scenario you've described is not that likely to happen, for a simple reason and that is: India won't be cheap forever! The Indian programmers will eventually start demanding better healthcare, education for the kids etc. Whether they pay for it themselves or the government taxes their income more does not really matter. The point is that it will evolve in some stable state, where the Indians will be as expensive as Americans. Want an example: Check out what's happening in Eastern Europe skilled workforce used to be dirt cheap there and is still probably cheaper than most Europe and e.g. in Prague the difference is becoming rather negligible.
Of course this might involve loss of income in America. But given the current situation, where couple of hundred million Americans consume rather bug share of worlds wealth, now that can't last forever can it?
The problem you're facing is to decide between being selfish and saying "all high paid jobs belong to us". Or being reasonable and saying, well acually the Indians deserve their share as well. Look up older Slashdot coverage of the topic to see that they're not working in sweatshops and that it's the Indians who benefit in the first place.
Of course you can resort to protectionism like you have with US and EU agricultural industry. Thirld world farmers can't export their cheap goods, because ours are far too subsidised. Furthermore EU and US dumps their produce in their market, below the production value, thus driving locals out of bussiness. See http://kickaas.typepad.com/ to get an idea of the outcome of protectionism.
If you really are old enough to have remembered Goldwater, then you're old enough to have heard these tired arguments every five years every time ANY industry goes overseas. You're also old enough to (supposedly) have some historical context on this. Will all jobs go overseas? Well, over 50 years, almost ALL tech jobs will. I guarantee it. Hell, all the "tech" jobs from 1950 have. Is there anything wrong with that? No, because they're replaced by whatever becomes high tech.
Looked at another way, if the US maintains a static labor market, we will become irrelevant and reduced to 2nd-world status quickly. Would you want to have the same sort of jobs available to Americans now that existed 50 years ago? Of course not, because bolt-turning jobs don't pay well, because anyone in the world can do that now. Unless the US keeps innovating, there's nothing to sustain the high salaries commanded by US labor. Unfortunately, we haven't figured out a totally painless way of getting rid of jobs that become less-needed as we innovate, but getting rid of certain jobs has to happen. Don't worry, assuming the US economy stays healthy over the long term, they WILL be replaced. This has occurred in a healthy manner for 100 years. Note that the total loss of manufacturing jobs that has occurred over the last 50 years has had NO ill effect upon the US economy or unemployment. Do you have any reason to suspect this one is different as you claim? Or is it just because the white collar nature of these jobs hits too close to home?
Face it, this isn't a liberal/conservative issue anyway. The US is staring at its onrushing demise just like the USSR was a few years ago. In both cases it will be due to corruption and selfishness.
That's too ridiculous to even be speculative. The USSR collapsed because its centralized economy fundamentally didn't work, and because Reagan tricked them into a military spending spree - which gave us a bunch of debt but killed them. Put it this way - if you're so certain, how about a rough year for the US's USSR-style demise?
My problem with outsourcing to countries like China, and India is that American workers can't compete, and never will be able to.
With ~ 1.2 billion ppl in China, and ~ 1 billion in India, it's a question of supply and demand. Companies that locate factories or outsource in either country can pay whatever they want, and abuse the workers any way they please, because they have a virtually unlimited supply of labor.
So basically, this is how it works. Living wage and better jobs leave the US, leaving the newly unemployed unable to help support the US economy. Those jobs go to countries where wages are extrememly low and will remain stable for the next century because of population.
In those countries, the wages are too low and the working conditions not conducive to self-sustained economy growth. Basically, no consumer-class is being created. Hence, the argument that we are "spreading the wealth" or "creating economies that we can sell to" are moot if not disengenious.
Meanwhile, in the US, an as of yet non-existent "new industry" is supposed come along to create "new! better!" jobs, than the ones previously displaced by outsourcing to other countries. Contenders for the "NEW and IMPROVED" job creation engine are:
The previously mentioned and dicounted increased global trade (hint: currently our biggest trade defecit is with China.)
And BioTech which is still about 5-10 years from any major breaktrough. (but who's to say we can't outsource gene-sequencing. Doh!)
Finally, the political realities in those countries are firmly anti-labor, pro-business, and without organized labor and/or enforced government protections for the laborers overseas there can be no uppward pressure on wages and working conditions.
In those countries the only answer to labor exploitation will unfortunately be civil war witch only creates more poverty, more terrorism and more exploitation.
Unrestricted free trade can become a good thing for the US and the world if implimented slowly over decades, (unfortunately, having a country whose leadership changes every four years doesn't help, as it's not conducive to long term stategies.) but that would eventually create equallities between economies, and businesses wouldn't be able to take advantage of the currently encouraged inequallities.
Basically, the CEO's want to make their companies look good at the expense of the world-wide, future and present, middle class, or more to the point are too short-sighted to see where we're headed.
cat sig >
The Cato Institute thinks the following:
"The large majority of America's nonfarm workers, about 85 percent, are employed in service-providing industries, construction, and government--sectors where import competition is minimal. To those workers, imports are an unambiguous blessing that spurs innovation, expands consumer choice, and raises real wages." Full Paper Here
Moreover, this breifing goes on to argue employment grows in proportion to imports . There's a fairly rational reason for this, if we can all stop foaming at the mouth long enough to actually think rationally: when employment grows we (consumers) have more cash to spend on goods and services. Since imports are a relatively fixed percentage of the overall economy, whenever the overall economy grows, so must imports. Why am I discussing imports if the argument is over services? Well, services are imported and exported just like goods. So, let's understand the real numbers, here:
The United States had a $64.8 billion trade (BEG ITAL) surplus in services in 2002, despite economic stagnation in Europe and Japan. Services accounted for 30 percent of all U.S. exports and 43 percent ($3.1 billion) of U.S. exports to India. Full Article Here
But, if half of our exports to India are in the form of services why are so many technical jobs going to India? Actually, there's no real evidence that's happening at all. There are two basic erroneous arguments made by the media today supporting the assumptions in this question. First, is the post hoc mistake: because the US economy is losing jobs and because after that happened India started gaining technology jobs, then India must be responsible for losses in American technology jobs. Actually, poor investments by venture capitalists and fund managers caused the loss in US jobs. The fact those losses occured coincidentally with India's technology boom is completely irrelevant.
Second, is the hasty generalization mistake: Bob Smith has just lost his job because his company opened a software development office in India, therefore all American technology jobs must be moving overseas. There just isn't enough evidence to support the generalization made by reporters. We may suspect that India is taking some portion of American jobs, but news reports by well-intentioned NPR and New York Times reporters aren't evidence that its hurting our economy.
All this panic and paranoia about jobs moving overseas doesn't even make sense when we consider the real economics of it. The "entire employment of the US" can't possibly be outsourced. Even if your argument wasn't a textbook example of the slippery slope fallacy, you'd still be wrong on an economic basis. If the USA loses a sufficient number of jobs, i.e. unemployment rises, the consumers will have less capital with which to buy foreign-made products. Domestic workers who are out of work will be willing to work for less, thus driving down the cost of locally made goods. When the cost of local goods and services drops below the cost of foreign made goods and services, then jobs will start to flow back into the USA. Adam Smith's invisible hand at work.
During the Clinton Administration monetary policy for the dollar kept our currency strong, which helped keep prices for foreign made consumer goods low. This was a good thing during that time because Asia and Europe were both in the midst of deep recessions and American consumer spending helped to bolster those economies through that trying time. The Bush Administration has since let the US Dollar sag in relation to other currencies. This has helped decrease the price of American goods and services abroad
"He wrested the world's whereabouts from the heavens And locked the secret in a pocketwatch." - Dava Sobel
Pick some other arbitrary date than the worst excesses of the 19th Century, which caused the Panic of 1895, which caused the antitrust movement, which caused the "Sherman Antitrust Act", which collapsed the emerging monopolies over the American labor industry. Thanks to those wars a century ago, America actually took over the world, instead of remaining a manufacturing satellite for the British and German technology (steel and chemical) industries. Now the lesson *you've* learned from that triumph is that we should undo our victory? If you're going to talk like that, better make sure you cash your checks from the oil industry, or get a real job, overseas.
