Billionaire Investor Explains: Workers Are Screwed

Great Debates
61

Poor Mexicans, Indians and Chinese are working very hard to be like the US, and now American workers are feeling the pinch.

I can hire college educated employees in India for 1/10th of the cost of US employees with the same skills, drive and intelligence. This is because the rest of the world is catching up to the West’s level of industrialization and education. That means that the US employees, who I could not find in India 20 years ago, are now competing for positions with peers in India who can live and work for less. We used to do this by parking call centers in South Dakota, taking jobs away from New Yorkers. Instead we park some jobs in India, taking jobs away from Americans.

62

I’ve heard it’s getting more expensive in India, and India is starting to outsource. What happens when we have 15 billion people on earth and we’re fresh out of places to outsource to?

Does the whole planet become corrupt third world?

63

Wouldn’t that mean that the whole planet would become more like the US/Europe if there wasn’t any places to outsource too anymore?? And, of course, if that actually does happen there will probably be a population implosion, since birth rates tend to go down as a society becomes more affluent.

-XT

64

Basically, yes, that’s the way it’s looking.:mad:

65

Wait, you really don’t think infrastructure spending can be an investment?

Your refrigerator was an investment. If you had not made the purchase, how much would you have spent going to the store everyday because you couldn’t keep food for longer? How much did you save in the last year buying bulk at costco? A TV is not an investment, you get no gain from its use, but I would argue a refrigerator is.

Anyway, companies invest in locations that have good infrastructure:[ul]
[li]Roads to allow employees to come to work.[/li][li]Rail lines to allow the the delivery of raw materials.[/li][li]A port to ship out finished products to world wide customers.[/li][li]Airports for potential customer visits and to support a mobile sales force.[/li][li]Fiber optic or other cable for good communication with the field and customers.[/li][li]A stable power system so that the work force can stay productive without down time.[/li][li]A good clean water supply both for the employees and but also for industrial processes.[/li][li]An educated workforce, both to have an effective workforce, but also in the sense that good local schools will attract talent.[/ul][/li]
The list goes on and on. All of these things help companies thrive which will attract them and give a return in tax revenue; sales, income and corporate. This is why so many cities around the US have revitalized their downtown areas, because they see a return on that investment… This is one of the main reasons why the US was such a dominant player going into the 1950s; it was the only modern country that had a fully developed infrastructure. This is why so many people have wanted to immigrate to the US, our system has been set up for success.

66

This is true only when we run deficits. Let’s borrow a bunch of cheap money now, work the next couple of years on entitlement spending and revamping the tax code, and in 2014 (or whenever we start to emerge from this great contraction), make sure we run surpluses so we don’t replace old debt with new debt…

I don’t like the huge deficits we are running these days, and I think we need entitlement reform and tax reform, but let’s try to do it intelligently.

67

Apples and oranges.

Americans are currently the fourth most productive workforce in the world. They may cost more but they generate more wealth than all but Luxemborg, Norway and the Netherlands as of 2010 (latest data I could find). Not sure how India compares but willing to bet they are far down the list.

Clearly Asian countries are making strong headway on this front but they have a long way to go yet.

Also, compare the legally mandated vacation and holiday laws in OECD countries to the United States. See something odd? Americans have none while everyone else has considerable time off guaranteed as a legal matter.

When you outsource to cheap workers in other countries you have things like that to deal with. It may still make sense to outsource workers to there but there are more considerations than merely adding up their hourly wages.

68

Do you, personally, wish to be as poor as Mexicans, Indians and Chinese? If not, how can you advocate that for others? The idea from my POV was for the Mexicans, Indians and Chinese to become as wealthy as us by improving their standard of living to our level by becoming wealthier, not by siphoning away our wealth.

69

Yes. I agree. An I think that in the main it will be good for the world, and good for Americans, but it will be a painful adjustment and we could easily screw it up. We cannot compete with cheap foreign labor, any attempt to do so with tariffs or labor requirements is in effect raising the tax on all consumers and passing it on to the workers. Might as well just short circuit the process and give tax revenue directly to the workers as welfare; it would have the same effect.

