Labor Department Downplays Offshoring 849
twitter writes "The New York Times is reporting the US Labor Department's first assessment of International Offshoring. The report claims that less than 3% of Q1 2004 jobs were lost to offshoring. Companies were asked if workers had been replaced and taken at their word. A Federal Reserve governor is also quoted as dissmissive. Estimates by Goldman Sachs are 20 times higher. Despite Washington's IP fetish, no one quoted is worried about the export of US research and knowhow. Your job and 830,000 others are gone."
cant wait to get bush out of office (Score:5, Interesting)
oh wait, his wife's companies are offshoring as much as anyone else.
ummm...
NADER '04 !!!1!
Go work for the government (Score:5, Interesting)
Here is some advice that I took after I graduated college. During my last few years of college there was a lot of talk that companies may start outsourcing their work to places such as India. Living in an area where there is a large air force base I was given the advice to get a job there working with either with a contractiong company or the civil service (government). They are so strung for computer-minded people that they can offer up to a $60,000 hiring bonus on top of about $60-70,000 per year just to get you to work for them. And the best part? The US government isn't going to outsource your job anywhere. The only thing to worry about, however, is that your job can be eliminated. But the benefit of working for the civil service? They also have to find you a new job of similar pay.
Huh? (Score:5, Interesting)
So 60%? I don't think so...
Re:I am optimistic... (Score:5, Interesting)
Fine, but be prepared to pay at least twice what you now pay for a lot of your consumer goods, including your PC, TV, clothes and most of what you can buy so cheaply at the mall or Wallmart. Why is it OK to outsource the manufacturing jobs so you can have cheap electronics, but when the job being outsourced is something you're trained / interested in, it's wrong?
Oh, really? (Score:2, Interesting)
That's a lot more than 3 percent!
I have no idea what started this most ugly trend of bleeding off the 'industrial edge' that the U.S. once had but, like raw engineering know-how, I firmly believe that the drain is going to reach a 'critical mass' (if it hasn't already), and true innovation and invention will be left to other countries who still value the long-term gains of pure R&D.
Boeing has already suffered so much of a brain-drain, thanks to its "outsourcing," that I question if it can ever recover.
And that's just one example.
[sarcasm_mode]
So when does the US industrial base go up on the auction block?
[/sarcasm_mode]
I helped do my part (Score:5, Interesting)
I can tell you that I did not feel the least bit sorry for the American call center employees whose jobs were sent to India. The Americans in the call center were men and women right out of high school and college with crappy attitudes and a streak of laziness a mile wide.
The Indian workers had master's degrees and had drive and ambition. The Americans did not even care about the job competition and thought they were owed work. Sorry, I cannot agree with protecting an entitlement!
That being said, there is still a barrier. Despite English being the common language between India and the U.S., Most Americans cannot understand the Indian accent and get rather frustrated. (I am sure it works both ways. ) Also, some of the Indians take a "Brahman" or intellectualy superior view and treat their American customers like crap, especially women.
The offshoring will level off in my opinion. Some companies will still try to gain competetive service level where empathy and understanding are part of the customer experience.
On a different note... (Score:3, Interesting)
For a good part of the latter half of the last century, MNCs (which are incidentally mostly US owned corporations) have been trying to *market* their goods to third world countries with an aim to get their earnings up (expanding markets = more money). This has often resulted in loss of local jobs and industry and made the countries more dependent on foreign corporations, and local unions/organization have often opposed opening up local economies for this reason - but mostly to no avail.
Lately, we've seen that corporations have figured out that the skill/education levels in these so called developing countries have been increasing, and it's more cost effective to shift their manufacturing/services divisions abroad. This has caused widespread annoyance due to loss of jobs in the developed countries.
But really, is it the people's fault anywhere? Is it fair for people living in developing nations which have been invaded be these megacorps to just serve as profitable markets for the MNCs while being denied economic benefit from them? A bit of pondering may reveal that it's profit minded corporations which have been sucking peoples from both sides for their benefit (and for their parent countries' since the profit trickles down in the form of jobs/cashflow).
I think it's just the completion of a circle. Not flamebait - sincere concerns.
