Article: Economists: 'Offshoring' overblown as a problem

[Mark Herschberg]

Boston Globe
Economists: 'Offshoring' overblown as a problem
WASHINGTON -- Only in an election year could something statistically insignificant assume seismic proportions.
The phenomenon known as ''offshoring" -- the outsourcing abroad of white-collar work -- represents a tiny proportion of total US employment, say most economists. What's more, the downsizing of manufacturing jobs is taking a heavier toll on Asian workers -- the ones allegedly stealing so many American paychecks -- than their US counterparts.
...
Forrester Research , an independent technology firm based in Cambridge, estimated in a November 2002 report that 3.3 million service-industry jobs would be relocated abroad by 2015, compared with the 108 million service-related positions that existed as of January.
...
Less than 5 percent of jobs associated with the nation's $200 billion-a-year information technology industry have migrated overseas, says Daniel Griswold, associate director at the conservative Cato Institute.
...
Between 1995 and 2002, the Carson study finds, industrialized countries shed some 22 million factory jobs. The US lost 2 million of those jobs, in line with the global average of 11 percent, compared with China's 15 percent.

[Joe Pluta]

Daniel Griswold, associate director at the conservative Cato Institute,
Ah yes, the Cato Institute. If anyone is interested, here's a little light reading on these fine upstanding citizens.
Admittedly the web site is pretty biased, but I think it accurately reflects the fact that the Cato Institute is a sham organization whose purpose is to shill for big business. For example, in 1998 they actually had the gall to publish a report with the following quote:

"the war on smoking...has grown into a monster of deceit and greed, eroding the credibility of government and subverting the rule of law."

You want to trust these folks? Not me. But it's interesting that the Globe is stooping to quoting these guys. You can tell when some business practice that is terribly bad for America is actually on its deathbed; certain papers start quoting places like the Cato Institute.
What do I mean by "certain papers?" Well, you might remember the Globe as the paper that suspended a reporter for a week without pay... for having a pro-union sign near his desk.
Joe

[Paul McKenna]

I think the Cato is a very valid economic research institution. Sure they have principles based upon conservative economics but to dismiss them as irrelevant shows one's own bias, IMHO.
Infact I, am one of several people I know who, think the activism against tobacco usage is way overblown in the United States. For all those liberals who want to ape Europe in every way ranging from economics to government they sure overlook that most countries in Europe are very pro-tobacco. Seriously, what right does the government have telling me that I need to establish smoke free zones in "my" business???
I would be very very suspicious of anyone who has a union membership sign while claiming to be a reporter who is supposed to report without any bias. I applaud the Globe for that suspension, shows they are one of the very few mainstream newspapers in this country that can actually take action against any sign of bias in their staff, be it conservative or liberal.

[Paul McKenna]

Originally posted by Joe Pluta:
Ah yes, the Cato Institute. If anyone is interested, here's a little light reading on these fine upstanding citizens.
Admittedly the web site is pretty biased, but I think it accurately reflects the fact that the Cato Institute is a sham organization whose purpose is to shill for big business.

Do you see your own bias??? The website you provided has the following title on its main page:

Critiques Of Libertarianism
Welcome to the web site dedicated to critiquing libertarianism

And you expect this site to paint a fair and accurate picture???
Seriously Joe, what you need is a good dose of Rush Limbaugh.. I couldnt carry on a single day without Rush.

[Joe Pluta]

Paul, you crack me up. Heck, just Google "Cato Institute" and read a few topics. Try this one. Or this one.
Anyway, there isn't a single thing you said in the last two posts that isn't rebutted either by a little research or by common sense, so I'll just agree to disagree with you. But I do love that the people who advocate outsourcing also advocate tobacco. There's a delicious irony there.
Have a nice day!
Joe

[Paul McKenna]

Originally posted by Joe Pluta:
Anyway, there isn't a single thing you said in the last two posts that isn't rebutted either by a little research or by common sense

Apparently you are of the opinion that common sense is not held by people who favour outsourcing... its tough to argue with that kind of prejudice. I already stated that Cato forms its opinions based upon traditionally agreed upon Conservate / Libertarian principles. What's wrong with that? Would you apply the same dismissal to WSJ which has an op-ed page which is regarded by many as ultra-conservative? Or Washinton Times? Or Fox News? If you would, carry on with this debate on your own.. and good luck!
I am a big advocate of "tobacco rights". A "trying really hard to quit" smoker myself, I believe if someone wants to smoke in his own private space he should be allowed to. Government or anyone else has no right to control that.

[Joe Pluta]

It must be a night for bizarre and irrelevant answers.
First, Paul, neither of your two previous responses ever used the word outsourcing. So why you bring that up is beyond me. Second, the Cato paper was not about smoker's rights. It minimized the health dangers of smoking. Please do me the courtesy of reading the links before you post.
To clarify my position: I disagree with your characterization of the Cato Institute as a valid economic institution (it is a shill for big business), I disagree with your defense of the Cato paper on tobacco because it falsely attempts to minimize the dangers of one of the most lethal products ever developed by man, and I disagree with your position vis-a-vis the Globe. I find it particularly hypocritical of you to say in one breath that a person should be able to smoke in their own space, but yet applaud censorship of free speech.
I find your positions arbitrary, illogical and inconsistent, and once again, I will happily agree to disagree with you.
Ta!
Joe

[Paul McKenna]

Originally posted by Joe Pluta:
First, Paul, neither of your two previous responses ever used the word outsourcing. So why you bring that up is beyond me.