--
make install -not war
And I submit to you that those not in the workforce are those that "gave up" on looking for work after being unemployed for so long. Wish I had a link handy, but this has been well documented. There may be 17 million more people working than 10 years ago, but the population of the US increased by about 40 million in that time (not sure how much the working age population increased, obviously a figure less than that)
India is already starting to hemmorage jobs to China and Malaysia, which are cheaper.
Any way you cut it, the data all point to a race to the bottom.
Finding God in a Dog
"our unemployment rate has been dropping steadily for the la[s]t 8 months"
1) That statistic offers no insight into how many former professionals or blue collar workers with good paying industrial jobs are now flipping burgers, cleaning rest rooms, or operating cash registers, having already forfeited their homes. Hey, a job is a job, right?
2) That statistic does not count those who are no longer interacting with the unemployment department because their benefits have run out, and they have despaired of ever finding suitable jobs again.
"This is a concept the young replublican, right wing, econ-nazis' need to learn to deal with..."
Your points were great until you had to start the name calling. Calling republicans nazis makes your credibility zero.
This is a concept the young democrat, left wing, econ-commies need to learn to deal with, or as Dlylan said these times will be a changin'. It's not so nice the other way around, is it?
Yes times can change. I don't know if you realize this but we live in a democracy. We elect our leaders. In about eight months you and I will have an opportunity to elect a new President. Our system is great however over half of the U.S's eligible voters don't vote. This fact angers me deeply. We take our system for granted and then complain.
Our GDP per capita is the highest in the world. Poverty as defined is the U.S. is nothing like it is in Africa where I lived for two years. I saw things that disturb me to this day. At least in this country you won't die if you are unemployed.
Enough of my ranting and raving. Sorry for trolling and flaming but after living in what seemed as hell for two years and experiencing a truly corupt government it makes me upset when someone attacks a group of people whom they don't agree with. Instead of attacking debate them.
He says that indian companies are buying computers and that this is a net gain of sales.
However, if the call center was in the US, the US company handling it would still have to buy computers, software, drinks, etc. I don't see how an Indian company buying these instead of an American company really makes any difference to the bottom line of the selling companies. He is claiming that these sales would not have been made, but the call center would HAVE to buy what it needs to run no matter if it's American or Indian. So his entire basic premise seems to be wrong.
Evan Reynolds evanthx@hotmail.com
Two peanuts crossed the street. One was assaulted.
Here's a hint, look under Employment Situation:
Jan 94: 121,971,000 employed. 65,286,000 not in workforce.
Jan 04: 138,566,000 employed. 75,298,000 not in workforce.
"Liberal cry-baby" ad hominem aside, it is of course the ratio of these numbers that we are interested in, not the absolute figures. By your measure, China and India have the strongest employment figures, because they have hundreds of millions more people working! The drop between the '94 and '04 figures you quote is a few tenths of a percent. No impending doom, to be sure, but hardly cause for celebration, or triumphalist chest-beating, come to that.
While there are significantly more people not in the workforce, I submit to you that most of those are retired! (baby boomers getting older, that sort of thing)
While that's partly true, most of the uptake in the "not in workforce" category is due to the increasing number of folks who are unemployed and have given up looking for work. Actually, this is discussed explicitly in the text of the report whose numbers you cite, so I presume you have read it. Anyone who had not actively looked for employment in the four weeks preceding the survey were counted as out of the workforce, but no longer considered technically unemployed either...
This is a concept the young liberalcrat, left wing, econ-morons need to deal with, or they'll get left behind
That's not much of an argument.
Mouser
Assume the following:
If one aims at a bruto salary of $60000 year, that's 60000 / 0.6 = $1000000 (1 Million bucks )
If the taxes are the same on income and over selling of shares, it results in the same netto income.
So, you have to be a millionair already in order to earn from you stock portfolio the equivalent to a $60000 year salary.
