[jsfg_cinti] Re: U.S. Programmers at Overseas Salaries (Indian-style wages to American workers)

First off, while I'm sure the original message was sent to keep job-seekers
informed of job market conditions so they could "respond effectively", I
think that your readers would be better served by messages that presented
BOTH sides of the issue rather than just the problem. "Here's the problem"
messages can be demotivating, which is NOT an effective response for
job-seeking.

I'm teaching Economics at NKU and UC; here's my take on the situation.
Improved telecommunications technology has made geography a less significant
barrier to information and resource mobility among different markets. This
is a good thing; we will end up reallocating worldwide resources to their
most cost-effective use, which means that companies will be able to use cost
savings as investment to make the business grow. This means MORE growth and
jobs in the long run, even though in the short-run many resources (e.g.
people) will have to adjust; for example, retraining to flow to industries
where they can earn more. (By the way, careers where personal contact is
necessary, such as health care, tourism, hospitality, etc. will probably be
less susceptable to outsourcing. At the same time, there has been some
moderate INsourcing in production because computer technology has closed the
gap between in-house and outsource production costs, in-house production
reduces the number of information transfers and thus improves accuracy, and
managers have more flexibility for custom orders and changing conditions
with in-house production.)

Finally, if overseas salaries are the main item that managers consider for
evaluating a decision to outsource (it should ultimately be the differential
in "labor productivity", not just salary and benefits), these salaries will
rise overseas as demand for workers increases relative to supply.

Best of luck to you in the New Year.
Tony Malinauskas
Econ Adjunct Professor & Former JSFGer

----- Original Message -----
From: "feldman8396" <feldman8396@xxxxxxxxx>
To: "JSFG Main listserv" <jsfg_cinti@xxxxxxxxxxxxx>; "JSFG ITSIG listserv"
<CincinnatiOH-JobSearchFocusGroup-ITSIG@xxxxxxxxxxxxxxx>
Sent: Tuesday, December 30, 2003 7:20 AM
Subject: [jsfg_cinti] U.S. Programmers at Overseas Salaries (Indian-style
wages to American workers)


> What do you think of the ideas discussed in this article?
> Could this be the future for all U.S. jobs (i.e., competition from
overseas will drive down the wages paid to the level of third world
countries)?
>
> Notice the final sentence where the article's author comments that if this
trend continues "the results could be quite interesting".  If this trend
continues, what would be the results?  In what way would the results be
interesting?
>
> -----------------------------------------------------------
>
http://techupdate.zdnet.com/techupdate/stories/main/US_Programmers_at_Overse
as_Salaries.html?tag=zdafavorites
>
> U.S. Programmers at Overseas Salaries
> By David E. Gumpert
> December 4, 2003
>
> It's the great unanswered business-economic question of our day: How do we
replace the hundreds of thousands of information-technology, call-center,
paralegal, and other jobs rapidly exiting the U.S. for India, Russia, and
other low-wage countries? The main answer that the so-called experts put
forth, without a lot of conviction, is that we'll create new "high-value"
jobs to replace those leaving the U.S. What are those jobs? No one seems to
know.
>
> In the meantime, the matter of overseas subcontracting appears to have
become open-and-shut. If you're an executive with half a brain, you can come
to only one conclusion when tallying the differences in costs between hiring
computer programmers in the U.S., vs. India or Russia. These days, the jobs
are going to Indians and Russians.
>
> ...
>
> Jon knew the numbers for experienced American programmers doing the
specialty work he required: $80,000 a year, with benefits adding an
additional $5,000 to $10,000 per programmer. The intermediary came back with
the number for the services from India: $40,000 per programmer.
>
> ...
>
> And then Jon had a brainstorm. What if he offered Americans the jobs at
the same rate he would be paying for Indian programmers? It seemed like a
long shot. But it also seemed worth the gamble. So Jon placed some ads in
The Boston Globe, offering full-time contract programming work for $45,000
annually. (He had decided that it was worth adding a $5,000 premium to what
he'd pay the Indian workers in exchange for having the programmers on site.)
>
> The result? "We got flooded" with resumes, about 90 in total, many from
highly qualified programmers having trouble finding work in the down
economy, Jon says. His decision: "For $5,000 it was no contest." Jon went
American. And the outcome? "I think I got the best of both worlds. I got
local people who came in for 10% more (than Indians). And I found really
good ones."
>
> ...
>
> What if other companies begin taking the same approach -- offering
Indian-style wages to American workers? On the positive site, we could begin
to solve our job-creation problems. But on the negative side, America's
standard of living would inevitably decline. There's only one way to find
out for sure how it all might shake out, and that is for other executives to
replicate Jon's experiment. The results could be quite interesting.
>
> -----------------------------------------------------------
>
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>
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