PROFITS vs. JOBS

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David Bruckman needed a job. So, at the deli counter of a supermarket in suburban Seattle, he made $8 an hour. One day, a customer came in wearing a jacket with the Microsoft logo. Bruckman mentioned he used to work there. He just shot me an odd look for a moment, and then he grasped the pound of roast beef I had sliced for him and hurried off, Bruckman, a fortysomething technical writer, wrote on RescueAmericanJobs.net. Was he afraid that what had happened to me could also happen to him?

Bruckman is a disenfranchised white-collar worker. Rescue American Jobs is an organization made up of their swelling ranks. Galvanizing them, offshore outsourcing of U.S. jobs is injecting an angst that has plagued America's industrial workforce into a new stratum of labor: desk jobs, skilled technicians, the vanguard of the IT revolution. Outsourcing has sparked complex lines of debate, but simply, outsourcing's causes and effects pit the interests of a purist orthodoxy of globalization or free trade against champions of the living wage.

Free-market purists say the furor is protectionist alarmism that unfairly exploits our current economic straits. Treasury Secretary John Snow and Council of Economic Advisers chair Gregory Mankiw articulated the Bush administration's view that outsourcing, as Snow put it, is part of trade [and] trade makes the economy stronger. Opponents argue that offshoring results from a pursuit of profits run amuck, with catastrophic implications. Paul Craig Roberts, senior research fellow at Stanford University's Hoover Institution, states that, should job exports continue apace, the U.S. will be a Third World country in 20 years.

Forrester Research in 2003 forecast that 3.3 million white-collar jobs, mostly tech services, and some $136 billion in earnings will go overseas by 2015. That's about 2 percent of U.S. jobs. In April 2003, consulting giant Deloitte reported that the financial services sector alone would send 2 million jobs abroad in the next five years. In November, researchers at Cal-Berkeley's Fisher Center for Real Estate & Urban Economics estimated jobs at risk at 14 million.

Company executives apparent concern over the issue doesn't promise to stem the tide, reveals a spring survey of 182 companies by Chicago consulting firm Diamond International. Eighty-four percent fear backlash from employees, 62 percent fear negative publicity, and 85 percent fear legislation or political pressure to curb job exports. Still, 86 percent plan to outsource incremental IT jobs in the next year, up from 32 percent last year. The Information Technology Association of America a mouthpiece for Microsoft, Intel, etc. released a March study that claims while 104,000 IT jobs have been shipped abroad (3 percent of the domestic pool), money saved on labor costs in 2003 will create 90,000 new jobs.

Offshore outsourcing is not the tsunami that many claim, writes Daniel Drezner, assistant professor of political science at the University of Chicago in the current issue of Foreign Affairs, house organ of the Council on Foreign Relations. Most of the numbers thrown around are vague, overhyped estimates.

Citing a nearly two-century-old tenet of Free Trade Orthodoxy, economist David Ricardo's notion of comparative advantage, Drezner echoes that production flows to countries with workforces apt for specific tasks. India, for example, boasts a large pool of well-educated, English-speaking workers, skilled in IT disciplines and able to communicate with home offices and American consumers. This theory assumes that the U.S. economy would reabsorb downsized workers into a Next Wave of skilled labor, when companies pump payroll savings into domestic R&D and innovation, which, according to the theory, is America's comparative advantage. Allowing countries to specialize translates into cheaper goods, and a greater variety, for all consumers, Drezner writes.

But, whereas outsourcing proponents see at-risk jobs as finite, opponents see burgeoning, wired overseas operations as beachheads for a greater exodus of ever-higher paying jobs.

Conventional wisdom is that there is this Promised Land out there somewhere, the next innovation that will soak up all these American workers, says Elizabeth Drake, analyst for the AFL-CIO's public policy department But now, anything delivered over telephone or computer line can be outsourced. We see outsourcing move up the skills ladder, we're going from data entry up to radiology there's no logical end to the trend.

A 2003 survey of IT execs by the magazine CIO corroborates this. It found that 11 percent of companies queried had already sent system and architecture planning offshore, and 14 percent had outsourced R&D two categories that analysts and chief information officers have predicted would never leave these shores, CIO reported, concluding, The IT jobs that are going offshore are going there for good.

So, what fills the domestic job chasm? The answer, says Roberts, seems more and more like jobs at deli counters. A close look at March 2004's 308,000 job gains illustrates. Manufacturing jobs showed no gain, nor did semiconductors and electronic components, computer and peripherals, chemicals. IT lost 1,000 and telecom and electrical equipment and appliances sector lost 2,000 each. Sectors that added jobs paid an average of 21 percent less than those that lost.

As displaced U.S. manufacturing workers and knowledge workers are forced into domestic non-tradable services, it puts downward pressure on wages in those occupations, Roberts avers. Even if new industries were coming on the scene, the same incentive to outsource cheap labor would apply to them.

In an April Harris Poll 16 percent of Americans agreed with Mankiw that offshore outsourcing of jobs is good for the U.S. economy. Forty-nine percent agree (38 percent disagree) that offshore labor reduced companies' costs such that American consumers pay lower prices. But 69 percent say they'd support a tax on companies who replace jobs with offshore labor, as John Kerry has suggested. Harris Poll chairman, Humphrey Taylor, explains, while the head may understand the reasoning behind outsourcing, the heart adamantly doesn't.

David Bruckman's story is hard to refute with profit margins and economic doctrine, especially if Americans follow their hearts to this embattled intersection of Wall Street and Main.

MONEY TALKS

American companies looking for a cheap source of labor, turn to countries like India.

HOURLY WAGES FOR SELECTED OCCUPATIONS U.S. AND INDIA, 2002/2003

U.S. OCCUPATION INDIA
$12.57 Telephone Operator Under $1.00
$13.17 Health Record Technologists/Medical Transcriptionists $1.50-$2.00
$15.17 Payroll Clerk $1.50-$2.00
$17.86 Legal Assistant/Paralegal $6.00-$8.00
$23.35 Accountant $6.00-$15.00
$33.00-$35.00 Financial Researcher/Analyst $6.00-$15.00
Source: U.S. wages are from U.S. Bureau of Labor Statistics, National Compensation Survey, July 2002; India wages are from interviews, business literature search and review of employment want ads by the author.
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