Some quotes:
Multinational corporations (MNCs) engage in very useful and morally defensible activities in Third World countries for which they frequently have received little credit. Significant among these activities are their extension of opportunities for earning higher incomes as well as the consumption of improved quality goods and services to people in poorer regions of the world. Instead, these firms have been misrepresented by ugly or fearful images by Marxists and "dependency theory" advocates. Because many of these firms originate in the industrialized countries, including the U.S., the U.K., Canada, Germany, France, and Italy, they have been viewed as instruments for the imposition of Western cultural values on Third World countries, rather than allies in their economic development. Thus, some proponents of these views urge the expulsion of these firms, while others less hostile have argued for their close supervision or regulation by Third World governments.
Incidents such as the improper use in the Third World of baby milk formula manufactured by Nestle, the gas leak from a Union Carbide plant in Bhopal, India, and the alleged involvement of foreign firms in the overthrow of President Allende of Chile have been used to perpetuate the ugly image of MNCs. The fact that some MNCs command assets worth more than the national income of their host countries also reinforces their fearful image. And indeed, there is evidence that some MNCs have paid bribes to government officials in order to get around obstacles erected against profitable operations of their enterprises.
Don't Trust Unprecedent Manipulation of Govt Trust (Score:2, Interesting)
Look, the Bush Administration has done something that has never been done by any previous administration: they're actively distorting truth in the reports that low-level non-appointed staffers put out. Sure, in the past political appointees could always be counted on to put spin on things (and even bury information, like Reagan did with AIDS and the CDC), but actively creating misleading information was not done by the career service government workers.
Until Bush, that is. For example, recently the State Department put out a study claiming that world terrorism incidence were down in 2003 (even if you include Iraq). This bolstered Bush's claim that he's winning the War on Terrorism. But thanks to Rep. Henry Waxman, this report was shown to be false and misleading. The State Department then issued a statement admitting the mistake. (Read here [nytimes.com]).
As another example, recently a government study pointed out that children who had breast milk has 30% fewer incidents of ear infections, allergies and Downs syndrome, compared to infants who used formula. So, the FDA decided to launch a commercial campaign to promote the use of breast milk. Well, the infant formula companies saw the commercials (which included the statistic), and were allowed to intervene, and this vital data was cut out. So, the campaign promoted breast milk, but did not say that compared to formula use, babies suffer fewer maladies. This outrageous intervention by industry had never been done on a matter of public health before. But Bush's FDA let it take place. The same thing [center4policy.org] has happened with other government studies on the safety of abortion, women's health issues, etc.
So, now we have another report in an election year that outsourcing is not costing the US jobs (at the same time education cuts are not replacing them with better-skilled positions...) Do we believe this? No. The Goldman Sachs report states that there were 20x as many jobs moved over seas.
Now, I'm what you'd call a Reagan Democrat. I even voted for Bush (but probably won't a second time--still need to see about Kerry.) But what Bush has done is simply this: he's squandered the public trust we used to have in government research and studies. Whether there was a Democrat or Republican in charge, we used to trust the staff would do the best job they could to study a problem. (Sure, sure, in the end it was a government study, and perhaps not the best, but it was at least an honest effort). Now, that trust is gone.
So, the Government claims outsourcing is not costing jobs? And this comes right after a huge wave of press articles about outsourcing... I don't believe the study for a second. I'll stick with the Goldman Sachs study. They have a financial incentive to get things right, not a political incentive.
Does Mexico count as offshoring? (Score:2, Interesting)
Lessons from history (Score:2, Interesting)
SiO2
So What? (Score:2, Interesting)
Did you ever think that perhaps those jobs are being outsourced because it can be done better *and* cheaper? That means that even if it weren't cheaper, it could still be done better.
Don't like the job market is going? Get better or change skillsets. When I vote with my dollars, I want value, not the warm fuzzy feeling that comes behind paying more money for something just because it was "Made in the USA".
Misleading Summary (Score:5, Interesting)
It's not 3% of all jobs - it's 3% of the jobs that have been lost. Quit with the mindless troll attitude. Don't blow the outsourcing thing out of proportion.
