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Sustainability Of Outsourcing And Labor Importation

 
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There is an article
http://groups.yahoo.com/group/H1BClassAction/message/530
arguing that neither outsourcing nor H1B/L1 importation can be sustained.
 
Greenhorn
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You cannot get access to the article without joining a list group.
Any other way of seeing this? I've already got enough mail.
Todd Killingsworth
 
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Thanks a lot. Great post.
 
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There have been many such doomsday predictors. The moment outsourceing to India becomes non profitable, companies will start outsourcing to China, Russia, South Africa, Mexico etc (not necessarily in that order).
As long as US dollar is higher than any other third worl country with decent educational infrastructor, outsourcing will go there.
I am surprised by the India fixation of the outsourcing bashers. Don't they understand that India is no holy cow? Companies don't love India...they love cost savings. If not India, they'll go somewhere else.
Only thing US can do is ban outsourcing completely. If they do that, other US industries will become expensive and will in turn lose market to other companies.
IT has now entered the infrastructure of the economy. IT is no more a luxury for companies. IT is a necessity just like Electricity and Gas. For US industries to compete globaly, they need cheap IT...whether it comes from India or Gulf, it doesn't matter.
I believe nothing can be done about outsourcing. But that's not really a bad thing. Countries move up the value chain. US workers will find better and more profitable things to do. They have to.
 
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Good words Pakka,
Everyone wanabe like Mike, just don't want to pay a pair of sneakers like Mike.
He did not have them for free, he paid with his game records.

Just a thought,
MCao
 
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I remember hearing this argument back in the 80s, but the sky never fell.
You can find some charts here. You'll notice the imbalance isn't as great as the raw numbers indicate. Although the overall trade deficit has been steadily increasing, so has the economy. The numbers only make sense in the context of US and global inflation. The chart showing exports as a percentage of GDP is, IMO, a more accurate picture; and those numbers don't look so scary to me.
--Mark
 
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Companies that move operations offshore will be taught a lesson in economics and will face backlash as well.
...that's funny
....very bold
...but funny.
 
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This country runs an astronomical trade deficit


Well after reading that I kind of lost interest in reading the rest of the article. I think the author needs to pick up an elementy ecomomics books and read the chapter on 'trade deficit'.
(If you can't be bothered to read the chapter yourself a trade deficit is a GOOD thing)
 
Michael Bronshteyn
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trade dificit is when nation spends more money on import goods than can get by selling its own. in other words you buy more than you can afford based on your production. could you please provide a reference to economic resources which say that trade dificit is a good thing?
 
JiaPei Jen
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Thanks a lot, Michael, for your message. I finally found a person who understands Economics.
 
Mark Herschberg
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For some opinions on whether current economic status and policies are good or bad, check out http://www.ustdrc.gov/reports/tdrc_ch3.pdf.
Brief summaries of consequences can be found at http://www.ustdrc.gov/reports/tdrc_ch3.pdf.
--Mark
 
SJ Adnams
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No, no no, no & no.
Both the US and UK economies run something called a central bank, which controls the amount of money. In the US this is called M1/M2 in the UK the most meaningful figure is M4.
The job is to control primarily inflation, by controlling the supply of money.
Lets say that the US didn't export anything, and you bought a japanese car. you give the dollars to the japanese company, the japanese company can do 3 things:
1) spend the dollars on something from the US.
2) put the dollars under the matteress
3) buy stock in a US company or T-bills
Looking at each option:
1) money will go back into circulation.
2) The US fed will print more money (to maintain domestic supply) so the US get an interest free loan!
3) The japanese are investing in the US economy - as opposed to their own.

Most (about 2/3rds) of all physical dollars are not in the US. So that is a huge interest free loan. The Japanese did not buy US exports with the dollars you gave them which is why the Japanese economy is worse off than the US (which has so much foriegn investment).
There is no need to worry about "what happens in the future" because the central bank policy will ensure that the supply of money remains constant.
read more here:
http://www.bized.ac.uk/virtual/economy/library/theory/monetarist4.htm
The thing to remember is that money is NOT underwritten by gold, it is just a unit of exchange. Inflation ensures that the 'interest free loan' actually means that you make money out of the people who hold dollars.
my 2c
 
Michael Bronshteyn
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Thanks a lot for the post. It is certainly an interesting theory. I am posting some other info I found about monetarism.