And that's not even taking the higher risk in the stock portfolio into account (let's just say that you would party during half of the 90s and starve during half of the 00s)
It's not enough to know that jobs are moving over seas, you need to know why.
The simplest answer is that it is cheaper to hire people in (India), labor cost less. Materials cost nearly the same, transportation costs nearly the same, time runs at the same speed. Labor.
Why is labor cheaper in 2nd-3rd tier economies? Cost of living is cheaper. Why is cost of living cheaper? Imports cost the same, travel, utilities, products cost nearly the same barring local production costs being cheaper. What is the biggest expense month to month and year to year for anyone in the world?
Housing. Rent, Mortgage, Real Estate, Property. What can't be exported or imported? Housing and Land.
Home prices and in parallel rental expenses have been going up 12% - 24% year over year in all regions of the USA for at least a decade. What is the annual cost of living inflation rate or even the average annual wage increase? More along the lines of 3% - 8% annually. Compound this over ten years and you can see that housing expenses have become the number one increase in cost of living throughout this America.
How is this possible? People still 'buy' homes right? People still rent apartments? Yes and No. More people are renting than ever before. Homes are being mortgaged using 30 to 60 year payment plans. Nobody who has 'bought' a home in the last ten years, excepting the very wealthy, will even come close to owning their home in the next ten years. As mortgage rates go up cost of living goes up, as mortgage rates go up, comparable rental rates go up... they are directly manipulated to equal local mortgage rates.
We are a nation of debtors whose income barely equals our expenses and often does not meet it. Out of control real estate values are bankrupting our nation. The average home where I live is priced at $420,000... average, meaning 3 bedrooms, 2 baths, small yard, 1.5 car garage, built in the 1980s over 20 years old. It is worth barely half of that, most likely less.
People are still buying because the banks and credit companies let them... which encourages the value of real estate to continue increasing well beyond any reasonable expectations of anyone to pay for it and still save for retirement or for the childrens college funds. This means they have to borrow even more to pay for the 'cheap' imported products so they can save their cash for old age. Insanity.
Now real estate isn't to blame... they are simply following market forces, "what the market will bear". The problem is that the market can't really bear it without creating enormous amounts of debt to finance everything. We are spending money which won't be realized as real value for 30 to 60 years. This is billions if not trillions of dollars I'm talking about. The federal deficit is nothing compared with the amount of consumer debt which is building up quietly behind the scenes with no one watching or assuming accountability.
The worst part is that we can no longer afford to compete with the rest of the world because property holders and credit companies are holding our paychecks hostage for the rest of our lives. We are paying so much for the right to have our basic housing needs met that we can't afford to take a pay cut. Not if we want to live where there is work to be done.
Look into this. It's much scarier than I've let on.
c ya. Got to go pay the rent.
A fool throws a stone into a well and a thousand sages can not remove it.
I do agree that standards of working conditions should be part of any trade deal though.
Drill baby drill - on Mars
Domestic workers who are out of work will be willing to work for less, thus driving down the cost of locally made goods. When the cost of local goods and services drops below the cost of foreign made goods and services, then jobs will start to flow back into the USA.
And when the average quality of life for American citizens drops until it equals that of other developing nations, we'll finally be able to compete toe-to-toe with their cheap labor. And when everything in the world becomes a commodity -- where do we go from there?
You're talking about lowest-common-denominator economics. While it makes sense from an objective, global perspective, from a subjective, local perspective, it sucks goat nads, and we're entitled to a little bitching.
These figures only refer to the number of people that are collecting unemployment benifits. They stop after six months and people no longer count in this number but they are still unemployed.
A better number to look at is the total number of tax receipts recieved from employed people, that number is also dropping indicating that less people are working. The government publishes this number but rarely points it out at press conferences.
The USA job market is shrinking... during a recovery. No, it's not lots of people retiring and living the good life.
