And people made exactly those arguments, too. The mechanization of agriculture didn’t come without its widespread protests, and the arguments used bore a striking resemblence to anti-globalization arguments today. In fact you still hear people bemoaning the loss of the ‘family farm’ as if there was some god-given right to force people to buy expensive food because you want to live a certain lifestyle and can’t compete with modern farming practices.
But lost in that argument is the fact that little billy who lives with a single mom on a poverty wage can now eat fresh vegetables and fruit.
Sam – yu’ve pulled out the arguments used to defend against charges that outsourcing labor will resyult in fewer labor jobs. That’s not what I’nm saying.
I’m pointing out that this urrent phgase is placing engineering and R&D work at risk. We’ve passed the point where much of the production has been moved elsewhere. Now I’m saying tha the design and the research itself is being moved elsewhere, because of cost-saving. The argument has always been that moving the drudgery of manufacturing elsewhere frees us for more intellectual pursuits and a more reasonable use of our time. But now we’re moving the creative spark, the knowledge part of our mechanical rocesses overseas. This is the stuff we were supposed to be free to do with all that liberated time. What are we going to do now? Twiddle our thumbs?
You can’t just say we’re going to go on to other intellectual pursuits. In the first plce, people aren’t automatons, nd the trainin period for these specializatoions is long. But even i people could, the potential jobs in any other such field is just as exportable.
Wha happened to those 75% of displaced agricultural workers from that earlier, cruder revolution? They went into other trades mostly factory work, feeding the vast maw of the factories that came to replce a lot of farm opportunities. Now with mnufacturing going overseas for a couple of decades, and engineering and R&D following suit, where are the displaced workers supposed to go? They can’t all ork fr he governmen or government contractors. But who else has an incentive to keep jobs in the country?
Is it better for the world? Probably. But the folks in th US are ging to take a beating, eve if they try to adapt. Little Billy’s going to find it hard to get vegetables and fruit if mom’s laid off, no matter how cheap it is.
I think the death of engineering and science in the U.S. is greatly overblown. My company has gone the route of outsourcing software development jobs to India - it’s been less than an overwhelming success, and our efforts have been scaled back dramatically. It’s not just time zone changes, but communication across language and cultural barriers. There are also a lot of intangibles - cultural differences that are hard to quantify but definitely exist. There’s the added cost of travel, and a host of other things.
I do think there’s a problem in North America with our education system. One is that we’ve pushed so hard on the notion that a degree - any degree - is important for everyone, and we have subsidized anyone who wants to go to school heavily. The result is skyrocketing prices for education as the market adjusts to increased demand, and a shortage of quality educators. In addition, the flood of people into colleges without discriminating by faculty has crowded out science and engineering. In short, we have very expensive liberal arts colleges and not enough engineering and science-oriented schools.
The reaction to that has been for trade schools to fill the gap, and we’re seeing more and more people going to junior colleges and trade schools. That’s great for filling the need for technical people, but not so great for world-class innovation.
Nonetheless, there have been scare stories about other countries coming along to take the lead in science and engineering from the U.S. First, it was the Japanese taking over. Then the Asian Tigers. Then Europe. Now India and China. The thing is, if they get as good as the U.S. at this stuff, their wages increase and their competitive advantage vanishes. So you wind up with everyone making good wages, and the aggregate production of science and engineering goes up, making the world wealthier and raising the standard of living for everyone.
This is the theoretical “virtuous cycle” that I spoke of in an earlier post, and it certainly sounds like a good thing. But the trouble with it is that we don’t seem to have a reliable schedule for when it’s going to kick in. There are many people who were thrown out of work years ago by plant closings in the manufacturing sector who still haven’t seen the return of jobs anywhere near as good as the ones they lost. At what time can we expect to see “everyone making good wages”?
Get it out of your head that this is an issue of dealing with vastlyu different cultures and vastly different languages. It ain’t all India and China – there’;s a lot of underutilized Eastern European and Russian talent, for instance. A lot of them speak very good English, and aren’t culturally different wnough for it to be an issue. I honestly don’t see the barriers you’re suggesting.
For years the United States has been able to quietly take advantage of the educational systems of other countries, because their best students, having come over to the US for graduate and post-graduate school, tended to stay here, since the jobs were here in those high tech fields. The US didn’t have to pay for their early education, but reaped the rewards of it. Now, with more high tech in their home countriers and the expanded job opportunities due to outsourcing, they can work in their home countries. This is manifestly a Good Thing for them and their home countries, but it will have an effect on the US, in part because their talent won’t be here and because those countries will be able to compete. These people won’t have problems with cultural differences and language barriers – they’ve been here.