Monetarism reached the peak of its popularity during the 1970s. In the 80s, however, it suffered a sudden reversal of fortune, and today economists generally agree that "monetarism is dead." Friedman stands virtually alone now among top economists in his belief that it contains any merit.
What happened? Monetarism was tried in Great Britain during the 80s, under Margaret Thatcher, and it proved to be a disaster. For almost seven years, the Bank of England tried its best to make it work. According to monetarist theory, the British economy should have enjoyed low inflation and high stability. But in fact, it went berserk. The economy sank into a deep recession, while lead economic indicators zigged and zagged. Although inflation came down, this was at the price of rising unemployment, which soared from 5.4 to 11.8 percent. Between 1979 and 1984, manufacturing output fell 10 percent, and manufacturing investment fell 30 percent. (5) Eventually production recovered to a respectable 2.8 percent growth, but it became clear that high unemployment was a permanent feature of the British economy. Eventually, the Bank of England came under overwhelming pressure to abandon monetarism, which it did in 1986. The experiment was such a failure that not even conservatives abroad wish to repeat it.
In step with Great Britain, the U.S. Federal Reserve announced in 1979 that it, too, would follow a monetarist policy. Many people blamed the double-digit inflation of the late 70s on Keynesian theory, on too much expansion of the money supply trying to achieve "full employment." Many critics thought that monetarism would restore some responsibility and stability at the Fed. Chairman Paul Volcker apparently agreed, and under the name of monetarism contracted the money supply down to a steady level. This produced a deep recession, but it did cure double-digit inflation.
In 1982, when inflation looked defeated, the Fed suddenly abandoned monetarism and reverted to a Keynesian policy. In that summer it sharply increased the money supply, and a few months later the economy roared to life, in a recovery that would last seven years. Milton Friedman was furious at the betrayal, but he got little sympathy from his fellow economists, who were witnessing a monetarist disaster unfold in Great Britain.
Why did the Fed abandon monetarism? Because it was never really monetarist in the first place. Volcker's strategy to defeat double-digit inflation had been classically Keynesian: reign in the money supply, and accept a deep recession in the process. The "monetarist" label was simply political cover, to mollify the Fed's growing number of critics. Such criticism was not renewed after monetarism failed in Britain, and Keynesian policies produced a seven-year boom in the U.S. The contrasting experience of those two nations was responsible for the demise of Friedman's theory.


web page
[ April 23, 2003: Message edited by: Michael Bronshteyn ]
 
Mark Herschberg
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Originally posted by Simon Lee:

2) The US fed will print more money (to maintain domestic supply) so the US get an interest free loan!
...
Most (about 2/3rds) of all physical dollars are not in the US. So that is a huge interest free loan.


I'm pretty rusty on economics, but I believe this is incorrect. The US does not, and cannot simply print more money as physical dolars leave the country. To do so would create inflation, as the amount of money in circulation increased while goods and services remained constant. Some exmaples of the negative consequences of such monetary policy have been seen in Germany post WWI and even in the US just after the Revolutionary War.
Now of course, in modern times it's not as simple a matter of how much paper money there is. For example, the US was looking to print up $50B for expected Y2K runs. That wasn't viewed as having a significant impact on inflation.
Inflation really comes from how much money is available. Most US dollars aren't physical bills, but exist in loans, and asset holdings (I think I remember a number around 10-20% for the amount covered by US bills, but I could be way off). This is largely effected by the feds interest rates (although different economists will disagree as to how much, and whether this is they key influencer). But the boom line is, the US did not simply "duplicate" all bills outside US borders.
--Mark
 
SJ Adnams
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In 1982, when inflation looked defeated, the Fed suddenly abandoned monetarism and reverted to a Keynesian policy. In that summer it sharply increased the money supply, and a few months later the economy roared to life


This is not correct. Keynes theory is that to get out of a recession the Government (NOT the Fed) should issue debt. To increase the money supply the Fed would buy bonds (thats monetarism AFAIK).
Mark - The Fed (not the Gov) can do what the hell it likes. 'Open market operations' sell and buy bonds - when it buys a bond it takes money out of circulation, when it sells bonds it puts money into circulation.
here is a chart of US money supply M2
http://www.economagic.com/em-cgi/charter.exe/fedstl/m2sl
Anyhow this is all getting a bit off topic. We were talking about the trade deficit...
 
JiaPei Jen
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I happen to be a well trained economist. The trade deficit and current accout balance should be viewed in proportion to GDP. The U.S. trade deficits are not going to lead the country to doomsday. Nonetheless, huge trade deficit can never be something good.
What make that article interesting are the exchange rate and purchasing power of the countries -- they have a lot to do with the sustainability of outsourcing and labor importation.
 