The original post and the title of this thread is about outsourcing. And in your opening post you seemed to question the validity of any research / papers of the Cato Institute. Its bizzare how you have forgotten what this discussion is all about in the first place

Second, the Cato paper was not about smoker's rights. It minimized the health dangers of smoking. Please do me the courtesy of reading the links before you post.

I did read the article and I agree with portions of it. But for anyone to say that Cato published nonsense is just as much nonsense. Incase you didnt know, smoking has still not been proven to "Cause" cancer it has been thought to activate cancerous cells in some people.

To clarify my position: I disagree with your characterization of the Cato Institute as a valid economic institution (it is a shill for big business),

From now onwards, carry on this discussion by yourself.. I do not have the patience or time to convince people that they should have the very qualities that Cato espouses. Namely Objectivism.. instead of arbitrarily dismissing an institution / a point of view because it goes against generally accepted premises is a sign of lack of tolerance for other POVs.

I disagree with your defense of the Cato paper on tobacco because it falsely attempts to minimize the dangers of one of the most lethal products ever developed by man,

IMHO, shows your lack of objectivism.. just think about this, WHO conducted a study on the harmful effects of second hand smoke. But stiffled it.. you know why? because they found none!

and I disagree with your position vis-a-vis the Globe. I find it particularly hypocritical of you to say in one breath that a person should be able to smoke in their own space, but yet applaud censorship of free speech.

When did I censor free speech? And when you are a reporter you are supposed to be unbiased and fair in your reporting. A union membership can definetly be thought to bias the reporter's work.

[Joe Pluta]

smoking has still not been proven to "Cause" cancer
Not true, Paul. Go here.
Joe

[Joe Pluta]

The original post and the title of this thread is about outsourcing.
But the two posts I referred to said nothing about outsourcing. The topics were the Cato Institute's credbility, the paper they published on smoking, and the Boston Globe's suspension of an employee. I said I didn't agree with anything "in the last two posts". So, as you can see, I wasn't saying anything about outsourcing.
In any case, it's hard to argue with a guy who insists that cigarette smoking doesn't cause cancer.
Joe

[Mark Herschberg]

This thread is rapidly deteriorating. Let's please keep posts on the topic of economics and jobs. It's ok to attack a source, but the discussion on smoking is way off topic.
--Mark

[Alex Ayzin]

I monitor news about outsourcing pretty closely, given that I lost my jobs 3 times in the last 3 years - all of which were outsourced. I just want to ask a question on the jobs that are about to be created in place of jobs that are gone: what are those jobs??? I keep hearing about those new jobs, about us in dire need to be retrained, but what area should we look into?? Are new jobs going to be in accounting, transportation, fire fighteres, copsspeech patology? What should we do? What should we study for? I just finished paying off my college loans 3 years ago, we still pay my wife's (who was layd-off from one of the top Wall Streeet brokerage houses last Friday due to the whole department outsourcing in India). I still have my job, but for how long? What the hell should we study for now? What are those jobs that going to be created???
--Alex

[Matt Cao]

Hi,
I think new jobs are from the user side not from IT. It has a double meaning. If you work for software house and you are considered as software engineer, you are very much on the user side because you are belong in the company operations. You are indirectly generate company revenue. But if you are in the MIS Dept., I pray for you. The other meaning, I know some AI folks utilize their software engineering to create bugs, spy-bot, etc. dropping into the unfriendly/hostile system for the US Airforce. How are you going to label them? I see them as an intelligence agent first and IT second.
Don't be like someone with MBA but resolved into delivery pizza. Or a fellow PhD in Physics works in a morgue. :roll:
Regards,
MCao

[Jeroen Wenting]

Infact I, am one of several people I know who, think the activism against tobacco usage is way overblown in the United States. For all those liberals who want to ape Europe in every way ranging from economics to government they sure overlook that most countries in Europe are very pro-tobacco. Seriously, what right does the government have telling me that I need to establish smoke free zones in "my" business???

The only reason European governemts are not as anti-tobacco as the US ones is that they appreciate the massive infusion of taxmoney from tobacco sales...
As to the government having the right to tell you to establish smokefree zones, that's protection of the citizens from a hazardous workplace.
It's been proven time and again that tobacco smoke is poisonous.
Other poisons are restricted in the workspace, so why not that one (which isn't even a part of the production process except in specialised companies like cigarette factories).

I would be very very suspicious of anyone who has a union membership sign while claiming to be a reporter who is supposed to report without any bias. I applaud the Globe for that suspension, shows they are one of the very few mainstream newspapers in this country that can actually take action against any sign of bias in their staff, be it conservative or liberal.

That I do agree with wholeheartedly.
Most news agencies (both printed and TV/radio) are extremely biassed towards a leftwing view (less so in the US than in Europe maybe but it's still visible).
Any newspaper trying to reduce that to a more neutral stance should be applauded.

[Tim Holloway]

Ideology, as I've said on many occasions, is but one step removed from idiocy. Carry any good idea to extremes, and sooner or later it snaps.
My two fundamental gripes with the pontifications of professional economists (whose predictive abilities are legendary ) are that much of their justification comes from one of two questionable principles:
1. The Bandar-log principle ("It must be true 'cause we ALL say so") - which, if you've not read Kipling's Jungle Book, was how the monkeys asserted their wisdom.
2. The "It's Always Worked Before" principle. Which is the cliff over which so many ideologies go. I think there's a word to describe extrapolating off the end of a curve, and it's not a complementary one. Attempting to plot trends in human behaviour based solely on past history is especially idiotic, since, despite the assertions of the pessimists, we truly do learn from history. In any event, human affairs are so complicated that circumstances are never the same twice, and often it's the "minor" differences that make the major difference in the outcome.
It's accepted dogma in CompSci that "testing cannot prove the absence of bugs, only their presence". Economic models are, in fact, nothing but test suites themselves, but the economists don't seem to have caught on. Shakespeare, at least knew better ("There are more things in Heaven and Earth...").

