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Globalization Decimating US I.T. Jobs
mrraven writes, "According to Ronald Reagan's former deputy secretary of the treasury in this
article in Counterpunch, globalization is destroying US I.T. jobs. From the article: 'During the past five years (January 01 – January 06), the information sector of the US economy lost 644,000 jobs, or 17.4 per cent of its work force. Computer systems design and related work lost 105,000 jobs, or 8.5 per cent of its work force. Clearly, jobs offshoring is not creating jobs in computers and information technology.'" Paul Craig Roberts quotes a number of formerly pro-globalization economists who are now seeing the light of the harrowing of the US middle class. It's not limited to I.T. Roberts quotes one recanting economist, Alan Blinder, as saying that 42–56 million American service-sector jobs are susceptible to offshoring.
Speaking of R&D... ...one of the comments made by Lucent CEO Patricia Russo about the pending merger with Alcatel said (and I'm paraphrasing because I don't have the quote in front of me):
"Alcatel does not do the kind of research that Lucent has historically done at Bell Labs. Future projects at Bell Labs will need to focus on productization in a 5-year timeframe. This transition has already started."
Science and research for the sake of science and research is now officially dead at Bell Labs. If they can't turn it into something that can be sold within 5 years, shitcan it.
Learning HOW to think is more important than learning WHAT to think.
The IT sector hired far more people than normal as a result of the dot com boom. The IT market adjusted after the boom ended. The period they study includes the dot com crash. These jobs may simply have vanished along with the dot coms, rather than being outsourced.
Good luck finding anything with the "Made in the USA" label. I don't remember the last time I saw it. Shoes, clothes, cars, electronics... Been to Walmart lately? When companies can get cheaper labor with little or no labor or environmental restrictions in foreign countries, then who can blame them for moving? Some say the solution is to remove labor and environmental restrictions in America. I believe that would result in the US becoming just another 3rd World nation. I figure we should bring back tarriffs. If a country has shitty labor or environmental laws, slap a tarriff on their products to make them just as expensive as their American counterparts. But I'm not an economist, so maybe I'm missing something important.
Does it really matter if jobs go from LA to Las Vegas or from LA to Toronto or from LA to India? Either way, unless you are willing to follow the job and take the prevailing wage, you are still out of work.
It's a fact of life, almost any job that doesn't require your physical presence is relocateable. If the cost of moving raw materials abroad and the finished product back is low enough, and the difference in the cost of doing business is high enough, then everything else being equal you will see job migration.
If you want security from relocation, be a computer-equipment-installation technician. If you want security from offshoring, find a job that is "outsource-proof" such as certain defense-industry jobs.
The biggest issue in my mind isn't offshoring because overseas engineers work for half of what Americans charge, but offshoring of any type because costs imposed by the "American standard of living" are significantly greater than the equivalent costs in countries with a much lower standard of living. As long as we insist on things like clean air, good police protection, something approaching a "living wage" for our lowest-paid workers, good health care, safe cars, good infrastructure, etc. etc. etc., then we will have higher costs to do business here than in countries whose citizens don't demand these things. In a country or region without such costs, the cost of living will be much lower and wages can be lower while still having employees feel well-compensated.
There are parts of America with a relatively low payroll burden on companies and with relatively low costs-of-living. If your big-city job were suddenly transferred to some rural area 2000 miles away where 2/3 of your salary could let you live in a house twice the size of your existing one, but with the nearest big city 3 hours away, would you take the transfer or would you start sending out your resume? How about if it was transferred 10,000 miles away and the salary was 1/3, but even after paying for a flat the same size as the one you have now, you'd still be able to bank a huge amount each month?
Look on the bright side - the world and it's nearby neighbors are a closed system as far as the job market is concerned - no jobs are going to Alpha Centauri Prime any time soon.
I am not a troll. Just a realist.
Knowledge is how to play a game, intelligence is how to win, wisdom is knowing what game to play.
Meanwhile, at Bell Labs, things have been business-focused for a very long time. Remember that Thompson, Richie et al. couldn't get funding to make a new O/S, they had to pretend they were writing a text processor instead.
Disclaimer: I am an IT manager who sets up and runs IT groups in India. So I'm the "bad guy" I guess.
1. Outsourcing is not new. And the reaction by the IT industry is not new. The garment industry was outsourced, the steel industry, to a degree the automotive industry. It happens. The people directly impacted don't like it but as long as it make economic sense, outsourcing will happen. Adapt to survive and thrive.
2. Isolated protective measures to limit outsourcing will ultimately fail. If you put restrictions on US companies that increase their costs while overseas competitors have no such restrictions, US companies will be at a competitive disadvantage ultimately hurting their growth and their employees.
3. Outsourcing is not easy in the IT industry. I can point to as many failures as successes. Not every company in the US that needs IT resources will be candidates for outsourcing. Not every job will end up overseas. In fact even though my entire IT organization is in India I'll soon be looking for a Systems Engineer in the US because I'm not happy with what I find in India.
4. Salaries for IT candidates in India are increasing very rapidly (think Silicon Valley, 1999). Given the inherent inefficiency of dealing with people great distances away, the economics of outsourcing are getting worse.