Mark Herschberg
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Originally posted by Simon Lee:
Mark - The Fed (not the Gov) can do what the hell it likes. 'Open market operations' sell and buy bonds - when it buys a bond it takes money out of circulation, when it sells bonds it puts money into circulation.



I wasn't trying to draw lines between different US governmetn agencies, but yes, there are multiple parts to the government, including the Fed and US Treasury. Yes, the Fed is technically independent, but can be "influenced" by other organizations and their opinions on current economic realities. For example, the president can undertake certain policies and publically request that the Fed raise or lower rates. Also, the Fed is accountable in the same way that Congress is accountable (opinions will vary greatly on what "accountable" means in these cases).
My mian point above was that the US government (none of the many parts of it), actively replaces every dollor which exits the country.
--Mark
 
SJ Adnams
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please read this
http://www.neosophist.com/tradedeficit.htm
JiaPei - the trade deficit is not good for JAPAN, because it is not investing in it's own economy.
 
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my view based on rusty economics goes like this:
the US consumes more goods and services than they produce.
Macroeconomically they finance this consume by atracting foreign capital to invest money in the US (only in a quite small fraction direct investment like factories).
Of course foreign capital wants to have their money back (with interest) some day in the future.
So US is paying future consume to Asians, Europeans and is getting todays consume.

The man on the street finances his consume by borrowing money. Lots of people in US are heavily indebted. If those guys indebt themself more and more and more this is a bubble which will burst one day... like any bubble before.
And that's a real risk.
I have heard that DaimlerChrysler is building up risk reserves against a private debt crisis in the US.
But ones getting used to those not-so-good-economic-times.
 
SJ Adnams
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I agree that private (personal) debt is a problem. a lot of banks here are trying to sell off there credit risks, they call it 'securitizing lending assets', in the news here.
The bankrupcy laws allow people to 'get out of debt' probably quicker than if they paid of the loans themselves.
I can quite imagine that if house prices fall 30% and someone has 30K of loans + 100K negative equity they'll just file for bankrupcy..
 
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Now going back to original topic,company eFunds is closing down its Mumbai operations,Here is the editorial from today's Times Of India:
Arizona-based eFunds Corp is reportedly set to wind up its Mumbai operations. So what�s the big deal? The fact that the foreign backlash against the Indian business process outsourcing (BPO) industry seems to be gaining strength. eFunds, which manages a welfare programme for the New Jersey state government, had earlier relocated its customer-service operations to Mumbai from Wisconsin. However, it will now shift these
operations back to a call centre in Camden City, New Jersey. This is expected to add $70,000 per month to the company�s costs, from the present $270,000 to $340,000. But the state government has offered to underwrite the extra cost, since it will create jobs locally. Not coincidentally, the New Jersey state Senate recently discussed a Bill, introduced by senator Shirley K Turner, which seeks to stop outsourcing of government work to other countries. This initiative enjoys popular support, which is perhaps understandable, since the unemployment rate in the state has touched six per cent. But the citizens of New Jersey might want to reflect on the fact that the money for underwriting the extra costs incurred by eFunds will eventually come out of the taxpayers� pockets.
American citizens, in general, might also be interested to learn that affiliates and subsidiaries of Indian infotech companies contributed around $215 million to the US exchequer as taxes last year.
Unfortunately, these facts are being lost sight of, amidst the hysteria that seems to be building up in the US and other countries. The anti-offshore lobby may well move beyond the BPO segment and start targeting Indian software services as well. There will be a temptation for the Indian industry and government to stake out the high moral ground and ask the Americans how they can legitimately preach the virtues of free trade, globalisation and market access when they themselves adopt protectionist measures at the slightest fear of job losses. But while this line is logically correct, it would be tactically wrong, since it would only stoke hostility further. Instead, it makes much more sense for Indian IT firms to collectively point out to both American policymakers and ordinary consumers that outsourcing is a win-win deal. Indian firms undoubtedly benefit, but American corporates too get the advantage of reduced costs and enhanced competitiveness. This, in turn, translates into higher profits, better returns to shareholders, and larger investments � creating more jobs back home. Isn�t a little pain worth the substantial gain?
 
