White Collar Anger By Kevin Danaher and Jason Mark, AlterNet December 18, 2003 Pete Bennett is fed up, and he's not going to take it anymore. "People are tired and angry and upset," says the 47-year-old unemployed worker from Danville, California, frustration noticeable in his voice. "People are hurting, losing their homes. If we keep pulling jobs out of the country, how is the economy going to stay up?" Coming from an autoworker or a steelworker, these would be familiar words. But Bennett isn't a laid off Ford or GM employee. He used to work for companies such as Bank of America and Wells Fargo, where, as a contract database programmer, he earned between $80,000 and $90,000 a year. But in the last year, he says, he hasn't been able to find any programming work – such jobs, he is told, are moving overseas. Bennett is not alone. In recent years, hundreds of thousands of highly skilled, well-paid positions have been sent abroad. These days architects in the Philippines are producing blueprints for Fluor; electronic engineers in India are designing cell phone chips for Texas Instruments; and computer programmers in the Czech Republic are building software for Kodak. The stream of job loss is set to become a torrent; a November 2002 study by the consulting firm Forrester Research estimated that over the next 15 years some 3.3 million US service sector jobs would be sent abroad. A more recent report by economists at UC Berkeley says as many as 14 million programming, accounting, paralegal and other service jobs are at risk of being "off-shored." The off-shoring of service jobs is déjà vu all over again. In the 1970s, U.S. corporations started shipping manufacturing jobs to low-wage countries such as Mexico, China and Indonesia in an effort to cut labor costs. Now, that same drive to reduce labor costs is hitting more highly skilled workers as service jobs go to well-educated workers in New Delhi and Prague and Singapore. As skilled workers are painfully starting to learn, the logic of cost cutting doesn't distinguish between blue collar and white collar. While the economics of sending manufacturing jobs and service positions abroad may be the same, the political consequences promise to be different. In American politics it's one thing to attack the working class, but quite another to undermine the middle class, which votes in higher percentages. As any political consultant will tell you, as the middle class goes, so goes the nation. By cutting white collar positions, American businesses are sowing the seeds of a populist backlash that could redraw the political map. One political topic that is bound to be influenced by the off-shoring of service jobs is the hot-button issue of trade policy. Surveys by the Pew Center show that support for free trade policies splits sharply along income lines. Among families earning more than $75,000 a year, 63 percent of people see globalization as positive; among families earning less than $50,000 a year, support drops to 37 percent. In effect, better paid workers have supported free trade policies so long as they aren't impacted by them. But now many of those people are suffering the same cold fate that manufacturing workers have grappled with for decades. As more and more skilled jobs go abroad, supporters of free trade are almost certain to reassess whether corporate globalization is in their best interests. The loss of high skilled jobs could also have a significant impact on next year's presidential election. Voters' job anxiety is shaping up as the number one election issue, with President Bush struggling against the loss of more than 2 million jobs on his watch and a so far "jobless economic recovery." Off-shoring skilled positions is only going to make the anemic job market worse: According to the industry consulting firm Gartner Inc., one in 10 U.S. technology jobs will move overseas by the end of 2004. The disappearance of those good-paying jobs gives Democrats a chance to reach out to more affluent voters whose natural sympathies may lie with Republicans – but whose anger could translate into Democratic gains. Winning elections is in large measure about managing expectations – and it's the newly unemployed skilled workers whose expectations are being downsized furthest. As Pete Bennett puts it: "These people have never experienced this before. ... What are we going to replace these jobs with? Flipping burgers?" The long-term political effects of the off-shoring of skilled jobs promise to be larger than one single issue or one election. The export of skilled jobs could very likely cause an anti-corporate backlash that will reverse the decades-long drive toward deregulation and the weakening of organized labor. During the heady days of the late 1990s, America's high tech class by and large supported the push for deregulation and laissez-faire economics. Now, the software designers and tech engineers who didn't think the government needed to play a role in overseeing the economy are the victims of uncontrolled economic forces. The once comfortable are becoming the insecure. The shift from being a winner to a loser is bound to prompt some serious rethinking about whether corporations should be given free rein to do whatever they like. The first signs of this are already evident. Newly vulnerable high tech workers – traditionally not big union supporters – are starting to listen to the entreaties of organized labor. The Communication Workers of America says it is seeing increasing enthusiasm for unionization among off-shored high tech workers. Calls are also increasing for government regulation to staunch the hemorrhage of jobs. In response, state and federal legislators are considering laws to keep service jobs in the United States. The laissez-faire mentality of the 1990s is being replaced by demands that government act to restrain corporations' basic instincts. The political pendulum between dislike of big government and dislike of big business is swinging in a new direction. Those businesses shipping high skilled jobs overseas should beware: Short-term profits may come at the cost of future political peril. Kevin Danaher and Jason Mark are authors of the new book, "Insurrection: Citizen Challenges to Corporate Power" (Routledge Press). They work for the human rights group Global Exchange.