---

Of course, you can consider this as being simply my own idioc^H^H^Heology. On the other hand, in my little corner of the world, I see lots of people losing jobs/income and few people gaining them. And, more to the point, nowhere on this half of the planet do I hear otherwise.
The jobs production we're supposed to get from all the savings due to offshoring is, as yet, unseen. The losses are very visible and immediate. Not only in terms of our own careers and those of those we know, but in terms of people being unwilling to invest in an uncertain future. If we are going to see the benefits, we'll first have to weather the storm.

[Steven Broadbent]

If you laid all the worlds economists end to end they still wouldn't reach a conclusion

[roy russo]

Originally posted by Tim Holloway:
It's accepted dogma in CompSci that "testing cannot prove the absence of bugs, only their presence". Economic models are, in fact, nothing but test suites themselves, but the economists don't seem to have caught on.

Funny. I recall Greenspan and his fellow economists screaming at the top of their lungs that the stock market was a bubble that was soon to burst several years ago. Remember, "irrational exuberance"? It all fell on deaf ears, and after it burst and the layoffs began, everyone turned to blame the economists for not warning us. Maybe people hear what they want to hear.

[Tim Holloway]

Originally posted by roy russo:

Funny. I recall Greenspan and his fellow economists screaming at the top of their lungs that the stock market was a bubble that was soon to burst several years ago. Remember, "irrational exuberance"? It all fell on deaf ears, and after it burst and the layoffs began, everyone turned to blame the economists for not warning us. Maybe people hear what they want to hear.

You mean the same Alan Greenspan who got up recently and said the problem with all us unemployed IT workers was that we needed more education? I used to have more respect for him.
Although it beats Steve Balmer's solution: double up on the number of IT grads so that the glut will drive salaries down to be more competitive. Funny, Steve B. didn't seem to be volunteering for a pay cut!
Seriously, a lot of us were fully aware of the "irrational exuberance" and the fact that a recession was already about 2 years overdue based on conventional wisdom (the economists, again). It was a matter of not being able to let go because we couldn't tell where the bottom truly was.
I was going to pass on the cynical joke that economists have predicted something like 14 out of the last 10 recessions, but...

[roy russo]

Originally posted by Tim Holloway:
You mean the same Alan Greenspan who got up recently and said the problem with all us unemployed IT workers was that we needed more education? I used to have more respect for him.

I happen to agree with him. IT jobs are being farmed out to cheaper sources and it is a trend that is not letting up, so I either sit around and shake my fist in the air or I educate myself and move up the IT ladder to positions that can't be outsourced (at least any time soon). This is how economies evolve, and it is good for us all that it occurs, over the long run.
Now, one could debate whether a programmer is a "low-end" job though, ready to be outsourced. I have yet to see an offshore outsourced IT project work without delivery delays, shoddy coding, and arrive way over budget. I've come to the realization that CEOs and those in charge of budgets have no freaking clue what it is I/we do, and so they think they can farm me out like I'm an assembly-line worker. Let them. By the time they see their mistakes, I would have moved on anyway.

[Sadanand Murthy]

Originally posted by roy russo:

or I educate myself and move up the IT ladder to positions that can't be outsourced (at least any time soon).

There are a lot of IT folks here in US whose jobs have been farmed out & many of them are very highly educated. Would you care to shine some light on what these IT positions are that can't be outsourced? From most of what I've seen, pretty much any position in IT is offshore-able these days.
Sure certain positions should not be offshored in the interest of the project; but today they are being offshored. Sure the companies will learn the hard way that they should not had offshored these jobs. But that will be a little to late for quite a few senior IT folks in US. The long term view that economists look at is fine as long as you are not the one who ends up on the short term sacrificial alter of offshoring.

[Jason Cox]

I too, would love to hear what these positions are that can't be outsourced or even "outsourced soon". Talk about a false sense of security.
However, as I continue to move around Dallas (nature of my particular job) I've definitely noticed that the real problem isn't outsourcing, but rather the current trend to do more with less.
Outsourcing/Offshoring is here to stay, that's the reality of the situation. What is coming is the realization of how it can be effective and that companies will still need domestic IT staff to successfully herd projects to completion. A successful project has to have some sort of customer-facing side to it or what the business wants will never be delivered. This is actually what I do, though not on off-shored projects.
Unfortunately, it seems to be the current trend to simply work the existing workforce harder without bringing on new talent. I think this will create more jobs over time as companies start to lose their better people to what slow job growth there is. However, that doesn't change the fact that we're seeing some of the slowest job growth and some very reluctant hiring practices.
What really stinks is that off-shoring is not going to create these "new positions" we keep hearing about so long as companies keep their payrolls under lock-and-key. Of course, the great irony of the day is that despite all the talk of tough times we haven't seen any great reduction in executive salaries or compensation packages. It still amazes me how execs can justify their salaries and bonuses but can't seem to find the budget to hire a handful of techies.

[Rufus BugleWeed]

2. The "It's Always Worked Before" principle.

Yeah! It's like in a mutual fund prospectus Past Performance is no indicator of future returns....
The bunk about better education really erks me too. Unless you are young, industry will accept no amount of training.