I think what we need to do is invest in our future. We need to untie health insurance from businesses so people can leave thier poorly paying jobs to start companies without being afraid of losing health coverage. A single payer plan would be the best way to do this IMHO. We should also invest in infrastructure and education much more than we are doing now. Make it easy to ship goods around the country or overseas. Make communication easy and cheap with robust networks. Make energy plentiful and reliable. And educate our populace so they can compete in innovation and invent the next products the world will be using. This is the only way we can compete. If we don’t invest the wealth we have in our own country, we will just piss it away on cheap goods from overseas. Sure, we will all have nice televisions and running shoes cheaply for a generation, but we won’t have shit to show for it 50 years from now. Invest now, even if it means taxing or borrowing, that’s my vote.

70

It sure doesn’t seem that way, with all the talk about how the important thing is to simply goose up spending. Even Keynes said that paying people to dig and hole and then fill it in was okay, because the key was that they were being paid, and would therefore consume.

Now, it’s one thing to assert this when there is a major collapse of aggregate demand due to uncertainty or fear. It’s quite another to adopt the ‘consumption is everything’ mantra as being the proper steady-state way to run a government.

I haven’t seen a single analysis of any of the major infrastructure projects being proposed that even begins to talk about return on investment. I hear about ‘green jobs’, but I’ve never seen credible estimates for how much new output they will create. Estimates touted for the cost of high-speed rail projects are a joke, and the benefits overblown or nebulous.

If you’re all about ROI, shouldn’t you be starting from that number and working backwards, rather than promoting favored ‘infrastructure’ that benefits the kind of people you want to benefit, and then working backwards from there to find an economic rationale?

Which infrastructure improvements are you talking about? Can you name some of them specifically, along with the calculated returns on investment for them, hopefully generated by an independent auditor or consulting firm that isn’t an arm of the government or a mouthpiece for the special interests that would get the money?

71

Can be. But it generally is not. Just because you get some advantage in doing something doesn’t make it an investment, for purposes of our discussion. For this purpose, an investment is something that the investor has reasonable expectation of getting back their initial investment plus profit. If you don’t have this, then you’ll eventually have to refinance at higher rates.

[The government has other valid reasons for spending money on infastructure. The government has other valid reasons for spending money on welfare, military, space program and so on. That doesn’t make any of these investments, for purposes of this issue here (which is, again, whether you can point to today’s low interest rates).]

Hmm, I wonder why no one else ever thought of that … :slight_smile:

72

Of course, the devil is in the details and I would support an ROI calculus applied to all major projects. I also agree that their is a lot of pork in politics and the high speed rail projects in many of the proposed areas falls into this bucket. But that realization does not invalidate Keynesian economics nor does it mean that we should turn away from all investment in infrastructure. Labor and money are cheap right now, we should take advantage of that fact.

73

Of course there are, or there would be no American jobs at all.

When businesses decide to outsource, they have to look at many factors - transportation costs, management costs, efficiency losses from cultural differences causing communication breakdown, the infrastructure available in the other country, political stability, you name it.

Americans don’t make the salaries they do because they’re special, or because the government protects them. They make those salaries because they are more productive. They are more productive because by and large there is more capital investment supporting their activities. The infrastructure is more efficient. They have access to other companies in America, allowing more specialization of labor. Rail freight is cheap, and ports for overseas trade are large and efficient. The power grid is stable, etc. All of this contributes to worker productivity, which in turn determines wages paid.

What causes productivity of workers to decline? Lots of things. Lack of competition due to union monopolies, high taxes on capital, displacement of competitive jobs with government jobs, inefficient corporate management, breakdowns in infrastructure, trade barriers, a decline in the quality of education, misallocations of resources which causes shortages of labor in some areas while pushing other people into jobs they aren’t well suited for, a reduction in capital investment, economic booms causing labor prices to increase because of shortages, yada yada.

All of it is tied to the underlying real factors in the economy. If you want to help workers earn more, help them to be more competitive in the global marketplace by taking steps to make the economy more efficient and companies more productive. Taxing capital and passing the money down to the working class is ultimately counter-productive. It reduces capital formation and reduces incentive to strive to be better at the bottom.

74

Of course, and thanks to the differences in costs I can cherry pick in India (and in a few South American countries where I can find coders as well). I am not arguing that India has equivalent productivity. However, I am arguing that India has areas where American type productivity in certain sectors and job descriptions can be acquired for less than it costs to pay Americans. Specifically, I can offer 24/7 phone support to my customers without needing to pay overtime rates for swing shift. I can ensure that my servers are watched 24/7, and that my code base is being created / updated 24/7.