- AndrewN
While it is true that employment in these industries has declined dramatically, it's not really true that the industries themselves are in trouble. American steel output, for instance, has been stable or generally increasing in the last thirty years. What's really happened is that technological improvements have made the production of steel much more efficient; for instance, a steel worker in 1987 could make 472 tons of steel a year, while in 1997 the same worker could make 947 tons of steel a year. Modern steel mini-mills are actually thriving; it is the old steel firms who have to deal with the leacy of massive pension costs from the days when they had to hire many times more workers than they need to today who are in trouble. The situation is much the same for autos and textiles; it is the transition from low productivity technology to high productivity technology, not so much competiton from imports, which is causing the bulk of the dislocation.
You're right, some things get cheaper with truly open markets. So far those things seem to mostly be plastic trinkets at WalMart. The cost of education continues to outpace inflation, healthcare costs are spiralling out of control and the housing and real estate markets are heavily overvalued, at least in my part of the country. Bargain-basement cars may be marginally cheaper, and of course electronics always get less expensive, but those are the only two durable goods I can think of that have become significantly less expensive.
Strangely enough, health care, education, and real estate are the components of our economy which are NOT generally outsourced overseas. Connect the dots yourself...
Terry
> The scenario you've described is not that likely to happen, for a simple reason and that is: India won't be cheap forever! The Indian programmers will eventually start demanding better healthcare, education for the kids etc.
Yes, but India may well be cheap for a very long time. And then there's China. The point is that the potential pool of underemployed labor in the 3rd world is huge,. This pain's going to go on for quite some time before any equilibrium is reached.
>The problem you're facing is to decide between being selfish and saying "all high paid jobs belong to us".
Who said those jobs are "high paid"? Maybe they were reasonably high paid in the US, but these jobs are going to India specifically because they are not high paid there. Just because they're better for Indians than the alternatives doesn't make them high paid. And if Indian pay gets too high, that's when the jobs go to China.
It would seem reasonable to at least attempt to establish a minimum global standard of living to mitigate the race to the bottom. Otherwise, outsourcing becomes slave labor by another name (no health benefits, no job security, no wage leverage). How much difference does it make that the slaves' choices are so limited that they are willing slaves.
Posted from my Android phone. Oh, I can change this? There, that's better...
People are always threatened by free trade, since the benefits are diffuse, but the pain concentrated.
So, here's a thought experiment:
Explain why you think outsourcing to India is bad, or evil, or should be illegal.
And then explain why the same isn't true of outsourcing to say, South Carolina.
South Carolina has lower environmental and labor standards that the rest of the us. Lower wages.
You really want every state to make their own cars? Furniture? Grow their own oranges? Wouldn't that make more jobs everywhere.
In fact, couldn't we cure suburban blight by preventing cities from importing products from their suburbs?
Now, how is that a better alternative?
And how's that meaningfully different than what's happening in India.
And yes, I am a liberal Democrat who works in the technology industry. The job that might get exported is my own. But I've also worked on a job where engineering was in India, and product management was in the US. That particular product was something that wouldn't have been worth doing at US labor rates. In many cases, this isn't a matter of exporting jobs, but creating jobs that didn't exist before, or couldn't have had as much labor behind them.
Another way to think of it: How much extra are you willing to spend on products in order to have them done in the USA. Are you willing to have your support contracts 4x higher to have an American answer them. Are you willing to pay 4x more for clothes? $400 Nikes?
Me neither.
Moreso, I'd rather have Africa get richer exporting food, Pakistan richer exporting clothes, and then get to pay even less for those goods. Ever wonder how much each of us is paying in tax dollars per American farmer?
Note that, if your income stays still, and you pay twice as much for everything, you just had a 50% pay cut. Anyone think outsourcing would get as bad as that? Nope.
As David Ricardo proved a couple of centuries ago, the strongest economy is one where everyone does what they're best at. Trying to pick winners and losers just drags everyone down.
The problem with our economy today isn't outsourcing and free trade. It's the most bolluxed up, politicized, fundamentally ignorant economics team in the history of the country. I would have been hard pressed to find a way to have spent MORE money with LESS economic stimulus than the the Bush economic "plan."
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