They might earn less than in the US, but they can work in more familiar surroundings, and the money will, for the present, go farther there. A US Citizen will have a much harder time going to a foreign country and getting a job there, and it’ll be difficult to compete with the overhead cost difference.
I just calls 'em as I sees 'em. If you really do believe that this is an evolutionary change not significantly different than those that have preceded it, perhaps you can tell us where the jobs for the displaced will be.
That’s true, and I didn’t mean to give the impression that I totally dismiss outsourcing as a threat to American jobs. It is, but the factors I mentioned do work to counteract it. For instance, in order to be available during American business hours, Indian white collar workers have to work vampire hours in their country. Turnover costs are high as a result.
I see what you mean. I was pretty much unaware of these trends in wages, and about to ask you for a cite, but then I found one on my own: http://www.epinet.org/content.cfm/bp154
It doesn’t seem to have reached disaster level yet, but I definitely see the cause for concern. On the other hand, artificial economic barriers obviously hold back the world as a whole, and their elimination in places such as India has been the spur for fantastic growth in wealth and opportunity (although primarily restricted again, to urban middle and upper classes).
I can’t say that I’m ready to say that America should close its borders to services and goods, and I don’t think that would be anything but a band-aid to the situation, if it would even be that.
It isn’t. You can go ahead and insert a [dramatic] before my mention of impact on standard of living. From the cite above, I don’t really think erosion of wages on the terms of 0.2-1.4% constitutes a dramatic erosion of standard of living. It sure doesn’t make living easier though . Will the erosion continue? I don’t know, but I don’t see stopping movement of goods and services between the US and other countries as a viable alternative. You mentioned capturing markets, but at this point in knowledge distribution, perhaps the best way to do that is to be at the center of generation of new markets. There are few existing markets that we still have a cost advantage in.
The generation of news products and devices was typically the result of R&D. But we’ve been closing down our R&D facilities at a record pace, and moving those to China, India, and elsewhere. So where are the new markets going to come from?
I wonder how much the rising cost of energy, will take the staem out of outsourcing. For example: shipping lines will quote you a price to ship a container fron, say , Shanghai, China, to NYC. To this charge will be addeda “bunkering” (i.e. fuel adder )charge. It used to be about $120/contanerload…it is probably twice that now. The big appeal of China is that their factories churn out great volumes of very cheaply priced mechandise. but is shipping gets more expensive, it just may be cheaper to make stuff here 9again). Added to this: China is now consuming so much of the world’s raw materials, that commodities are now skyrocketing. take copper-up 350%, scrap steel -uo 300%, cement-up 200%. So we WILL be paying more for outsourced goods-directly or indirectly!
That’s a trend we’ll have to reverse unless we want to fall into some sort of society with a huge divide between vast masses of the poor and a very few extremely rich (more so than we already are, anyway).
Or more likely the cost is slightly less to the consumer to make it attractive. The lion’s share of the difference goes elsewhere. The consumer’s a little better off, the company’s a whole lot better off.
If it’s necessary, people make adjustments to their schedules to accomodate the time differences. Also, yeah, it’s a pain, but tough crap. If you don’t like it…
I’m losing my white collar job not directly to off-shoring, but in a kind of restructuring ripple effect. The more mundane functions of my department have gone to India, leaving me with project oversight, essentially.
Now this oversight job has disappeared as my job and my colleagues’ jobs were smushed together into one big new insane job. Same pay of course.
Jobs more highly skilled than mine, requiring advanced degrees, have gone to our Indian counterpart.
So while the numbers of white collar jobs lost overseas may not be on the same scale as manufacturing, I assure you the practice is alive and well.
Can I get another job? Sure, but I thought this one was going to last. How long is that one going to last? It’s like in the cartoons when someone is running across the bridge while it falls away just behind.
Ka-Ching! Finally someone has followed through to (what should be )the obvious conclusion – That Way Lies Oligarchy.
he oproblem is that no one seems to have any interest in doing anything about it. Corporate R&D is going the way of the dodo, and it’s cheaper to do it overseas. In the US all R&D does is pull down the balance sheet, and doesn’t do anything for this quarter.
I’m not so sure that’s a different result (in the long run, obviously not in the short) than protectionism.
Maybe we shouldn’t depend on corporations to keep R & D in the US. I’m wholly in favor of making sure we retain the best higher education system in the world, which will naturally attract some private R & D, but we can’t entirely leave this up to private corporations, as you say.
That’s not the way it works. If it’s a competitive market, then the marginal cost of imported goods will be such that it just barely makes sense for a company to import rather than make it at home (i.e the decision to import brings in just enough additional profit to cover the added risk, complexity, opportunity cost, public relations hit, and other costs of importing). If there were big fat profits to be made, investment would flood into these countries like mad, driving up the price of labor and manufacturing until we reach the margin again.
In fact, that’s what happens, but it’s slow. You may see a company making a big profit temporarily, but that’s because you’re not accounting for things like the additional risk they take on when outsourcing. Risks that include things like political instability, lack of control of the regulatory environment in the foreign country, infrastructure problems, difficulty in shipping raw materials to the country in question, etc. Whenever there is higher risk, there are higher profits. This only makes sense, because if the same profit could be had with lower risk, no one would ever risk anything.
Outsourcing is not about greedy fatcats getting rich on the backs of the poor. It’s about the pressures of a competitive market driving companies to spread their investment where they have to to stay competitive.
If you don’t like it, you go somewhere else. The U.S. unemployment rate is less than 5%. Or put another way - if two companies are hiring, and one forces you to deal with ugly time zone changes and the other doesn’t, then all else being equal, you’ll choose to work for the one that doesn’t. Therefore, the other company either has to offer more money, other benefits, or settle fora lower quality of employee. That’s one of those hidden costs of outsourcing.
And if your company didn’t outsource, it might have found itself unable to compete, and ALL your jobs would be lost. Or perhaps outsourcing will lower the cost base enough that the company can afford to invest in new development, creating new jobs at home. That’s what my company did. They went on a drive to reduce costs, and were successful. The freed-up operating capital was used to hire new people to create more products.
So far, blue-collar American seems to be bearing the brunt of outsourcing. I have a proposal…lets outsource CEO staff positions, and politicians to India. Think about it; you could get an Indian CEO for perhaps $60,000/year! We could replace a US Senator with an Indian senator for maybe $20K/year-the savings would be enourmous! The whole cancer that is the washington Federal government…it could easily and cheapluy be outsourced. pass it on!
In the meantime, my widowed cousin loses her data entry job because it was outsourced to India, then takes a telemarketing job which she also eventually loses to India. She temped for a while, but got sick of having an undependable income that roller-coastered from one month to the next, often leaving her unsure of how she was going to pay the rent or buy groceries. She’s currently slinging hash for a small local restaurant and over the last ten years has seen her standard of living decline from lower middle class to working poor. She’s asked me to help her apply for a state job because she’s sick of having the rug pulled out from under her. This will be an office grunt kind of thing paying maybe $8 or $9 an hour, though at least it’ll have pretty good security and some fairly decent benefits.
But I guess it’s all her fault for not being adaptable enough … damn lazy, greedy American workers …
One of the companies I worked for made a type of product that requires pretty experienced labor – a lot of the manufacturing process is “black art”, not weritten down anywhere,. You get this information and skill from doing it for many years. At least two of the guys working there were of this sort – guys you would need to open a busuiness doing this. The business is now gone. Two others in the US closed recently, as well, leaving only one in the entire country to do this. But there are several companies in other countries that manufacture this.
Once this sort of company disbands, it’s hard to reconstitute it. You’ve lost all those years of experience and expertise, and you won’t get it back in a hurry, if at all.
I think it’s a potyentially hot field, because it feeds into a lot of up-and-coming products and business lines. Even several military items use these products. But AFAIK, no one in this country is innovating or doing R&D on it. So where’s the future for it in this country? And how happy will the military be to have to purchase this from, say, China?
It’s all in accordance with the laws of business and trade, but is it what you want, to hamstring yourself by jettisoning the ability to innovate and produce yourself? Businesses and governments have certainly worked to maintain their control of other processes and products (pharmaceuticals, sugar), but nobody seems to be proposing that we simply let those flow ith the rules of the unfettered marketplace.
I note that fewer American citizens are studying programming and other high tech skills because they feel these skills no longer make them highly employable–it’s just too easy to outsource those kind of skills. These means that fewer American citizens will have the kind of high tech skills needed to maintain a high tech society.
In the name of globalization and laissez faire, our economy is being gutted.
We can’t be a nation of lawyers, real estate agents, burger flippers and Wal-Mart greeters. It’s a sure recipe for disaster.
. Will the erosion continue? I don’t know, but I don’t see stopping movement of goods and services between the US and other countries as a viable alternative. You mentioned capturing markets, but at this point in knowledge distribution, perhaps the best way to do that is to be at the center of generation of new markets. There are few existing markets that we still have a cost advantage in.