Oh, and by the way - all you ACLU loving
Lies, Damned Lies, and Statistics (Score:3, Interesting)
Re:BPO jobs: (Score:3, Interesting)
Re:Look, folks. Do it now, nicely, or be blindside (Score:3, Interesting)
The job loss numbers also don't seem to tell the whole story, I think for those quarters quoted there was a net job gain overall.
Despite the harping, the last Labor department figure I've seen, I think for Q1 2004, was that unemployment was about 5.9% with other figures being favorable as well. I thought that figure is very nice, especially considering we were comming out of an overheated economy in the 90's where those considered completely unemployable were given a second look. I think unemployment was only slightly under 5% at some points in the 90s.
I remember a time when 7% was considered an acceptable compromise between inflation and unemployment, so the hand-wringing may be overblown. Sadly, the alarmists like to take the figures that fit their case best and play chicken little. Let's try a balanced approach, shall we?
Comment removed (Score:3, Interesting)
Offshoring problems (Score:4, Interesting)
The basic problem is because there is approximately a 12 hour time difference between the US and India. This makes business communications quite slow. For example, at 6 AM in the US, it's 6 PM in India.
What happens is that the normal project related problems pop up during the day -- and if you need input from "the other side" then you have to wait up to 8 hours. Or make your best guess and verify it with "the other side" at a later time.
As developers, we all know this happens a lot during product development. What used to take a few minutes with a call or a quick meeting can take a day or more. This dramatically slows down the development cycle.
Of course, management is excited about the fact that the labor cost is about a third as expensive. They are now starting to realize that this benefit is offset by the cost of lost revenue (products that are late can't be sold!)
So long term, I don't see offshore development being used for new product development. It's likely that it will continue to be useful for product maintenance and support since they have a lesser need for constant communication.
-ch
The thing which ALL these analysts screw up (Score:2, Interesting)
If we're to believe the industry "analysts", Senior C developer with 10 years experience == MCSE straight out of Microsoft "boot camp" == "Would you like fries with that?".
If in doubt, remember where the word "analyst" comes from:
"anal" - bumhole.
"lystere" - to pull numbers from.
Benefactor of Strong IP Laws (Score:2, Interesting)
Strong IP protection is for the incumbents, not future generations. :-\
If you don't already have a patent, you don't get to vote.
Re:I helped do my part (Score:1, Interesting)
Re:cant wait to get bush out of office (Score:4, Interesting)
FYI, Kerry has already backed off from that position now that the primaries are behind him. Didn't you hear about the WSJ interview where he explained that his "Benedict Arnold" reference solely concerned tax havens and that he couldn't imagine where people had gotten the idea he was talking about offshoring? (His 30 or so speeches where "Benedict Arnold" directly referred to job transfers notwithstanding...)
The Latest Management Fad... Outsourcing! (Score:1, Interesting)
The owner started hearing that the projects in fact didn't get cancelled, but instead were being farmed to offshore programmers in India. The owner turned his division into a group of project managers instead, writing specs and doing code audits for recruited offshore programmers. Alakazam - now that the work is going offshore (although we're back to billing as many hours as before) we magically get all the projects back. So long as the programming is done offshore, the clients were happy.
So... lessee... how does that add up... we're charging them the same number of hours to write specs, debug and audit code, fix mistakes they make, manage employees on the other side of the Earth plus we're subcontracting work to offshore programmers we've hired. And it takes them twice as long to write the code in the first place, considering their a) awake while we're asleep and b) they don't have as much experience in the industry.
All in all... I'm guessing that the invoices are now probably 50%-90% more than they were before, but since they're being "offshored" they think they're getting a bargain.
Workers "rights" != high living standards (Score:5, Interesting)
I live in Brazil, where workers have many more "rights", or rather, entitlements, than in the USA. For instance, women have four months childbirth leave with full pay. Every worker has 30 days vacations each year, with full pay. Depending on the activity, some can retire with full pay after working for 20 years, it was only recently that a minimum age for retirement has been legislated. I know several engineers who retired in their early 40's. This list could go on and on, there are thousands of laws regulating labor in Brazil, starting from the Federal Constitution downward.