Axel Janssen
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Rahul,
its part of the politics of USA / Western Europe and maybe Japan (purchasing power centers) to sometimes take the protectionist stick. But generally in the last 55 years there has been a tendency towards more trade, off-shore outsourcing, etc.
Right now there are especially "good" conditions for protectionistic actions: Lots of broken tech companies.
So news like that do not surprise me.
In every case you have dwindling numbers of comp sci students in USA, W-Europe. This says much more about long term expectations.
Sure there will be a steep rise in outsourcing to India for this year, although you will have more reports about protectionistic spots in US and maybe in Europe.
Far more interesting question is how sustainable will be growth for India in the years to come and what fraction of the business China or other neighbours will catch.
Watched some documentation in tv yesterday where they talked about indian car-parts exports to europe and some plant in Poona to be the most productive assembly line of Mercedes world-wide. So this whole India-export-thing is diversifying and gets more prominent for the media here.
 
JiaPei Jen
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Americans are definitely thrown into unemployment and underemployment, and on a truly massive scale. The rest of the world is 20 times the population of the US. By the laws of supply and demand, any industrialized nation�s job markets would be devastated by a global supply being readily available to meet a demand that is only domestic.
The bottom line to outsourcing and labor importation is pure and simple - stock valuations in major financial markets. Lower cost without lower prices (or somewhat lower prices) equals increased margins. And it is a short sighted behavior. This behavior could turn to be a crime -- we have witnessed those who had cooked corporation financial books, cheated investors, involved in insider tradings, etc. were fined and jailed. They terminated their own career.
The U.S. and industrialized nations cannot outsource to the extent that the majority of the population lose purchasing power due to unemployment. The remaining very rich minority in industrialized countries are unlikely to generate much demand -- each of them already has 10 TV sets and is unlikely to purchase the 11th TV.
When Ricardo talked about the comparative advantage of international trade, he gave an example of "commodity production" and labor was almost not mobile at his time. Similar to other commodities, labor is a factor of production. However, Labor is different from commodities. If there is no employed labor, there is no purchasing power and there is no demand.
By that day comes, the currencies of industrialized nations will be greatly depreciated. As a result, the trade and outsourcing directions may reverse. The more likely scenario is that the employed skilled labor in less industrialized countries are earning so little and consequently unlikely to generate much demand either.
The bottom line is that LABOR IS NOT A COMMODITY. In addition to profit maximization, corporations have social responsibilities, which is business ethic. By looking at human history, we know that any form of production/regime that oppresses workers/people eventually vanquishes.
[ April 25, 2003: Message edited by: JiaPei Jen ]
[ April 25, 2003: Message edited by: JiaPei Jen ]
[ April 25, 2003: Message edited by: JiaPei Jen ]
[ April 25, 2003: Message edited by: JiaPei Jen ]
[ April 27, 2003: Message edited by: JiaPei Jen ]
 
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Originally posted by rahul rege:
... American corporates too get the advantage of reduced costs and enhanced competitiveness. This, in turn, translates into higher profits, better returns to shareholders, and larger investments � creating more jobs back home. Isn�t a little pain worth the substantial gain?


More jobs doing what?. By U.S. Labor Laws, the boy who bags my groceries has to be be paid about what a top-notch Java programmer earns in India - maybe even more. Reducing the minimum wage wouldn't help, because to be sustainable over a long term, you have to earn a living wage. The cost of even the most basic housing, clothing and food in the developed countries is beyond the reach of someone on an Indian salary. And beyond that, what's the economic impact of 1.5 million US employees who used to pay an average of $25K or so suddenly falling into a salary range where they are paying little or no taxes at all?
What's been developing is a black hole into which many of the middle-class professions are rapidly disappearing. Anything that doesn't require a physical on-site presence can and will be offshored. So grocery baggers, police officers, and doctors are safe. At least until robotics improves. Executive jobs are safe in that the executives are part of a mutual-aid network, they won't save the money that their jobs demand, but sooner or later I'd expect the IBMs, GEs, Oracle's and Microsofts to reap the natural rewards of building up highly-skilled personnel in a foreign land. That is, some day Satyam or InfoSys may be a household word and Microsoft will have gone the way of Montgomery Wards.
To go simply and solely with the cheapest solution is to practice the business equivalent of slash-and-burn farming. Already there are critical labor shortages on what few US manufacturing facilities remain because even though the pay's good, no one want to train for years for a job that will lay them off next week. The seeds of a similar scenario in IT are being planted as the current crop of US college grads come into a cramped labor market.
The bad thing about the situation at present is that there is such a great imbalance. The economy wants to achieve an equilibrium and eventually it will. However nature can be very cruel. The greater an imbalance, the more intense the forces to correct that imbalance will be. If there were only a small disparity, Indian/Third World salaries would probably rise and Western salaries would fall and life would go on. But when the differential goes beyond belt-tightening to directly affecting people's ability to live, the consequences could be runaway inflation in the East and/or financial collapse in the West.
If we do nothing, the results are likely to be dire. No country that has no middle class is stable. What we will do probably will be awful, but we have to do something.
 