[Jeroen Wenting]

Originally posted by roy russo:

I happen to agree with him. IT jobs are being farmed out to cheaper sources and it is a trend that is not letting up, so I either sit around and shake my fist in the air or I educate myself and move up the IT ladder to positions that can't be outsourced (at least any time soon). This is how economies evolve, and it is good for us all that it occurs, over the long run.

Pretty soon the only jobs NOT being outsourced will be the jobs translating products and manuals from one language to another.
That's a job for typists knowing more than one language, not programmers, as in a properly designed application all that data is in external config files anyway (at least prior to compilation).
Of course for people whose language is a large one like English or Spanish there's little hope as the number of Indians and Chinese speaking your language is large enough that they can deliver your localised version ready to roll...
Managers will outsource ANY job (except their own, but their manager will do that for them) given the opportunity until that bubble bursts too.

[Don Stadler]

Originally posted by Tim Holloway:

You mean the same Alan Greenspan who got up recently and said the problem with all us unemployed IT workers was that we needed more education? I used to have more respect for him.

Well that is the problem for a lot of us. Not precisely education but updating our skills. I do have a problem with the word 'all' however, and a healthy IT job market is a necessity even for those who have reskilled.

Originally posted by Tim Holloway:
Seriously, a lot of us were fully aware of the "irrational exuberance" and the fact that a recession was already about 2 years overdue based on conventional wisdom (the economists, again). It was a matter of not being able to let go because we couldn't tell where the bottom truly was.

Yep. I was in the telecoms sector and knew things were going out of control. I got my investments out of harm's way but couldn't move my employment as easily. The only readily-available move was into dot.coms, and that was even worse. I tried earnestly to move into finance but didn't succeed in time.
The difference between investors and jobholders in a recession reminds me of the old joke about the difference between chickens and pigs in a breakfast. The chicken is inteterested while the pig is committed!
An investor can sell out and limit their exposure, but a jobholder is committed!

Originally posted by Tim Holloway:
I was going to pass on the cynical joke that economists have predicted something like 14 out of the last 10 recessions, but...

The actual joke is something like 8 of the last 2 recessions, but it might be more appropriate to joke about economists forecasting 4 of the past 0 recoveries....

[Don Stadler]

However, as I continue to move around Dallas (nature of my particular job) I've definitely noticed that the real problem isn't outsourcing, but rather the current trend to do more with less.

Yes, agreed. Though doing less with less is the way it turns out don't you think?

[roy russo]

Originally posted by Sadanand Murthy:

There are a lot of IT folks here in US whose jobs have been farmed out & many of them are very highly educated.

Obviously they were expendable and easily replaced by third-world labor. In their case, maybe their high education wasn't helpful, but perhaps they were too expensive or simply had a bad work ethic. Its hard to debate the cause of a layoff on a case by case basis.

Would you care to shine some light on what these IT positions are that can't be outsourced? From most of what I've seen, pretty much any position in IT is offshore-able these days.

Architects, designers, DBAs, project managers, etc... are less likely to be outsourced than the $20/hour code monkey positions.

The long term view that economists look at is fine as long as you are not the one who ends up on the short term sacrificial alter of offshoring.

Maybe in the long term (decades), IT will be a low-end profession here in the states. Maybe it wont. So far it doesn't look good for us. But one thing I do know, is that I need to move up the food chain, or leave the industry all-together if I want to keep my standard of living what it is today. However, I'm constantly wanting to move up the food-chain anyway, so what difference does it make?
What the media isn't telling you is that the unemployment rate is currently around 5.6%, which is LOW. I agree with a previous poster, the trend now is to squeeze productivity to the max out of every employee. After a while of that, the hiring will HAVE TO begin. The media-fueled hysteria oever outsourcing IT jobs is just that... hysteria. Remember also, that when the media speaks of outsourcing, they are also lumping in manufacturing jobs, and that industry in the U.S. has been declining since the 80s. If you work in that industry and didn't see that coming, you deserve to lose your job, IMHO.

[Tim Holloway]

Originally posted by roy russo:

I happen to agree with him. IT jobs are being farmed out to cheaper sources and it is a trend that is not letting up, so I either sit around and shake my fist in the air or I educate myself and move up the IT ladder to positions that can't be outsourced (at least any time soon). This is how economies evolve, and it is good for us all that it occurs, over the long run.

You've touched an inflamed nerve, here, I think! You're just regurgitating the party line when you assert that, and that's one of the things that we're concerned/annoyed about. You're assuming that A) We aren't highly educated. and that B) We aren't already pretty high up the IT ladder.
My last job (some people here may recall) involved, among other things, solutions of systems partial differential equations in 2 variables. You know, those "math skills" Greenspan said we needed to acquire. Also the ability to build a J2EE database web application that initiated and monitored long-running background computational process threads.
It still took me 28 months to find another job after that one went away.
I consider any day I don't add to my store of knowledge to be wasted and have since the day I entered this profession decades ago. I was one of the first to introduce a C++ compiler product for personal computers back in 1986. And developed my own Java compiler back when Java was still new and shiny. Today I work with JAAS and Web Services.
So pardon me, if I find an accusation of being insufficiently educated to be facile and offensive.
However, personal offense aside, what really gets my dander up is when people blithely assume that the forces at work here are benign. market forces are for the most part impersonal, and like the equally impersonal rain, can vary from the gentle refreshment that brings a parched land to life to the tearing monsoons that wash whole villages out to sea. At the moment, it appears we're heading for the monsoon. We will find a new equilibrium, it could take decades, like it did nearly a century ago (more recently, Japan is still trying to dig its way out of their economic implosion). The best way to forestall this - especially, since damage to the US economy in particular has a long record of washing down to the rest of the world - is to find ways to harness, direct, and control that change and not simply say "That's the way it is".

