You have approached in this discussion a lot of the concerns that I have about the outsourcing revolution. You’ve made it easier for me, as a non-specialist, to ask some further questions about my doubts that refuse to go away.
One of my concerns was with those left behind. My comment was that a $120k MIT education goes wanting. And I acknowledged that, actually, it probably doesn’t, but the effect probably ripples through the economy so that some guy somewhere with a $60k State Uni engineering degree can’t find a job. The marginal US engineer whose position just went to India for $15k - he’s out there, doubtless.
The number of jobs that the US economy will be short…are these jobs not just being outsourced to others? Those ‘good jobs’, as I think of them, aren’t being replaced with new economy good jobs. Maybe as the boomers retire, they just aren’t replaced, or are replaced by others offshore, at a fraction of the cost. Maybe they represented an overhang on unraveling the “productivity paradox”?
Did you see last week how the UK Network Rail was planning to outsource National Rail Enquiries? At what point does the cost savings just not justify the hollowing out of a nation’s workforce any further? These are ‘just’ call centre jobs, but I reckon every one of them would be missed. Rotating these people into other responsibilities just masks the idea that there is less work within the economy - and less work that actually serves the UK economy - for UK people to do. But I digress.
Sure, there are places for some in the hierarchy. But I suppose not all. And not for the kind of money they were earning before, most likely. We all just become ‘resource managers’ (if you have occasion to use the Amazon help system, you’ll notice replies from the likes of “Kapil Sehgal”, “Pankaj Sharma”, “Nitin Jain”, when you have a “cut and paste” answer, but when it comes to something complicated, “Karen Richardson” steps in. All real names from my correspondence with Amazon customer service, so anecdotal, of course - could just be three nice guys from Birmingham).
Next, the idea of profits coming home. Are those profits really recycling through the US economy, or only into the coffers of the “US” corporations that are benefitting from them. Then what? They aren’t employing US employees, so to what extent should they rightly be seen as US corporations from the workers’ perspective? What exactly happens to that $143 that comes back?
- dividends, to the owners? are these, generally, spent, or do they accrue sidelined in the hands of the wealthy, relatively lightly taxed by new (thankfully ’sunset’) tax legislation. I suppose that a goodly tranche of dividends paid actually winds up in American pension system, so at least they might be captured for the present, presuming the
shares they are used to buy can maintain their growth momentum to justify the share prices. But that’s another story. And what of offshore owners? Probably a small percentage of the US equity market.
- taxes? I would suppose that this could at least ensure that they recycle into the economy, but the current US government seems not to be interested in “tax and spend” to generate economic activity.
- growth? Where? Not domestic, I would argue. Hearing Intel’s Andrew Grove speak out about the threat to the economy posed by outsourcing is a little ironic, don’t you think? I don’t know, but I don’t suspect Intel is investing much in the US these days. Probably most of their mfg for years has been built in Asia. “We did it, but you should wake up before everyone else does it!”
The coming wave of boomer retirements interests me enormously. As a person in my mid-30s, I am wondering about opportunities this demographic might create. My father suggests becoming an estate lawyer, which is a pretty good idea, actually. What about a surge in purchase of retirement property? What will the US, or Japan, or W. Europe look like when this comes to pass? “Neutron” cities, where these enormous prices can no longer be sustained? I reckon my own neighbourhood in London is starting to turn over in earnest, judging from some of the places I looked at when we moved there.
I am all for competition and creative destruction. I just argue that the US isn’t thinking very strategically here, and that the government is almost intentionally letting this happen as a backdoor way of cutting costs and globalising the workforce - avoiding paying their share of the costs. The idea of the jobless recovery rings true, but it has to come from somewhere, no? I hate to indulge in conspiracy thinking, but a part of me can be persuaded that the Bush administration really does have at heart the idea of letting their cronies and financiers rake in as much as they can now, then letting the whole mess crater while they live on within their gated communities. Then “hoi polloi” can vote Democrat and let them put up the taxes so everyone feels the pain all the more. The suggestion that the Bush Administration tax cuts are actually good for the economy only helps to fuel these speculations in my mind.
What happens to the Social Security deficit when the “good jobs” migrate and there aren’t enough other jobs left in the economy to prop it up? How many “bad jobs” will it take to fund one “good” retirement? How many “bad jobs” will just slip off-radar into the informal economy?
My other question: what happens to the structure of American education when those who pay for it find themselves unemployed at the other end? Some kind of expectations compression? Those of us on the other side, who have no debt, can treat education like a sunk cost. I can work for peanuts if I want to, or if I have to, or if I can find a job. Those coming up to prop up the system - will they have such a luxury? Will the system itself survive in anything like its present form?
I never had a problem with the influx of talent, if the market will bear it. The likes of Ronaldo are actually good for Brazilian football the way any overseas worker is good for the folks at home in the low-wage country. All the better that he is not being exploited, and brings up Brazil’s street cred in the world. Where the Ronaldo analogy breaks down to me is in what happens when the talent goes home and takes the ball with them. In the analogy this
doesn’t happen, exactly. Pele just came home and became an advertising icon. Maybe a better analogy here is relegation - what happens to a Premiership League team when they fall from the League? My own “home team”, Wimbledon, may serve as an example. Revenues fall. Gate receipts fall. Salaries *must* fall. In the case of Wimbledon, oh, where are they now?
I think of the US workforce as relatively inflexible in their expectations; the American university system that raises them relatively unable to “retool” to produce less-costly, lower-trained, more specialised workers. Isn’t that what this argument of a structural effect comes down to: the whole economy must react to the loss of this sector of employment?
I would argue that this is where Americans should be most concerned. Do (we) want to surrender our standard of living, our education system, our state benefits (however meagre they may be by European standards)? Does this kind of growth improve our economy? Is it, in fact “domestic” product at all?
I think the visa programme is a red herring and that the two phenomena are only tangentially related. White collar job flight - it’s the opposite of brain drain. The brains are still here, earning less, standing around wondering what they’re s’posed to do now. Milton Keynes, anyone?
From Brazil, where as a Yank working for a UK company under contract to a Brazilian one, I no doubt occupy a very hypocritical desk of my own.
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