Pakka Desi
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How is s/w services outsourcing different from making Ford vehicals in Mexico? Or Nike shoes in Malaysia/Indonesia? Or your underwear (cotton) in Pakistan/Bangladesh?
Every damn commodity on a walmart shelf is "Made in China". Every observed that?
Software is a miniscule part of the total outsourcing that has been going on since decades.
For the past 50+ years, developed nations have been doing the hi-tech stuff and exporting it to other nations. Essentially, developing nations have been outsourcing their technology from the developed nations. So are you going to stop that too?
Jobs were lost in the US earlier also, in manufacturing, in Steel etc. but US did not go bankcrupt.
 
Axel Janssen
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no. not the same Pakka,
there is a difference between this outsourcing and the outsourcing before.
The jobs being outsourced in IT are been seen as qualified jobs. This wasn't the case with outsourcing in other industries, where overwhelmingly blue collared jobs were exported.
A lot of investment in skills is necesary to become a programmer, consultant, designer, etc. Such investments were better secured in the purchasing power centers of the world before.
So this is a fundamental change.
This new process of exporting huge amounts of qualified labour to developing countries might be an important building block for the strengthening of the middle class in those countries.
We will see what will happen.
The voices who see outsourcing as an evil are slowly getting stronger in Germany (still we have quite a huge surplus in our trade).
 
Mark Herschberg
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Originally posted by Axel Janssen:
no. not the same Pakka,
there is a difference between this outsourcing and the outsourcing before.
...

A lot of investment in skills is necesary to become a programmer, consultant, designer, etc. Such investments were better secured in the purchasing power centers of the world before.
So this is a fundamental change.


This is an arbitrary distinction. In my mind, there is no difference. So what if someone needed 4 years of college versus 6 months of vocational training for a particular job? What matters is how readily available the information is in the target nations.
Its true that this didn't happen before, but only because the information and access to equipment wasn't available before. Similarly labor wasn't outsourced in the 50s and 60s because the manufacturing equipment wasn't so readily availabel overseas and the logistics wasn't as easy to support back then.
BTW, the jobs programmer, consultant, designers, etc do not necessarily require such specialized training. Most of the consultants in the Big 6 firms had a BS degree, but that's it, and such a degree is fairly common nowadays.
As for programmers, well, although I think a CS background is useful, there are plenty of mediocre programmers who took a 6 month training program. Employeers seem quite happy to hire those people--for the right price.

--Mark
 
Pakka Desi
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Originally posted by Axel Janssen:
no. not the same Pakka,
A lot of investment in skills is necesary to become a programmer, consultant, designer, etc. Such investments were better secured in the purchasing power centers of the world before.
So this is a fundamental change.


Yes, that is a fundamental change but that does not account for a lot. There a lot of jobs that requires skills and which cannot be outsourced such as doctors, teachers, nurses. S/w is the only thing which requires lot of skills and can also be outsourced. If you compare the dollar amount of s/w services imported by US, that is miniscule.
Even if there are not that many lower/middle level s/w jobs, that does not mean there are no skilled jobs. Why is there a shortage of teachers and nurses in the US? There is no outsourcing there.
Some people have mentioned in the past that if more software jobs go out, there will less in the US, and so less students will study CS. Thereby reducing the competency of the US in computer technology. That argument does not hold much water. Even after moving manufacturing jobs outside, US (or other developed countries) did not lose their competency in manufacturing technology (machines etc.). Similarly, the core competency in s/w will also remain in the US. There will still be MIT grads doing good stuff in US. In fact, if an MIT grad is doing routine programming, it's a waste of resource anyway.
That's just for the programming jobs. People are even against routine jobs such as call centers, medical transcriptions etc. I don't think you need lot of skills to handle support calls. So why target them?
 
Mark Herschberg
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Originally posted by Pakka Desi:
There a lot of jobs that requires skills and which cannot be outsourced such as doctors, teachers, nurses. S/w is the only thing which requires lot of skills and can also be outsourced.