But this does not translate into a high standard of living. For one thing, it encourages illegality, if the alternatives are working outside the law or being unemployed, what would you do? Also, so many benefits do have a high cost. Taxes are sky-high in Brazil, and still rising. The minimum wage is equivalent to about US$80 / month, raising it would cost too much for the government to pay all the benefits to retired workers.
OTOH, even if there was a way to legislate against importing from countries with low standards of living, it wouldn't resolve the problem of outsourcing. Exchange rates still make a difference. If countries like China, India, or Brazil seem to have such low wages, part of it comes from depressed exchange rates. In Brazil a typical restaurant meal, for instance, will cost about US$4. You can buy a new car for less than US$5000, or a man's shirt for US$5.
Re:The Real Problem - The Bob Factor (Score:2, Interesting)
* Bob was making $80K/year.
* Bob's job gets offshored, and puts Bob out of work.
* Bob isn't going to buy that new $3K plasma TV now, so Circuit City takes a hit. (Loss of consumer power.)
* Bob doesn't have the cash flow to make his mortgage payments, credit card payments, student loan, etc., which can ultimately lead to Bob filing for bankruptcy. (Publid pays the bills.)
* Bob no longer has a big house in suburbia, so he won't be paying $5K year in school/property taxes. Neither will his $80K/year allow him to "give" the federal government their fair(?) share. (Erosion of tax base.)
Now, Bob alone won't make a huge difference in our economy, but multiply that scenario by 830,000+.
Re:Look, folks. Do it now, nicely, or be blindside (Score:3, Interesting)
The purpose of this globalization of labor resources is to pit one labor market against another, forcing wages down. NAFTA actually decreased Mexican wages. It increased profits for American companies using Mexican rather than American labor. The justification polititians use for this is 'we need to keep down inflation' which is just another way of saying 'we need to keep down worker's wages.
Nothing is inevitable. It is in the best interests of 70% of the population to not trade with countries with inadequate labor standards. If you compete with slaves, you become one.
The American middle class, vital for democracy, is disappearing. We're becoming like other third world nations with a lot of poor, a few rich, and nothing in between. This isn't isolationist. It's recognizing the consequences of our actions rather than simply bowing to 'inevitability.'
Heck, countries like China don't even recognize American intellectual property. If they won't pay us for our work, why should we pay them for theirs? Shouldn't the American Government represent more than just American corporations?
"Rightsource" (Score:3, Interesting)
I can't stand it. I feel like I'm living in a fucking Dilbert cartoon. It drives me up a wall, how people try to change words to make things 'feel better'. That is one of the many reasons I'll never be in corporate management, because I don't deal in bullshit, and could never say 'rightsource' with a straight face.
Mod me down, please. I have too much karma, and I just needed to ventilate. I just found that funny, and disgusting, at the same time.
ANOTHER EXAMPLE (Score:3, Interesting)
http://www.nypost.com/business/23936.htm
WHAT ARE THEY SMOKING AT THE LABOR DEPT.? By JOHN CRUDELE
May 11, 2004 -- DON'T get too excited about all those new jobs that were supposed to have been created in April.
I'm not going to waste a lot of my precious space on this, but the bottom line is that most of the 288,000 jobs that the Labor Department says were created last month may not really exist.
They could be figments of statisticians' optimism.
Anyone who plodded through my column last Thursday knows I predicted that job growth in April would be better than the 160,000 to 170,000 jobs that the "pros" were anticipating.
But I also said, quite emphatically I hope, that the stronger growth would be an illusion - the result of the Labor Department's computers making happy predictions about seasonal job creation that could neither be verified nor justified.
I'll explain one aspect.
Back in the March employment report, the government added 153,000 positions to its revised total of 337,000 new jobs because it thought (but couldn't prove) loads of new companies were being created in this economy.
That estimate comes from the Labor Department's "birth/death model." You can look up these numbers on the Department's Web site.
As staggering as the assumption about new companies was in March, the Labor Department got even more brazen in April.