Now, the majority of my service and technicians are here in the US, in pricey California.

So, am I siphoning dollars to the 3rd world out of my hatred of the hard working American? Hell no - I am simply enjoying the fruits of the West showing the world how to educate their people and compete on the global level. I want more Indians making enough money to buy American movies, American software, American music, etc. I also want the production values of Bollywood to increase so that I can watch more movies with awesome dance sequences.

75

Except we are talking about society becoming less affluent, not more. And as said, we appear to be headed more towards the entire world becoming Third World, not become like Europe or America. A sea of poverty with a few ultrarich people and an extremely corrupt government that caters to them.

76

[QUOTE=Der Trihs]
Except we are talking about society becoming less affluent, not more.
[/QUOTE]

Except that runs contrary to observation. You don’t actually think that the world, as a whole, is less affluent today than it was, say, 100 years ago? Or 500 years? Or 2000 years??

Again, I don’t see the evidence of this. To me, it seems that the world is moving more towards a European/American model than towards the entire world becoming ‘Third World’ (depending on what you even mean by that). Again, do you think that, in general, the world is more corrupt today than it was 50 years ago? 100 years ago? 500 years ago? 2000 years ago?

I’m sorry, but horseshit. More people throughout the world today have more affluence than at any time in history. The Chinese and India standards of living are on the rise, and they aren’t alone. US and European standards seem to have topped out, but we make up a small percentage of the total world population. And 50, 100, 500 and 2000 years ago the percentages of people who were anything like ‘affluent’ were much, much smaller than they are today.

-XT

77

We are talking about a recent historical trend, so 100 years ago is besides the point. And the majority of people in the West do appear to be less wealthy than they were ten, twenty years ago.

78

You can really compare China and India with the west, they have huge economies only because of their populations. You have a billion people living in poverty in China. Sure the middle and upper class is bigger than in the USA, but a billion people living with conditions akin to third world African nations, isn’t a good thing.

India and China are rife with cholera, TB (I read WHO reported 2/3 of the world’s TB cases are in those two countries alone) and lack even modest simple accommodations for hundreds and hundreds of millions of people.

I also don’t agree industries are totally created. Sure the cell phone industry didn’t exist 15 years ago, well not like today. But things like faxes and landlines which were big back then have evaporated because of it. So in a sense parts of it were just replace.

I read cable and dish networks report users are dropping them and going to online Internet, where the quality is much less but it’s free. So again we’re talking replacement.

Also workers are scared. I’m getting laid off at the end of this month. I won’t find a job making what I made, I am not even getting call backs at places like fast food or department stores. But a year ago, my boss would’ve never have thought to even consider doing a host of things I now am training him to do.

Esentially my bosses are taking over my job. If I had 50 things to do each day they are giving 5 of them each to my 10 upper bosses. The company knows darn well these upper management can’t afford to quit, so they’ll take it.

I think a lot of the bewidlerment comes from employed people. A few months ago, I couldn’t figure out why people were unemployed when I see signs saying hiring everywhere. Well I can do those jobs, but they aren’t even considering me, much less hiring me.

So what gives, I don’t know, but whatever it is, employers certainly hold the key and it’s very different from 2006 when I last looked for a job, very different

79

Were you shaking your finger when you wrote this?

80

Is the whole planet going to become like the US was 40 or 50 years ago, now, or like the US after corporations are done revaluing human labor down to whatever the lowest going rate is? How do we get from where we are, to where we want to be? Do we all have to become third world and then slowly improve global standards of living, or do we figure out ways for those of us with high standards of living to keep them, while the rest of the world catches up?

As for a future affluence-driven population implosion, I wouldn’t count on that. Educated women preferring careers and good incomes over children is a pretty recent phenomenon and IMO it’s too early to say how that’s going to work out long-term. Most countries with declining native birthrates turn to immigration to make up the numbers. At any rate, when couples get affluent enough, they generally start having babies again as they can afford it, don’t they? Show me a couple who thinks they can afford it, and I’ll show you a couple about to get pregnant.