Au contraire, you can also outsource engineers in other disciplines. Who can software be designed in India, but not an engine? Now there may be cultural reasons why one if more common then another, but there is nothing inherent in software which makes it more likely to be outsourced.
Teachers, doctors, etc are unlikely to be outsourced anytime soon because they require a high degree of human interaction.
On the other end of the spectrum, you can outsource call centers, but you can't outsource taxi drivers. :-)

--Mark
 
Tim Holloway
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There are already reports that architectural jobs (buildings, that is, not software) are also being offshored. China's picking up some of them, since, unlike software, building plans don't require much English-language skills. There are a lot of people who think tht more teaching should be done via remote classrooms (some places like North Canada and the Australian Outback have been doing this via radio for decades, since it's the only effective way to reach widely scattered people in remote areas).
You might be surprised at the number of highly-skilled medical jobs that can be performed over a fast multimedia Internet connection - even some surgeries have been done that way via robotics and/or remote consulation.
We gave up the manufacturing jobs because we were told that low-skill jobs such as garment manufacturing weren't "important" anymore. Because we were now the "Information Economy". Except now the Information jobs are also fleeing, and so far nobody's told me what's supposed to be replacing them.
Even the "grunt" jobs have some value. A good many of my contemporaries started out as computer operators, tape librarians and the like. It allowed them to become familiar with the IT culture without costing the employer overmuch.
However, when the entire data center goes overseas, along with the accounting department and many of the HR functions, where's the career path?
 
Matt Cao
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Hello,
Read all of you comments sent the chill along my spine. It like department weekly action minute, I have to wade through before meetings.
You remind me of the science fiction movie... New York city only had executives and politics. The rest were solders and homeless people.
Keep reading this, I may have to change my career to CSI.
Thanks,
MCao
 
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Take a look of this site:
http://www.zazona.com
 
Mark Herschberg
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Originally posted by Tim Holloway:
There are a lot of people who think tht more teaching should be done via remote classrooms...
You might be surprised at the number of highly-skilled medical jobs that can be performed over a fast multimedia Internet connection


I'm not surprised at all, since the percentage is less then .1% and with technological advances in the next 20 years we're still looking at well less then 5%. I have a friend who does teledermatology. It's a great resource, but it is used "when necessary." It's still not as good as a personal consultation.
As for teaching, sure this is nothing new. No doubt it is good for raw data transfer, but I've always contended that the value of many educational facilities is in the group environment.

--Mark
 
JiaPei Jen
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Depending on the magnitude of the lost purchasing power of the unemployed, a "X" number of unemployed will force one more employed worker out of job. Although some occupations, such as taxi drivers and medical doctors, are unlikely to be outsourced, a taxi driver will not be able to make a living if less and less people can afford to ride taxi. A medical doctor will have to accept home grown vegetables/home made pancakes as their remuneration if all patients can not afford to pay cash.
Here is a theoretical example (may be over-simplified and not close to reality). To avoid offend people of different nationalities, I am going to talk about inter-planet trade between the people on the Mar and the people on the Saturn. In the past, the people on the Mar produced goods A, B, C and the people on the Saturn produced goods X, Y, Z. Within the solar system, the Mar and the Saturn traded those goods and benefited each other.
Because of techology advancement, production can now be outsourced to another planet. How long can the people on the Saturn sustain their consumption in case that the people on the Mar want to take over all the production in the solar system?
On the one hand, labor is a factor of production. Labor, like raw materials, intermeditate goods, capital, and technology, contributes to produce final goods. However, labor is not raw material, intermediate good, capital, or technology. Goods are produced for labor to consume. What is production/services for if people cannot afford to buy and consume?
In the past, the production in the industrialized nations was able to elevate from labor intensive to capital intensive, and then to technology intensive at proper time. It is going to be a problem if a major innovation/breakthrough does not happen soon and the production cannot evolute to the next level.
There are large corporations in every States in the U.S. To make sure their vested interest is protected, those large corporations contribute lots of campaign money to get those Governors elected. However, several States have legislated to ban outsourcing. Why? Because those Governors are unable to collect enough tax from the employed to meet needed expenditures (not because those politicians are patriotic or have conscience, unfortunately). Can a State, a nation, a planet really outsource to the extent of bankruptcy?
[ April 29, 2003: Message edited by: JiaPei Jen ]
[ April 29, 2003: Message edited by: JiaPei Jen ]
[ April 29, 2003: Message edited by: JiaPei Jen ]
 