[roy russo]

Originally posted by Tim Holloway:
You're assuming that A) We aren't highly educated. and that B) We aren't already pretty high up the IT ladder.

I didn't mean to offend. There may be other forces at work here. I never assumed anyone was uneducated or anything of the sort. However I, as well as you, saw a lot of people flooding the IT industry during the dotcom boom that simply had no business being in it. I had english majors and those with no formal education running million dollar projects with a gaggle of ill-prepared programmers under them playing foos-ball and table tennis earning 6-figure salaries. So if those jobs got outsourced, where is the loss? Those people didn't belong in their positions or earn their paycheck either way, and so they were expendable.

It still took me 28 months to find another job after that one went away. ... So pardon me, if I find an accusation of being insufficiently educated to be facile and offensive.

So maybe you live in a hard-hit area. Maybe you live in a small town with little demand for someone with your skill-set. Maybe you were overqualified for positions. Maybe you didn't want to lower your salary expectations to what the market was offering.

The best way to forestall this - especially, since damage to the US economy in particular has a long record of washing down to the rest of the world - is to find ways to harness, direct, and control that change and not simply say "That's the way it is".

How? I hear "That's the way it is" from the right, and "Stop the Benedict Arnold CEOs!" from the left. Permit me to lean to the right on this one. Being formally taught in economics, I shudder to think of trade barriers being errected right now.
However both China and India need to come to the table and play on an even field. China goes thru great pains to artificially keep their currency low, and India imposes tariffs on imported (U.S.) goods like there is no tomorrow. A harder line needs to be taken on free trade to insure ALL players are playing fairly.

[Tim Holloway]

OK. I can tell you've heard the official party lines, but here's some comment from the trenches.
1. No, I didn't/don't live in a "hard-hit" or a small market. In fact, Florida fared a lot better than the "glamour" job markets over the course of the Recession. That's based on job shopping on a nationwide basis. The entire country has been a "hard hit" area. Which is what we're ultimately complaining about.
2. I took a fairly substantial pay cut to take this job. It was the first offer made to me at any pay level (short of $15/hr) during that period.
3. Actually, I didn't see all these legendary English-major J2EE people withj the 6-figure salaries. While the dot-com boom was on, I continued to work in traditional IT. I have no reason to disbelieve that such creatures existed, but all the unemployed IT people I know were IT people long before Y2K. Thus - assuming that the English majors didn't get to keep their jobs, and the IT people got canned (Which is possible; Dilbert Lives!) I have to assume that there in fact is a true loss. Certainly nothing said by Gartner or Forrester has ever given me the impression that we're only shedding an artificial surplus.
And, in fact, 28 months doesn't appear to be atypical. Almost daily I hear of people who have been unemployed for 2 years and still are. A kid came to the door the other day selling newspapepr subscriptions. He claimed his dad had been on the street for a year. Which makes a good sales pitch, but he didn't bring it up until after the sale was made, so I think it's more than just a sob story.
Actually, my second intimation that the world had changed was when I looked at telecommuting options after I got laid off and was consistently underbid by offshore groups who could - thanks to cost-of-living differentials and the Internet - get fat off rates that would make it hard for me to pay my Internet bill.
The first intimation was when, at my former employer of 13 years, I attended a meeting where they discussed sending their work off to their Indian programmers. At the time, I thought that was great. At the time, there was work for all.

Originally posted by roy russo:

How? I hear "That's the way it is" from the right, and "Stop the Benedict Arnold CEOs!" from the left. Permit me to lean to the right on this one. Being formally taught in economics, I shudder to think of trade barriers being errected right now.
However both China and India need to come to the table and play on an even field. China goes thru great pains to artificially keep their currency low, and India imposes tariffs on imported (U.S.) goods like there is no tomorrow. A harder line needs to be taken on free trade to insure ALL players are playing fairly.