Last Friday, it was disclosed that these imaginary jobs had been increased by 117,000 to 270,000 for the latest month - because, I guess, the stat jockeys got a vision from the gods of spring.
Without those extra 117,000 make-believe jobs, the total growth for April would have been just 171,000 - sub-par for an economy that's supposed to be growing at more than 4 percent a year, but right on the pros' targets.
Take away all 270,000 make-believe jobs and, well, you have the sort of pessimism that the political pollsters are seeing.
If I was the suspicious type (and if I thought Washington was smart enough), I'd suspect a nasty motive behind the sudden surge in these mystery jobs. But for now, let's just acknowledge their existence.
Also keep in mind that the government doesn't distinguish between good companies being created and, say, a guy doing consulting work out of his basement because he can't find real work.
What does this new job announcement mean in the real world?
It means there will be more pressure on the financial markets, as we've seen for a while but especially since last Thursday.
It also means that the Federal Reserve now has the excuse it needs to raise interest rates in June (as I've said before would happen) and will probably start regretting that move by the end of the summer.
And President Bush will probably give in to temptation and start crowing about the economy, going against the mood, as captured by pollsters.
This will make him look as out of touch with reality as his father did.
Dodgy statistics (Score:3, Interesting)
This is very dodgy stiatistics. The fact that 830,000 jobs havce been sourced overseas doies not mean that 830,000 jobs have disappeared: that would be to assume no growth at all.
I don't have figures for softw3are developers, but The Economist reckons that the number employed in the US in call centers (one of the other major outsourcing scapegoats) has been essentially constant for about 5 years. Which suggests that one of the major drivers for outsorurcing is not so much cheapness as availability: the US has used up all the people able and willing to do that sort of work. Outsourcers have already found the hard way that the savings are way smaller than expected - even negative. But if you cannot get the people at home, overseas looks good.
Which is not to say that nobody has ever lost their job to overseas outsourcing - of course they have. But it is to suggest that there are still jobs somewhere in the onshore US for all those displaced - though maybe not where they currently live. But this is the US way - make firing easy so peopel will hire easy. The alternative is the European way: make it so difficult to fire someone that you don't dare set up a risky venture because the downsizing costs will double your losses.
Historically, the upside of the US attitude to jobs has worked very well. Why is Silicon valley in Californai, not England? Because the US has a risk-friendly, failure tolerant attitude. Losing out to outsources is the downside of the same coin.
Re:The Real Problem - Afterthought (Score:3, Interesting)
As a few readers have pointed out so far - The Bobs are earning less money, so consequently they are injecting much less back into the tax base and are not purchasing the same amount of goods and services.
How much less?
If 830,000 people are forced to take jobs elsewhere for 50% less pay, that's 33.2 billion dollars/yr in lost income. That's assuming they are able to find jobs AT ALL.
This is using the "$80,000/yr" figure from my first post. Obviously not everyone that has lost their job to offshoring earns $80k. Some earned less, some earned more. One interesting factor is that most of the lost jobs are from fortune 1000 companies, which tends to suggest that the average salary of the affected positions IS much higher than the average salary at a 50-1500 employee company in the Midwest.
Needless to say, regardless of the actual figures, the amount of lost income is in the tens of billions of dollars. If those people have not been able to find replacement IT jobs at all, it's
Re:I am optimistic... (Score:3, Interesting)
I mean, its one thing to outsource coders to India where its just like a programmer here - its another to outsource labour jobs to countries like Indonesia where they can treat child workers as abusable slave labour.
I figure there should be tariffs on outsourcing and importing - free trade is good economic sense, but not necessarily good social sense. However, it shouldn't be applied based on "they're stealing our jobs" so much as "we should not allow American companies and American products to be made by oppressed labour". Tax oppression. Simple. If they don't oppress their labour pool and they still steal our jobs, then you're right - they actually are more competative. But if the US has to start abusing its own workers in order to compete, then something's wrong.
Or would you rather go back to the days of Edison, locking the scientists in the lab until they invent something new.
Re:BPO jobs: (Score:3, Interesting)
The person making the complaint in the article is an Indian Catholic Priest.