Michael Bronshteyn
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Thanks JiaPei. Another good post.
For those folks who live in US and think that they are protected from outsourcing by stable jobs or big name college diplomas there is something else to think about. Even if you are going to sustain your income on the same level, the society is going to get poorer. There are certain things in the society that are shared between its members, such as hospitals, schools, police, all sort of public transportation (including taxi) etc. As society degrades and is not able to pay for those shared services the level of those services degrade for all the members of the society. You may still say that you will find privately held institutions. But the price is going to go higher, if it will be profitable to hold them at all, as it will be fewer members of the society who will be able to afford those services on that level. I am not predicting a doom day, but look what is going on in California now day.
 
Mark Herschberg
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Originally posted by Michael Bronshteyn:
For those folks who live in US and think that they are protected from outsourcing by stable jobs or big name college diplomas there is something else to think about. Even if you are going to sustain your income on the same level, the society is going to get poorer.



Which is also a good thing. Consider the housing market in the bay area. As incomes wen up during the boom, housing prices got inflated. Even with good salaries, houses were difficult to afford. When salaries drop and mine stays the same, I get more effective buying power.
--Mark
 
JiaPei Jen
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See the Reuteres news below. I have replaced the names of the outsourcing destination countries by "XXX" to avoid controversies.
===============================================
Thu May 01, 2003 05:39 PM ET
By Jake Keaveny
NEW YORK, May 1 (Reuters) - Wall Street research analysts have suffered rounds of layoffs, big pay cuts, and accusations that they routinely lied to the investing public. Now there's a new worry -- that their jobs are being shipped overseas.
Investment banks like Morgan Stanley MWD.N , Goldman Sachs Group GS.N and Citigroup Inc. C.N are mulling the benefits of shipping research jobs to countries like XXX, where salaries for business graduates are as little as 10 percent of those in New York and London.
Morgan Stanley plans to experiment by hiring stock analysts in XXX to support its U.S. and European analysts, while Deutsche Bank AG DBKGn.DE has contracted Irevna Limited, a London-based consultancy that specializes in outsourcing research to XXX, according to sources familiar with the situation.
Last week, J.P. Morgan Chase & Co. JPM.N said it will hire 40 junior stock analysts and other research staffers in its XXX office this year as a way to expand research in a weak market.
"Every bank on Wall Street will eventually use the cost benefits offshore to maintain their research businesses," said one executive at a major investment bank.
Financial services consultants and banking executives say that offshore operations are part of broader efforts to bankroll research departments in the face of shrinking revenue from equities underwriting and trading businesses and a tighter regulatory environment.
SOPHISTICATED RESEARCH
For now, the idea is for offshore analysts to collect data, do basic number crunching and create finance models, while production tasks like editing can also be moved abroad. The aim is to inexpensively provide support for more senior analysts, who would have more time to finish research reports and meet clients.
In time though, offshore hires could translate into fewer research posts in the United States and Europe. Once the operations are up and running, it will be a natural progression to shift more complicated tasks abroad, say financial services consultants.
Wall Street is looking to examples such as General Electric Co. GE.N , which shifted software development and back office jobs to XXX under former Chief Executive Jack Welch. Today, XXX engineers are contracted for tasks as sophisticated as analyzing the materials and design of new jet engines.
In the research world, consulting firms are leading the way. Firms such as McKinsey & Co. and A.T. Kearney Inc. have shifted the bulk of their research divisions to such places as XXXX, keeping U.S. and European offices staffed mainly with division heads who need to have regular contact with clients.
"If GE can do the advanced research over there on its next generation of jet engines, then there's no reason why that can't be the same case for financial institutions," said Stefan Spohr, a principle in Kearney's financial services division.
The potential opportunities have given rise to a cottage industry of consultants with XXXX connections. Fast-growing firms like Office Tiger, Smart Analyst Inc. and Irevna help to provide third-party research out of XXXX.
MASSIVE RELOCATION
A report recently completed by Kearney shows that the idea of relocating jobs has taken hold.
U.S. banks, brokerages, mutual companies and other financial services companies are planning to relocate 500,000 jobs offshore, or 8 percent of their work force, over the next five years.
So far, research accounts for a small fraction of that, but Andrea Bierce, an A.T. Kearney managing director who oversaw the study, said that financial analysis and research is fast becoming an offshore favorite.
In a Kearney poll, executives were asked which business process were being shifted abroad. The No. 2 answer was analytical and technical services.
"If it can be done by sitting at a desk in front of a computer, then it can be done abroad," said Bierce.