You know what is "funny" is that the decision makers who are sending jobs overseas will soon find that since the bulk of the people that they manage are overseas that it only makes sense to move their job overseas as well.
Not that it is probably that high paying, but yesterday I ordered a Direct Tv system from Circuit City. When I called for installation , I was talking to a polite man with a heavy Indian accent. After good service, I asked him where he was at. At first he said "an off-shore location". When pressed he said a city whose name I didn't recognize. He said it was a full time job and it was late at night in India. I wanted to ask him how much he got paid, but he seemed a bit uneasy at my questions
In this argument, why are lower costs for consumers *always* overlooked? Reducing G&A costs at a company benefits its shareholders through a higher net income figure and the corresponding increase in market value. The vast majority of shareholders are likely to be US citizens. Typical liberal propaganda. Although this sounds very protectionist. Patrick J. Buchanan would be proud of the DemonCrats on this issue.
At some point, I would hope that CEOs start learning that having a healthy corporation is about more than just the bottom line. There are sound economic reasons to not chase the lowest common denominator, including the very obvious one of needing a market for your goods and services (i.e. if everyone moves their jobs overseas, there's nobody left here who can afford the products), etc. It's unfortunate that companies are so short-sighted and cannot see beyond the obvious balance sheet/income statement equations and have vision to see where keeping jobs in the United States might very well be better for the company as a whole. To too many managers, a firm number has to be affixed to a decision in order to make it. But there is so much more to running a successful business than the firm numbers.
Because prices consumers pay are very often not related to the cost of the product in any real and meaningful way.
TJ, TJ, TJ, you are neglecting basic behavioral economics as you fail to account for the fact that consumers that are naturally loss averse, that is they tend to fear equivalent losses far more than equivalent gains. In addition, the fact that the wealth transfer is aggregated throughout a labrynth of recipients in a less than tangible fashion means that the mass of consumers as individuals have far less incentive to act in favor of, or even notice the $.22 a week off of their grocery bill than the swollen ranks of displaced workers. Eventually TJ, your plutocracy (which you aren't even a part of, just a henchman, ironically enough) will be consumed from without by the displaced. And your own head will be on a pike.
Really? Then why do so many companies have razor thin margins? Cost of the product is more than just material + labor. The fully loaded cost of a product includes the administrative support required to keep a company running. What's the solution? The world is a smaller place than it was 50 years ago (or 40, 30, 20, 10, 5, etc). As a result it is easier to take advantage of global resources. Compared to the rest of the world we earn too much money. If an American company can reduce costs by shipping some jobs overseas, it will make their product cheaper. If they don't do it, an international company will use global resources and sell cheaper products in the US. Eventually, people will stop buying from the American company with the higher cost structure and put it out of business anyway. It's a problem, yes. But certainly not a problem that is easy to solve. And you can't just say - American companies should ignore the cost advantages and use American labor. That's short-sighted and will kill the economy in the long-run.
So, are you repudiating supply and demand when it comes to determining prices of products and services?
Not completely, but I don't think most companies are fully aware of the supply-demand curves for their industry. Heck, most don't even truly understand their market. From what I've seen (especially in the industrial markets), for the most part companies are willing to sell a product as long as they believe their variable contribution margins are postive.