There are always trade barriers of some sort or other. Used properly, they keep the market from freewheeling out of control. Consider the SEC. Used poorly, you end up like China and Japan did back in the isolationist 1800s. To their detriment. But you haven't done the math. The average Indian IT programmer gets paid roughly 1/8th what the average US programmer does. The average Indian housekeeper gets paid about 1/10th of THAT, thanks to cost-of-living differential. The irony here is that an Indian IT worker can afford to keep servants but not buy a computer, whereas the reverse is true in the US.
But regardless of what you spend your money on, the magnitude of the differential is such that US jobs dry up, India gains jobs, and those fortunate enough to have the talent and connections to be middlemen take advantage of the fact that at an 8-to-1 ratio, you can make a huge markup and still own the market.
OK, well and good. Capitalism At Work. But consider. Things are not so simple. If an American worker has 8 times as much cash available, that's potentially 8 times as money that could be spent on Chinese-made goods at Wal-Mart. Take that away and India has just robbed China. And, while it's true that China artifically inflates their currency, even if they'd let it float, there's still such a vast differential in costs that they'd still own the market.
There's also the matter of self-sufficiency. The US manufactures absolutely zero LCD displays needed for modern-day computers and US military equipment. None at all. It hasn't manufactured a TV set in over a decade. Same for VCRs just about any other high-tech electronics. So far we've gotten by on doing the design, but between the two, India and China pumped out well over double the tech grads last year that the US has. It's virtually certain that eventually their best and brightest will start making major contributions of their own.
That's fine, too. Eventually, Indian and Chinese salaries will rise and US salaries will fall. In fact, it's already been happening for some time. Ever heard the term "job-worth-less recovery?". The claim that many people lose jobs, have to go to other fields and end up making on average 20% less than what they used to?
The big problem is, again, the differential. Rapid inflation isn't good for the Third World any more than it was for us back in the Carter-Ford era. Implosive deflation would be ruinous for us. Not only because of its effects at home but because we have such an exaggerated effect on the economy of the entire world. Economists like to say that when the US sneezes, Canad catches a cold and the world comes down with pneumonia.
To simply sit and do nothing is to put yourself at the mercy of the whirlwind. This is why ideological excuses are menaingless.
If we had a sure-fire solution, we'd do something. I doubt we ever will. Most likely a lot of things will get cobbled together and we'll eventually - and painfully - reach a new equilibrium. But we have to do more than we're doing now and we'll have to discard assumptions. Determine what works and use it and not what "should" work. And never assume that what works for today will keep working as the world changes into tomorrow. The point isn't to determine who's "right" and who's "wrong" or to polarize the planet between East and West. We're all in the same global boat, and if we let it sink, knowing who to blame won't make a bit of difference.

[Mark Herschberg]

Originally posted by Tim Holloway:

Actually, my second intimation that the world had changed

So we're on the new new new economy now? :-p
The new economy was dot coms (no old brick and morters).
The new new economy was, "oh yeah, I guess running a $30m annual loss doesn't make for a profiable company, but we know better now"-dot-com.
And now the new new new economy is about "global salary balancing."

---

I don't doubt that things are changing. However, I see this as the start of a muti-decade change. I don't think the laws of econocmics have been any more fundamentally changed than they were 7 years ago. (Yes, yes, I know the argument is not that the laws have changed, but that the with a smaller world the laws play out differently, but you know what I mean.)
Economists may have overpredicted recessions, but I think many more people have overpredicted fundamental economic changes of late.

--Mark
[ March 17, 2004: Message edited by: Mark Herschberg ]

[Rufus BugleWeed]

According to these guys in the Atlantic this is a structural change like we have not seen in a long time, if ever.

In the pre-1990 recessions, industries typically saw job losses during the downturns but then recouped those declines as the economy recovered. This "procyclical" pattern suggests that structural change was not a big factor. The pattern around the recession of 2001 was very different. The industries that lost jobs during that downswing�industries such as telecommunications, electronics, and securities and commodities brokering�were still losing jobs two years into the recovery. Conversely, industries that created jobs during the recovery�including other kinds of financial services�were creating them during the downswing, too. In pre-1990 recessions, the researchers estimate, about 50 percent of American workers were employed in industries undergoing structural change; in the recession of 2001, the figure was nearly 80 percent.

Read the essay here.

[Jason Stull]

This issue is personal. The body count for offshore outsourcing around me is 2 friends and my wife. No, they were not overpaid, uneducated freeloaders. Try giving the "food chain" speech to someone you love who has worked really hard to build themselves up, only to get the globalized sucker punch. Our locale is in Minneapolis, MN, another so-called safe area. BTW, Best Buy (electronics retailer) is just about ready to offshore about 2000 IT/IS jobs here. I call that pretty damn real. This trend is a downward spiral, with few winners and many losers.
No, we don't have to take it. No, we don't have to accept the tired old clich� of, "that's just the way it is". If I would have believed that growing up then I would have gotten absolutely nowhere. Is this feudalistic longing for us to do whatever our "masters" tell us some creepy genetic trait? Of course no answers to this problem are forthcoming. Just anger now.
Anyway, thanks for listening to me rant. viva la ranch.

[Warren Dew]

Originally posted by roy russo:
I have yet to see an offshore outsourced IT project work without delivery delays, shoddy coding, and arrive way over budget.

And you think that onshore projects are generally different?
I have to agree with those that note that during the dot-com boom, a lot of people were hired as programmers who were, to put it kindly, less than competent. At the typical dot-com, you had an IT staff of 20 or 30, of whom only 2 or 3 actually ended up doing productive work.
The problem is that the other 18 or 27 got their resumes beefed up just as much as the 2 or 3, so it's now very difficult for a hiring manager to actually discern who is a competent software engineer, and who just happens to have a lot of experience sitting in front of a screen with an editor open. So yes, the chaff that got added during the dot-com boom does affect even those who were IT professionals before the boom.
I don't have a short term solution to suggest, though. While I think Greenspan has correctly identified the problem - people who think they are IT professionals but who aren't really competent at it - many of them will never be expert programmers with any amount of training, and none of those can work for the same salaries as offshore workers of the same competency.
In the long run, the solution is for the standard of living in India or wherever to climb to the point where they make as much money as we do. That'll take a few decades, I expect.

[Tim Holloway]

Originally posted by Warren Dew:

I have to agree with those that note that during the dot-com boom, a lot of people were hired as programmers who were, to put it kindly, less than competent. At the typical dot-com, you had an IT staff of 20 or 30, of whom only 2 or 3 actually ended up doing productive work.

... And this is different from pre-dot-com offices in what way?
Seriously, I never met the wannabes. I only know un/uder-employeed people with decades of IT experience. Hopefully we shed the deadwood 2 years back, but the reason I'm worried is that the traditional employers are still not hiring long after the recession "ended". On this continent, anyway.

