Outsourcing High-Tech Jobs, p. 5
It's about the money (honey): IT work in Asia
Treasury Sec. John Snow put it bluntly enough: "You can outsource a lot of activities and get them done just as well at a lower cost." Indian computer salaries are around one-fifth U.S. levels. Indian programmers get paid anywhere from $6,400 for new-hires to $30,000 for workers with at least five years experience, and software engineers makes less than one-sixth what they'd get in Silicon Valley. ( Byczkowski , Erati, Tsuruoka, InStat/MDR)
While the Indian economy grew by 10.4% in the last quarter of 2003, the vast majority of nation's one billion people get nothing from the high-tech boom. Some 300 million Indians live on less than a dollar a day, and one in four Indians -- 260 million people -- live below the poverty line. Some 400 million cannot read or write, let alone use a computer. For the majority, things have actually gotten worse. To attract foreign capital and offer subsidies to high-tech moguls, the government slashed public services, cut wages, privatized agencies, and neglected transportation and other basic infrastructure needs. (Sly)
Indian computer workers frequently change jobs and many are dissatisfied with the lack of services that can force them to spend long hours commuting and do without high-bandwidth access. Many aren't happy that high-tech development is largely for export and controlled by fickle multinational companies that often neglect local markets and crowd out smaller employers. Many were outraged when India's largest private telecom company contracted out all its core functions to IBM and other multinationals.
Free-trade boosters assume that as Indians gain more experience and their productivity goes up, so will wages. And Singapore, which has been the first stop for high-tech outsourcing, might have seemed to be a good example of that. But in fact Singapore, as David Rothkopf reported in the New York Times, now "faces smaller-scale versions of the problems that beset the U.S. economy: It has to compete with much cheaper labor and much larger markets available in its Asian neighbors." Rothkopf believes Singapore is still holding its own, with an economy that's still growing three times as fast as the U.S., because the government invests in health care and infrastructure and proactively works with industry to plot a National Economic Strategy. Singapore still hosts the Asian headquarters of IBM, Electronic Data Systems Corp. and other global companies and attracts outsourced work because of world-class telecommunications infrastructure and a highly skilled workforce. (Collett, Rothkopf, Thibodeau 2004-2)
There's always a lower wage -- elsewhere
But IT workers in Singapore are feeling the competitive heat. In 2003, ITtoolbox, which provides
information to IT professionals worldwide, surveyed more than 3,000 of its members about their paychecks. In Singapore, IT professionals said they made the equivalent of $43,058 a year, little more than half the $80,286 reported salary of American IT professionals. But that's five times the $8,593 that Indian professionals said they made. More than one in three Singapore IT workers (34.6%) said they hadn't seen any raises, and 3.8% experienced pay cuts. One in four U.S. workers (24.7%) haven't gotten raises, with 6.7% suffering pay cuts. (ITtoolbox)
Wages are still surging ahead in India, where almost half --47.3% -- the IT professionals said they'd enjoyed raises of 15% or more. But how long will that last? What India is to Singapore, China -- or Russia, Poland, the Philippines or Vietnam -- could become for India. All are investing in IT workers, and India won't be the last stop for bargain-hunting employers. In Vietnam, programmers make half what they make in India -- and one-twentieth what they make in the U.S. (ITtoolbox , Hoffman)
"If you work for a U.S. firm that recently outsourced all its computer work to staffers in New Delhi, it might appear that India owns the market for cheap IT services," Investor's Business Daily reported in November. "Think again. . . .Nothing stays the same." Writer Doug Tsuruoka said Indian firms will "drown in a sea of rising labor costs" in five years or so, and their clients will start shopping elsewhere for cheap IT. (Tsuruoka) Growth in India is also hampered by its low investment in infrastructure like broadband and transportation, compared to China and even Brazil. (Rai 2005)
Indian IT workers are anxiously looking over their shoulders at China, where giants like Microsoft, Sun Microsystems and Bearing Point are expanding high-tech research centers and hiring software engineers. IBM is employing experienced Chinese programmers for around $12.50 an hour doing work that pays $56 an hour in the U.S. Even Infosys Technologies, one of India's star producers of outsourced work, is itself outsourcing some work to China. Indian outsourcing rivals Tata Consultancy Services and Wipro Technologies are also setting up shop in China to do application development and maintenance work for long-term customers like General Electric. China still doesn't have comparable skills or widespread proficiency in English, and rampant software piracy limits its appeal. But it already has over 200,000 IT workers and is putting a strong emphasis on education for such jobs. The Chinese government also keeps labor cheap with severe limits on worker rights and tying its exchange rate to the U.S. dollar. ( China Economic Net, Rai 2004-2, Singh, McMillion)
Even if the dollar drops precipitously, making U.S. work cheaper in world markets, there's no guarantee that will bring back the jobs. Although the dollar has dropped in value in Europe, our trade gap with Europe continues to grow. That's partly because there's no longer a domestic alternative to some imported work. And it's American companies with operations abroad that are now bringing in nearly half the nations' imports, says the Commerce Department. As they keep roaming the world to find the cheapest labor, a falling dollar won't stop imports from growing, says the director for the global institute at McKinsey & Co. (Uchitelle 2005)
'Free trade' -- for whom?
While Senator Kerry was right to criticize tax incentives that reward employers for moving jobs and assets abroad, that's just a small part of the problem. The modern trade system is skewed to favor corporate mobility and make the world their oyster, regardless of the impact on workers, living standards, and communities.Nobel Prize Laureate Paul Samuelson, author of the most popular economics textbook ever written, recently registered his "dissent from the mainstream economic consensus about outsourcing and globalization," and rejected the assumption that the U.S. economy "will benefit in the long run from all forms of trade, including the outsourcing of call-center and software programming jobs abroad." It is "dead wrong," he asserts, to assume the gains some Americans get from the current trade system are big enough to make up for what others lose. (Samuelson)
There's a punishing double standard in what we today call free trade. Modern trade agreements have strict rules to protect and promote financial investments and property, while they curb the ability of governments to balance those rights against the rights of workers and citizens. Nobel Prize-winning author Gunter Grass warns that our democracies themselves have been high-jacked by a "new totalitarianism . . . steered by the banks and multinational corporations - which are not subject to any democratic control." (Grass)
It wasn't until the 1986-94 Uruguay round of GATT trade negotiations that investment, services and intellectual property rights were included in trade agreements. Until then, free trade was mainly a matter of cutting tariffs and import quotas, slowly and selectively. The Uruguay Round, however, broadened the definition of "barriers to trade" to include policies, laws, or even cultural or religious customs that might interfere with the competitive rules of supply and demand -- and corporate mobility. For example, GATT rules bar a country from "discriminating" against imported goods produced in an environmentally dangerous way, such as chlorine-treated paper.
It was the Uruguay round that set up the World Trade Organization, which operates behind closed doors to enforce expanded free-trade rules and settle disputes. Belgian Professor Mireille Buydens complained in the UNESCO Courier five years ago that free trade pacts boost "an ill-considered increase in the number of privately held exclusive rights at the expense of the public domain." But attempts by labor and environmental activists to include in modern agreements the rights for people to stand up for themselves and have safe, decent working conditions, livable wages, or a healthy environment and share in their own productivity have so far largely failed. "Our trade agreements are about investing in foreign countries and sending back the products unimpeded to the United States," a former senior Congressional aide told the New York Times. (Oxfam America, Buydens, Polaski, Becker)
Last modified September 07, 2005 02:26 PM