So an Indian who serves a religion exported from the west is complaining about young Indians working jobs exported from the west because it interfering with social customs not exported from the west.
What's the big deal here? (Score:2, Interesting)
Offshoring creates opportunities for millions of otherwise disadvantaged individuals in countries where incomes are lower than they are in the US. Offshoring boosts their incomes and helps these poor countries become rich countries by funding improvements in their infrastructure and allowing them to access external resources through increased foreign currency reserves.
Also, it is not the case that a job outsourced is a job lost to an American. Oursourcing creates capacity which allows more production of goods and services and therefore supports a larger workforce -- in the US and abroad. Certainly there will be a period of adjustment where some US jobs are lost and seemingly not recreated, but look at what happened throughout the 1990s when manufacturing jobs were lost to cheaper countries. Jobs were created in other areas of the economy and Americans ended up far wealthier than before.
There are six billion people on earth and the vast majority of them are clamoring in the depths of poverty for any kind of upgrade. It's only fair that we share the wealth with them -- or suffer the consequences of a downtrodden, well armed opponent...
The problem is not binary (Score:3, Interesting)
As anyone who has looked into this issue can tell you, there is not in most cases a one-to-one correlation between an American losing their job, and the job going offshore.
For instance, Microsoft is shutting down a major facility in the US [eweek.com]. They are also hiring in India [indiatimes.com]. Will the Microsoft jobs lost in the US be counted as jobs lost to outsourcing? Probably not. That is why the new buzz words are "global sourcing" [google.com] and "insourcing" [google.com].
Also, how many jobs are being lost to "American" companys like Cognizant, who do not hire permanant US residents or citizens to work for them, only people on H-1B visas? 30% of Cognizant's 9K headcount [infoworld.com] work in the US (per the June 7th issue of Newsweek), and according to the Dept of Labor's LCA database [flcdatacenter.com] the company has 2719 immigrants here on H1-B visas (you do the math).
This issue is not simply them bad us good. American IT workers are getting shut out of the IT labor market, even in our own country. This is not good for anyone. We are wasting our own intellectual capital, which we should be sharing with other countries so IT can be used to bridge cultural and economic divides. People should not have to pretend to be from another country as part of their job requirement. People should not be brought here on temporary visas and be paid less and worked harder than the Americans that work in the next cubicle.
This black and white thinking about this issue is pitting the workers on both sides against each other. The only people who win in that situation are the big guys making millions and millions of dollars to come up with these schemes. We (all IT workers worldwide) created these technologies, and historically we have openly shared and taught everyone so that the technology would thrive. That cooperative spirit needs to come through when thinking about this issue.
www.displacedtechies.com [displacedtechies.com]
Re:cant wait to get bush out of office (Score:4, Interesting)
I am amazed at all the idiocy (not in reference to you, mind), that is on this forum. It is smart business to save money. Most businesses perceive that outsourcing saves money. Saving money means that the business can either spend more on employees, invest in better equipment, new tech, etc, or just give the shareholders a nice return. If they give it to the shareholders, then those SH's will either spend it or reinvest it. Both of these outcomes will help the economy.
Dead money is very rare. Even sitting in a bank account, money is being used.
Now I realize it doesn't help you now when your job just got cut. Nothing but another job will do that. John Kerry will not alleviate that any more than Bush will. The president will NOT make much difference. Unless the entire congress, senate and white house are all in agreement, there will be no significant change in offshoring practices. This is true for Bush or Kerry, regardless of what you think.
Sorry, you just need to think through this stuff more carefully.
Re:MOD PARENT UP! (Score:2, Interesting)
Future of American IT Jobs (Score:4, Interesting)
You can buy and sell IT JOB futures here:
http://www.ideosphere.com/fx-bin/Claim?claim=IT
Includes a lot of links to BLS statistics and gives you some idea of whether you will have a job in a few years. If this claim trades above $0.50 then market participants expect the job market to expand; below $0.50 and it is expected to shrink.
Put your (play) money where your mouth is: You can get a high score in this game by predicting the future. If you really think all the jobs are going overseas sell sell sell.
It's kind of an experiment, and a non-profit/academicy/free thing so give it a whirl.