5. Decimation means to kill off 10%, not 90% as some posts have said. From Wikipedia: The word decimation is derived from Latin meaning "removal of a tenth." So the article is correct, this is decimation.
6. I could be wrong on any or all of the above.
"Written on the pages is the answer to the never ending story..."
So, if we are supposed to rely on education, technology and research and development to keep our edge as a country, we are already in trouble, especially when one considers that even if we were to turn things around tomorrow, we have likely done enough damage that it will take a decade to recover.
Industrial recovery is not possible while we trade with non free China and your government/corporate masters have you screwed out for RD too.
GE, Microsoft and others have already started moving their research offshore. I'm talking about basic industrial research, like turbine design. "First World" Physics, no longer viable, so forget it. Brains are cheaper, and theoretically free, in Russia and India. The situation is worse in China, where people really are not free.
Our trade was supposed to set the Chinese free, but it's working the other way around. It's just business, right?, and China is just another big company. Not quite. Our big dumb companies might have you by the balls, read your email, and sell it all to big brother, but they can't put you in jail yet. That will take another dissaster like NorthWoods so that everyone is really paranoid and ready for rationing and a WW2 style command economy.
The only way out is lots of wealth creation to raise everyone's standard of living, but it's not happening. With all the mergers, wealth will continue to move to the already very rich owners of those companies. The mergers are the ultimate result of government favoritism of large companies. IT was supposed to be the poster child of new competition and robust US Performance. It has not happened because incumbent companies were allowed to crush new comers, so that "just enough" competition would be left. Now, we all sit under the M$ monopoly, two big media companies, two "broadband" companies, one electric company and a merged OPEC/ExxonMobileRoyalDoubleDutchFuck and wonder where the jobs are and why service sucks. If we can't help ourselves, we will never be able to help anyone else.
Eventually, this will get the rich too. A real depression is no fun for anyone, but those happen when wealth concentration reaches a critical level. When power is concentrated enough, the American Empire will go to war with China, kind of like the great Royal Fuck Festival that was the first World War.
Friends don't help friends install M$ junk.
Why should small/medium sized companies develop software in the US? It's too damn risky. If they compete with or are considered a threat to any of the larger companies, they will just get sued out of existence for "patent infringement". It doesn't even matter whether they have infringed patents, because suing someone for patent infringement is am easy way to cost them a lot of money and not have it immediately obvious about whether you're bluffing. Patents are usually very difficult to read and understand.
"The US *DOES* have a seriously bad management culture which is a far bigger threat than outsourcing IMHO."
A few years ago, I worked as a developer in a fairly large well-known tech company. The progression: Starting there, things were pretty good--well staffed, good morale, nice people to work with. The push for the "bottom line" started creeping in after a year or two on the job--secretaries got laid off, senior engineers got laid off, a website was set up for us to do our own expensing, travel, etc. It was hell. I, a well-trained software developer, getting paid pretty good money, was expected to deal with making travel arrangements, fighting with HR, etc. while my time was being billed to an engineering project. It isn't worth working for a company where my time and talent is simply not valued.
I'm an american who would really like to go abroad, as it turns out. I have a wide variety of IT and programming skills, but no management experience. I'm very close to quitting IT and teaching english or something else to achieve this goal, but I'm pretty good at all this computer crap. I hate to ditch what I'm good at.
But guess what? Although I speak fluent german, I can't work in Germany or Austria. A company has to advertise for 3 months for an EU resident to fill a slot before they can sponsor a visa for me. And I'm not even picky--I can't find an IT/programming job for an american anywhere outside of the US from Cape Town to Kabul.
Want to bitch about globalization? Bitch about the last trade barrier: Labor. Globalization currently benefits CEO's because the resource they have to start the game, money, is now easily transfered. But labor isn't allowed to be transfered--labor might as well be opium for all the free trade associated with it, but with more positions available. I, for one, can't fucking wait until that shit ends, and I can whore myself out to whomever I please, wherever I please.
Meanwhile, at Bell Labs, things have been business-focused for a very long time.
I'm not sure you counterexample is a good one. Operating systems are more likea product than basic research, although at the time this was less so than today. You take away know-how from both, but you need to have a plan for what to do with a product. Up until then, OSs were tied very closely to hardware; UNIX turned out to be the most portable operating system ever.
You are missing a major point though. Bell Labs had enoug people of this caliber running around that a couple of rapscallions could, with a wink and their fingers crossed, create an operating system under th guise of porting roff. In part this was due to the overal wastefulness of Bell as a regulated monopoly. They told the regulators how much it took to run a telephone system, and the regulators marked that figure up. But it goes to show if you're going to waste money, at least you should waste it on something useful.
Another factor that is different now than then is government investment in research. Part of this was the cold war, which post sputnik threw a lot of money at applied research projects, possibly because nobody knew where the next marginal dollar.