I don't have a short term solution to suggest, though. While I think Greenspan has correctly identified the problem - people who think they are IT professionals but who aren't really competent at it - many of them will never be expert programmers with any amount of training, and none of those can work for the same salaries as offshore workers of the same competency.
In the long run, the solution is for the standard of living in India or wherever to climb to the point where they make as much money as we do. That'll take a few decades, I expect.

This isn't a short-term problem. It's not like you can give everyone in India and China a 15% pay raise and we're all completing on a level field again. Any short-term adjustments are liable to be wrenching. As, in fact, what we've seen so far have been. My fear is that before it gets better, it will get much worse.
Greenspan has recently said several things I find unforgivable, but never (yet) that we were underqualified in IT. Of course, part of what I found unforgivable was that he parroted the standard line that education would make the difference without providing any concrete indications of what we could train for. Heck, I could say we need more "math skills" - except that I won't, since math-related professions require virtually zero capital - one reason why countries such as India and the Soviet Union where computational resources were hard to get have developed such good math-related programs.
This is what worries me. Always before, there was someplace where people could retrain. And generally move up. But most of the "move up" professions now are just as offshorable - if not more - than ours. The only ones truly safe are usually people-skill ones. Computer geeks' lack of people skills are legendary.

---

If it's any consolation, the last redefinition of the workplace was the "permatemping" craze that swept through the late 80's/early '90's. My concern then was that if everyone was a temp, the next recession would be dire because it's so much easier to lay off temps than permanent employees and thus the normal layoff process would snowball.
I miscalculated. The recession was a lot slower in arriving than expected and a lot of people ended up being hired back permanently in the mean time as permatemping turned out to be more expensive than maintaining permanent staff over the long run. With luck, my pessimism about the current situation is also misplaced. I hope so. But based on past experience, I doubt the "experts" will be right either. At least until the spin doctors "explain" it to us. :roll:

[Warren Dew]

Originally posted by Tim Holloway:
Seriously, I never met the wannabes. I only know un/uder-employeed people with decades of IT experience. Hopefully we shed the deadwood 2 years back

Vain hope. Here in Massachusetts, we were in the center of the dot com boom - I worked for four different dot coms over three years (making hay while the sun shined - but in my defense, I'll note that two of them are still around, not too bad a record). The 'wannabes', as you put it, are still around, have years of 'experience', and their resumes look as good as anyone else's, and I'm sure some of them have been willing to move to Florida and affect your job market as well.

This isn't a short-term problem. It's not like you can give everyone in India and China a 15% pay raise and we're all completing on a level field again.

Agreed. It took probably about 10-20 years for Taiwan to go from where China is now to first world wages, so it will undoubtedly take China and India at least as long.

Greenspan has recently said several things I find unforgivable, but never (yet) that we were underqualified in IT. Of course, part of what I found unforgivable was that he parroted the standard line that education would make the difference without providing any concrete indications of what we could train for.

Keep in mind that Greenspan is not giving advice to you or me for the short term; he's giving advice to Congress for the long term. What he's saying is that Congress should support education and continuing education programs. I think he's right, though I'd go further and support retraining programs for career switchers as well as people enhancing skills in existing careers.
And the flip side of what he's saying - keep the trade barriers down, make sure India is willing to import the things they need from the U.S. - is ultimately what's needed to reach a new equilibrium.

This is what worries me. Always before, there was someplace where people could retrain. And generally move up.

I don't know about that. When mechanization hit agriculture in the 19th century, resulting in a series of agricultural depressions, the extra workers flocked to the cities, where many of them were unemployed and all of them faced less healthy living conditions. When mass production was introduced, skilled craftsmen ended up earning less, not more. If you've got lots of skill and experience and the world changes to make that experience obsolete, you're going to reenter the job market at the bottom, if at all. It's the new people from the next generation of workers that get to move up.

But most of the "move up" professions now are just as offshorable - if not more - than ours. The only ones truly safe are usually people-skill ones. Computer geeks' lack of people skills are legendary.

True.
Sometimes I think computers will do the same thing for human brains as the industrial revolution did for human muscle. When was the last time you saw a job that paid extra because it needed people who were stronger than average?

[Jason Cox]

Pardon me while I play catch-up...

Yes, agreed. Though doing less with less is the way it turns out don't you think?

That does seem to be the case. We've actually seen some hiring due to some very productive and reliable people quitting for other jobs where they are not as likely to be overworked. What happens is that it is taking at least two or three new hires to pick up the slack.
I think this is a real testament to how bad it is right now. Not so long ago I remember it generally taking one new hire to replace one departing employee.
Now on to the other comments...
I really hate hearing about how unemployment is around 5%. Statistics without context mean almost nothing. 5% is not high, but it also represent only those who are "officially" out of work. It also does not show how many people are now in lower paying jobs.
It's interesting to note that while we have seen specialized craftsmen move into cities and work for lower wages in the past, this is the first time we've seen people with advanced educations and highly specialized skills being displaced on such a massive level. Whether the problem is off-shoring or lack of new hiring is moot. The reality is a shrinking of the modern middle class, and that's concerning to me. It means less revenue in the local economy, which IS (and has) going to impact those of us who still have jobs.
And to be quite honest, I don't appreciate being inconvenienced and receiving a lower standard of service so that some guy who already earns too much for doing too little can earn a big fat bonus on top of his big fat paycheck. This isn't just impacting me as an employee, it is impacting me as a customer. To be honest, I have never felt less valued as a consumer than I do currently, and it's hard to speak with your pocketbook when the problem is so widespread.
Also, why does it matter if onshore projects have had problems but it doesn't matter if off-shore projects have problems? If the "solution" is not saving money, why are we doing it? I've asked this question many times and never received a good answer.
The problem with the off-shoring fad is that it is not measured in real costs. Most of the figures don't reflect any reality I've encountered. I've seen some successful off-shore projects, but they don't represent a majority. "Successful" doesn't necessary mean the project was a success, but it was ran in a manner that was efficient and effective. However, we all know that some projects fail regardless of what is done on the technical side.
In general, I have not seen the lower costs or the better quality. At the same time, the other reality is that while we have created 180,000 jobs in India (estimated) that does not mean we would have had 180,000 jobs created in the US. More than likely, we'd be seeing the same growth we are now. The only reason the work is going off-shore at all is because of so many companies eager to leap on the bandwagon. I suspect that if not for off-shoring they'd probably be doing the same as the companies that are not off-shoring right now. Which is to say they'd be sitting on top of their payrolls and refusing to let it budge.
I believe the following are going to occur though, regardless of when the trend does eventually end:
1. Off-shoring projects will remain, though we will get better at coordinating them.
2. Companies are going to realize they must have customer facing staff to make these projects work. This is more than just a project manager. They need to have on-shore developers who can keep the project on track. Every successful project I've seen has been like this.
3. The opportunities for non-customer facing work are going to shrink dramatically. The age of the geek with no social skills earning a great living is in its death throes.
In time, companies are going to have to come clean and admit that off-shoring is not as cheap as they claim. What's really sad about this trend is that companies are sinking millions, if not billions, pursuing it and causing much pain and grief for many American families. While executives may tout their successes, they seem to be very tight-lipped about the number of projects that were not quite so successful. Even some of the "successes" are only so in that they work, but are very shoddily done.
The better, cheaper, faster claim is a myth.

[Mark Herschberg]

Rob, I have to disagree with you on a number of points.

Originally posted by Rob Aught:

I really hate hearing about how unemployment is around 5%. Statistics without context mean almost nothing.... It also does not show how many people are now in lower paying jobs.

The 5% is given in context, you just disagree with the context. Ironically, then you quote your own statistic (or hand waived statistic).
I would argue that many people were overpaid during the boom. Now either they were overpaid, and so earning less isn't a fair assessment, or they earned a fair wage because that's what the market set (even though salaries nearly doubled in a few years). In the latter case, the market is just setting new rates.

Originally posted by Rob Aught:

It's interesting to note that while we have seen specialized craftsmen move into cities and work for lower wages in the past, this is the first time we've seen people with advanced educations and highly specialized skills being displaced on such a massive level.

That's not quite true. Those "specialized craftsmen" were the highly educated people. From masons to those who worked on analog computers, many people lost their jobs as industries represented paradigm shifts.
Whole industries disappeared in the past. As a percentage, we haven't seen anything nearly as big this time around (although you won't know it from the noise everyone's generating).

Originally posted by Rob Aught:

And to be quite honest, I don't appreciate being inconvenienced and receiving a lower standard of service so that some guy who already earns too much for doing too little can earn a big fat bonus on top of his big fat paycheck. This isn't just impacting me as an employee, it is impacting me as a customer. To be honest, I have never felt less valued as a consumer than I do currently, and it's hard to speak with your pocketbook when the problem is so widespread.

I'm not sure what you're talking about, but I don't recall anyone forcing you into buying any product or signing any service contract. Vote with your feet. If the problem really is that widespread, someone will come in and offer a better alternative. It's the american way.

Originally posted by Rob Aught:

3. The opportunities for non-customer facing work are going to shrink dramatically. The age of the geek with no social skills earning a great living is in its death throes.

I disagree. It will shrink, but there will be plenty of work for in-house geeks who hide from the light of day and customers. We'll reap the advantages of having them in the same room as project manager. A team of 40 engineers still only needs 1-4 who actually meet with customers. That's 10% at best.

Originally posted by Rob Aught:

The better, cheaper, faster claim is a myth.

Yeah, it failed with computers, with cars, with medical technology... innovation as whole is one big sham that has never benefited humanity.

--Mark

[HS Thomas]

Originally posted by Tim Holloway:
. It's not like you can give everyone in India and China a 15% pay raise and we're all completing on a level field again.

Taxes on computer microchips in China are much lower than that in the US. The US is hopping mad.
[ March 18, 2004: Message edited by: HS Thomas ]

[Arjun Shastry]

{
India and the Soviet Union where computational resources were hard to get have developed such good math-related programs
}
May be Soviet Union.In India I haven't seen any good math related program which is open to all.I don't understand why this Math link always cropped up.

[Tim Holloway]

Originally posted by Mark Herschberg:
I'm not sure what you're talking about, but I don't recall anyone forcing you into buying any product or signing any service contract. Vote with your feet. If the problem really is that widespread, someone will come in and offer a better alternative. It's the american way.
--Mark

No they don't. That only works in small business. In big business (limited vendors), you simply get your choice of which type of crappy service you'll have inflicted on you. Or does your choice of phone company offer human beings who answer your calls and offer prompt, expert, and courteous service. Oh, wait. You're in Boston, aren't you? You can scratch courteous. 2 out of 3 ain't bad, though.
Did I mention I hate phone companies? Cable companies, too, speaking of captive markets.
It's true, though. I'm not being forced to buy their products. I simply do without. Oh yeah. About those service contracts they offer? The less said, the better.