Monday, March 22, 2004


Read closely as news coverage of the “offshoring” of U.S. jobs to lower-wage countries goes through the second stage, denial, after reaching a political climax in the first stage, alarm. Notice the denials are rich in generic economic wisdom and scant on details.

Alarm was easy. College-educated people losing jobs could cite Gartner Inc. and Forrester Research on the scope of the problem (one out of 10 tech jobs by the end of this year, Gartner says; at least 3.3 million white-collar jobs and $136 billion in wages by 2015, Forrester says), motivating politicians to speak out.

It’s not that the millions of lost blue-collar jobs weren’t alarming on their own. It’s just we’d been told laborers would be retrained to take tech jobs.

Denial began with tech-industry leaders gathering in early January to say retraining was still, somehow, the case, and the line stuck. By March 16, The New York Times said, Secretary of State Colin Powell was still reassuring Indian business leaders that the heat would come off them as “the Bush administration would work to train people for new jobs.”

Now all the world’s second-stage. The media are falling over themselves to be fair and balanced, meaning giving space to experts who want to say there’s no problem -- or at least that everything will, ultimately, be okay. The latest examples of this were in the Times yesterday and in the Boston Herald today, arguing offshoring will help the U.S. economy by creating jobs.

What you will never see in these second-stage articles: how many jobs will be created here; and for what kind of jobs Americans will be retrained.

This is because there are no such figures, or such retraining plans.

For instance, Herald reporter Jon Chesto quotes Amit Maheshwari, of Cambridge’s i-Vantage offshoring shop, as saying he “expects his firm, which is largely backed by an Indian steel and
construction company, to add jobs here to help manage the overseas work his firm does for future clients.” Chesto also points out that Maheshwari employs 10 people in the United States and 290 in India. Is this the kind of job creation we can expect from offshoring? It is unlikely many higher-paid managerial jobs will be created in the United States when the work being managed is in lower-paid India.

In the Times, outsourcer extraordinaire Azim Premji -- the lead in a piece called “Outsourcing giant fights back” -- gives the standard line about benefits to the United States: “Offshore outsourcing is another example of U.S. innovativeness to stay competitive by reducing costs and cycle times.” His example of how this is so is that “the United States financial services sector alone has saved $8 billion in the last four years by outsourcing to India.”

This is a disingenuous reply, because the answer is the question. The U.S. Department of Labor reports that the sector also sent 10,787 jobs overseas in 2000 and, according to Forrester Research, will be sending 61,252 jobs overseas through next year. In 2015, the number of banking jobs lost is estimated to be 348,028. The satisfaction we can take in the billions of dollars being saved is tempered by the hundreds of thousands of people losing their jobs.

A good example of how job creation is supposed to work was published by the Times Feb. 15:

If an Indian software programmer is paid a tenth of an American’s salary, a company that develops software in India will save money and -- provided competitors do the same -- the price of its software will fall, productivity will rise, the technology will spread, and new jobs will be
created to adapt and improve it.

Take cellphones, which 20 years ago were luxury items with the size and weight of a brick. Today -- thanks to competition and inexpensive, globalized production -- they are cheap, ubiquitous, tiny and packed with a mind-boggling complement of ancillary functions. The industry and the number of jobs have only increased. Global outsourcing also played a big role in the information technology boom of the late 1990’s. Personal computers were imported from abroad. Chip companies shipped production overseas. But this outsourcing prompted the creation of new jobs here, on the higher end of the technological spectrum.

The problem? Moving jobs overseas creates middle classes where there were none, which provides further educations and produces business and technological infrastructures that decreases reliance on the United States. What worked in the 1990s won’t necessarily work now. In fact, note that the above examples are of production, meaning blue-collar jobs, while the complaints now are increasingly of lost white-collar jobs. Australia’s Sunday Age noted Feb. 29 that “The speed of the development of third-world telecommunication skills and the wounds it has caused to [information technology] industries elsewhere, have turned what was, only two or three years ago, a quaint oddity, into a major issue throughout the world.”

American workers would feel more secure if there were a color of collar to move up to, but there isn’t.

Instead, the media will probably move to the third stages of coverage for the topic, boredom and resignation, and the topic will disappear for a while. Then comes the fourth stage: death, and the media will have an opportunity to write searching obituaries on what went wrong.

No comments: