Wednesday, January 28, 2004

Watch for falling wages! (and jobs moving south)

Those who've bought into the rhetoric and enthusiasm of globalization
can, I suppose, only applaud the trends noted in the Bob Herbert
column below. It's astonishing that American educators and politicians
remain so quiet about these matters.

*****************
NY Times, January 26, 2004

Education Is No Protection
By BOB HERBERT

The conference was held discreetly in the Westin New York hotel in Times
Square last week, and by most accounts it was a great success. The main
objections came from a handful of protesters who stood outside in a brutally
cold wind waving signs that said things like "Stop Sending Jobs Overseas"
and "Put America Back to Work." No one paid them much attention.

The conference was titled "Offshore Outsourcing: Making the Journey Work
for Your Corporation." Its goal was to bring executives up to speed on the
hot new thing in corporate America, the shipment of higher-paying
white-collar jobs to countries with eager, well-educated and much lower-paid
workers.

"We basically help companies figure out how to offshore I.T. [information
technology] and B.P. [business process functions]," said Atul Vashistha, the
chief executive of NeoIT, a California consulting firm that co-hosted the
conference.

Several big-name corporations had representatives at the conference,
including Procter & Gamble, Motorola, Cisco Systems and Gateway. Because the
outsourcing of white-collar jobs is so controversial and politically charged
(especially in a presidential election year), there was a marked reluctance
among many of the participants to speak publicly about it. But Mr. Vashistha
showed no reluctance. He was quick to proselytize.

"These companies understand very clearly that this is a very painful
process for their employees and for American jobs in the short term," he
said. "But they also recognize that if they don't do this, they will lose
more jobs in the future and they won't have an ability to grow in the
future." He said his firm had helped clients ship about a billion dollars'
worth of projects offshore last year.

Noting that he is an American citizen who was born in India, Mr. Vashistha
said he is convinced that outsourcing will prove to be a long-term boon to
the U.S. economy as well as the economies of the countries acquiring the
exported jobs. Whether it becomes a boon to the U.S. economy or not, the
trend toward upscale outsourcing is a fact, and it is accelerating. In an
important interview with The San Jose Mercury News last month, the chief
executive of Intel, Craig Barrett, talked about the integration of India,
China and Russia ÿ with a combined population approaching three billion ÿ
into the world's economic infrastructure.

"I don't think this has been fully understood by the United States," said
Mr. Barrett. "If you look at India, China and Russia, they all have strong
education heritages. Even if you discount 90 percent of the people there as
uneducated farmers, you still end up with about 300 million people who are
educated. That's bigger than the U.S. work force."

He said: "The big change today from what's happened over the last 30 years
is that it's no longer just low-cost labor that you are looking at. It's
well-educated labor that can do effectively any job that can be done in the
United States." In Mr. Barrett's view, "Unless you are a plumber, or
perhaps a newspaper reporter, or one of these jobs which is geographically
situated, you can be anywhere in the world and do just about any job."

You want a national security issue? Trust me, this threat to the long-term
U.S. economy is a big one. Why it's not a thunderous issue in the
presidential campaign is beyond me. Intel has its headquarters in Silicon
Valley. A Mercury News interviewer asked Mr. Barrett what the Valley will
look like in three years. Mr. Barrett said the prospects for job growth were
not good. "Companies can still form in Silicon Valley and be competitive
around the world," he said. "It's just that they are not going to create
jobs in Silicon Valley."

He was then asked, "Aren't we talking about an entire generation of lowered
expectations in the United States for what an individual entering the job
market will be facing?" "It's tough to come to another conclusion than
that," said Mr. Barrett. "If you see this increased competition for jobs,
the immediate response to competition is lower prices and that's lower wage
rates."

We can grapple with this problem now, and try to develop workable solutions.
Or we can ignore this fire in the basement of the national economy until it
rages out of our control.

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