----------------------------------------------

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============================================

1. What is it for? I am going to ask this question to those parents who have worked down to nose to pay their childern's education at the Cambridge, Oxford in UK, the Stanford, Ivy League in the US. For their children to have prestigious jobs for several years and then take whatever can be found in the job market for the rest of the life? Note that the Cambridge, Oxford, Stanford, Ivy League have educated students from all over the world; including students from the outsourcing destination countries.
2. What should I do to make a decent living throughout my life in this global corporatism? All of us are educated to be employees. Most of us only know to say "Oh! Please give me a job." after graduation. Should the school curriculums be revised to blend in entrepreneurship?
3. If I had children, where should I send them for education? What should I do to provide them with relatively better assurance of self sufficiency? I might consider to keep them on a farm to grow vegetable, raise livestock and pray that God would be merciful enough to protect them from nature disasters.
In case that the Bush Administration successfully stimulates the U.S. economy and millions of jobs are consequently created. Provided that all jobs created are kept domestically (none get outsourced), many will be happy to go back to work and soon forget the pinch they have ever experienced. The Roman Empire did not collapse over night. Doomsday is not going to come right away. The symptom of the problem will be gone temporarily, but the root of the problem is growing deeper.
We know the double-digit wage increase in some outsourcing destination countries, and they will soon lose comparative advantages to other countries where wages are even lower. For example, educated and talented people in the former Soviet Union are eager to be integrated into the global job market. Many of those countries have good industrial base.
Should we really give some thoughts to this prevailing global corporatism? How do workers all over the world survive under it?
[ May 02, 2003: Message edited by: JiaPei Jen ]
[ May 02, 2003: Message edited by: JiaPei Jen ]
[ May 02, 2003: Message edited by: JiaPei Jen ]
 
Matt Cao
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Originally posted by JiaPei Jen:

1. What is it for? I am going to ask this question to those parents who have worked down to nose to pay their childern's education at the Cambridge, Oxford in UK, the Stanford, Ivy League in the US. For their children to have prestigious jobs for several years and then take whatever can be found in the job market for the rest of the life? Note that the Cambridge, Oxford, Stanford, Ivy League have educated students from all over the world; including students from the outsourcing destination countries.


In the company I'm consulting has a technician with a nurse clerk wife, and two daughters in college age.
The elder daughter attended Stanford, major in MIS, worked as a Sys Info Doc Translation Intern for Nippon Telephone & Telecom in the sophomore year, worked as a Telecom Policy Editor Intern for American Telephone & Telecom in the junior year, worked as a Technical Support Specialist for the United Nation Secretary, upon graduation she landed a job as IT Policies Review (I) for IT Committee of United States Senate and still working. The younger daughter is in the first year of Stanford.


2. What should I do to make a decent living throughout my life in this global corporatism? All of us are educated to be employees. Most of us only know to say "Oh! Please give me a job." after graduation. Should the school curriculums be revised to blend in entrepreneurship?


What I learned from my relatives that in US school have the tendency try to provide student the broadview of skills so he or she could use as a stepping stone when graduated. But the labor market is looking for not so fresh in skill.
If school train student four year solid on-- technical, the student will very could do the job right after graduation.
I emphasis into technical because if student graduated as an accountant, he or she very much could handle the job like a pro.


3. If I had children, where should I send them for education? What should I do to provide them with relatively better assurance of self sufficiency? I might consider to keep them on a farm to grow vegetable, raise livestock and pray that God would be merciful enough to protect them from nature disasters.


With education your child very much have a good deductive reasoning, whereas without education your child could believe everything people said as true. I have seen people running into those fortune teller because they could make the decision by themselves. I know because I did create a database software for a fortune teller when I was an undergrad.
Cheers,
MCao
 
Jane Somerfield
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Originally posted by JiaPei Jen:
[QB]
Wall Street is looking to examples such as General Electric Co. GE.N , which shifted software development and back office jobs to XXX under former Chief Executive Jack Welch. Today, XXX engineers are contracted for tasks as sophisticated as analyzing the materials and design of new jet engines.
"If GE can do the advanced research over there on its next generation of jet engines, then there's no reason why that can't be the same case for financial institutions," said Stefan Spohr, a principle in Kearney's financial services division.

[QB]
What about defence related jobs?

 
It looks like it's time for me to write you a reality check! Or maybe a tiny ad!
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