With this logic, one is assuming the shareholders are directly driving the company. But if the board and CEO are driving the company and collectively benefiting from offshoring, their jobs are safe, since most shareholder resolutions fail miserably, the only other option for shareholders being selling. I can see the problem where how does one regulate and fund the regulation of a company that is free to move anywhere in the world - Euro style VAT?
While offshore outsourcing is certainly going to significantly affect employment patterns in the U.S., I disagree with the authors' suggestion that this will lead to a reregulation of the U.S. economy, or that white collar workers are going to unionize and vote Democratic. Offshore outsourcing is all the rage at the moment, just like the tech bubble of a few years ago. The fact is that about 75% of the companies that outsource terminate their outsourcing relationships early. Dell and Lehman Bros. are just two of the big names in the news within the last month that have brought back work that was offshored. Companies are finding out that offshoring driven solely by cost often fails. Quality matters. At the same time, it is foolish to think we can insulate ourselves from global market forces through protectionist measures. Our economy evolved from the agrarian age to the industrial age, and from the industrial age to the information age, and we can compete in this economy too if we are smart. In order to do so, however, we are going to have to invest in our infrastructure, particularly education. The U.S. superiority in higher education is eroding - we lost it in basic education many years ago. Just as protectionist measures failed in the auto industry (U.S. companies regained their footing by adapting the quality-oriented manufacturing processes of the Japanese), these measures will fail with respect to outsourcing. The answer is education, not regulation.
First, I ABSOLUTELY agree that the only way to preserve our competitive advantage is to be better educated than the rest of the world. I'm not sure, however, if we are losing that edge because America is getting dumber or if the rest of the world is just getting smarter. As other countries become more prosperous, they can invest more in the education of their children. We can become incrementally better educated, but the rest of the world will eventually have education systems as good (if not better) than ours. Your first point (that the jobs come back) is directly related to US workers being better through education. I don't think American quality is inherently better. So I don't think a lot of those jobs will come back. The ones that *will* come back are those that involve interaction with clients. Any interaction with a client is effectively a sales visit. It's easier to sell something to people who you relate to than those you don't. Therefore, as long as the consumer is American, the person who interfaces with those clients will be predominantly American. The only way this problem gets fixed is when the standard of living (i.e. incomes) increase in countries around the world. Then, the cost advantage disappears and you are only competiting on a quality basis.
The only way this problem gets fixed is when the standard of living (i.e. incomes) increase in countries around the world I agree with TL on this one point. That is why it so tragic when the US enforces Sadam's prohibition on unions in Iraq. That is why it is a tragedy when we spend so much time trying to thwart unions in the developing countries so that NIke can get Asian women to work for $.70 and hour rather than $2.00 hour or whatever.
My point about decision makers jobs also going overseas was more directed toward middle managers versus the board and CEO. The board may decide that jobs need to be outsourced overseas; it is the middle managers that affect the plan.
TJ when you lose your job to an overseas worker, I will buy you a beer and let you explain to me in more detail about this "propaganda" that you have demonized as liberal.
Do you a web site you can site for the 75% number? BTW, I suspect that the companies that have had bad luck with overseas outsourcing would have fared better with a more solid transition plan. Remember most of the companies are new to the white collar outsourcing game.
Why is education a silver bullet? Do you have any guesses at the sheer number of educated workers China and India have? And wasn't education also the message that our government sent out when we were losing our blue collar manufacturing jobs? Didn't we tell those outsourced workers and indirectly school kids that higher education was the key to the future employment successes? The only solution I see to the growing outsourcing reality is that American workers will now have to compete for outsourced jobs by lowering their salary demands (and their standard of living). At some point in the distant future, the standard of living in China and India will rise (and ours lowered) before the bleeding stops. BTW, Russia and the eastern European countries also have well educated work forces.
TL - good post. No Worries. I do have a link. I will post it when I have more time. If you are curious, my recollection is that is was from the website of DiamondCluster International. I agree that the failures in outsourcing are due to poor planning and implementation, and to some degree outsourcing processes that shouldn't have been outsourced in the first place. Education is not a silver bullet, but merely our best way to slow the onslought. I think regulation would be a disaster. Both of your points regarding standard of living are well taken. Rather than the U.S. lowering our standard of living, we need to get all those Indian programmers drinking $4 Starbucks.