Current attitudes towards government investment in applied research in Washington are rather negative. The idea is that it amounts to "government planning", and that applied research interferes with market efficiencies in allocating research capital to applied problems. Basic research -- OK for the government, but applied research is somebody else's job. Unfortunately, their counterparts in the US private sector is increasingly thinking the same thing, that their job is watching the quarterly profits and applied research is somebody else's job. That's what Lucent was saying; they shouldn't be in the applied research business anymore. The Federal government has cut research funding in energy R&D, agricultural R&D, and at NOAA, NIST and other Department of Commerce agencies.
It's not that the government doesn't do research anymore. Nor is it the case that the government and private sector don't do ANY applied research. But Lucent has a point. A private sector company can't be expected to invest in research that pays off in ten years; there are too many uncertainties in business to ask investors to shoulder that. Five years is reasonable. But if five years is a reasonable end point for private sector research efforts, and, say, twenty years is a reasonable starting point for public sector research efforts, then we have a massive gap in the 5-20 year range. That applied research gap is a massive national economic vulnerability.
Post may contain irony: discontinue use if experiencing mood swings, nausea or elevated blood pressure.
The cost of reproduction has risen by a factor of nearly 4 since I was born in 1954, fertilizing the portfolios of landlords, or more properly, land barons, with the decomposing marriages, fetuses and sometimes bodies of the bulk of the baby boom generation, leaving a demographic hole being filled with imported slaves* by those same landlords.
The baronage calls this "progress", even as as the price of homes was removed from the consumer price index while introducing CPI factors like "hedonic value" and "imputed rent" to make it appear "real" earnings have increased over the time period of demographic collapse and loss of ethnic enfranchisement to imported laborers for the baronage.
I call it genocide.
*It is really being too kind to the baronage to call the imported laborers "slaves" since the baronage doesn't have to pay for their human capital upkeep--the rest of us do via social programs. Southern Plantation owners were far more moral than these sorry excuses for human beings.
Figures from my insurance agent sent to me on my birthday:
The two big ticket necessities:
3 bedroom house price increase: 22 times
1954 $ 10,250
2006 $219,375
car price increase: 18 times
1954 $ 1,567
2006 $28,000
Even if we grant that the quality/cost ratio of manufactured goods has gone up so much during the last 52 years that $1,567 for a used car in 2006 is as good as a new car was in 1954, it doesn't bring down the sum of the 2 major debt-service items much:
house+car increase: 19 times
1954 $ 11,817 =$1,567+$10,250
2006 $220942 =$1,567+$219,375
So the debt-service load in a family household has gone up nearly a factor of 20 in the last 52 years.
And don't kid yourself that it didn't hit hardest at the peak child-bearing potential of the mid-to-late boomers who were paying 20% mortgage rates when they were trying to form families in the early 1980s.
Look at these foreclosure rates peaking within the first 10 years of boomer's trying to form families:
Year $ value of mortgage loans foreclosed (in millions)
1965 944
1966 1,034
1967 957
1968 865
1969 364
1970 321
1971 438
1972 478
1973 577
1974 715
1975 1,086
1976 1,129
1977 868
1978 723
1979 683
1980 917
1981 1,563
1982 3,282
1983 4,240
1984 6,163
1985 8,675
1986 13,942
1987 18,373
1988 18,859
1989 18,189
1990 22,862
1991 17,105
1992 12,408
1993 6,852
1994 3,422
1995 2,506
1996 2,138
1997 1,805
1998 1,470
1999 1,022
2000 900
Has household income kept up? Hardly...
average household income increase: 13 times
1954 $ 4,137 (one wage earner)
2006 $54,000 (two wage earners)
So household income has gone up only about 70% as much as the essential household debt service in the last 52 years.
Oh, but wait--that "household" in 1954 was one income and the income was relatively stable--the woman stayed at home and raised the kids.
How can we factor not only that both parents must work in 2006 and not only are each of their jobs less secure, but the effective income of the household, adjusting for risk of not being able to meet debt payments for a substantial period of time?
Here's a realistic option: We can reasonably say that the odds of both parents being out of work at any given point of time in 2006 is comparable to the odds of the father being out of work in 1954. Hence the reliable household income--the income stream that can service debt without foreclosure--is approximately 1/2 of the household income. Certainly we can say that there w
Seastead this.
Hey, you're the first to mention the concept for which I was looking, so you get the reply:
This is correct, in my opinion. The big myth - which was not cited in the article - is that you can actually maintain an economy with high standard of living based on "high value" services alone. The key to an economy is really its ability to produce wealth - hard, physical, tangible goods that, as you said, actually raise the standard of living of that society's citizens. All the dentists and doctors in the world cannot help you if you don't have good tools, good infrastructure, or even good food.
I remember from one of my early economics classes that the only wealth-producing endeavours known are agriculture and manufacturing - the rest of economic activity just shuffles that wealth around.
If the economy of a country switches to being service-based, it is then a slave to the actual wealth-producing nations, because if the nations that have the wealth no longer need or want the services, with what is the service-based economy left? The reason the US economy used to be so robust is it had a good balance between service and wealth production. The shift away from producing wealth locally (I don't mean by ownership, I mean physically) is probably a greater risk than most are able to recognize.
"There are a dozen opinions on a matter until you know the truth. Then there is only one." - CS Lewis (paraprhase)