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George j. Bryjak
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Outsourcing The American Dream
E conomists Ashok Bardhan and Cynthia Kroll of the University of California at Berkeley estimate that in July 2003 between 25,000 and 30,000 IT (information technology) positions were outsourced to India. According to the Bureau of Vital Statistics, since 2001 “more than 500,000 people in IT professions in the United States have lost their jobs.” The website of the nationally syndicated business program “Lou Dobbs Tonight” lists over 300 outsourcing U.S. companies.
These figures are just the beginning. A study of 400 of the nation’s top 1,000 companies concluded that by 2006, between 35 and 45 percent of current full-time IT jobs will be sent overseas. Using Bureau of Labor Statistics data, Bardhan and Kroll estimate that of the almost 128 million workers in the U.S., 11 percent—or just over 14 million individuals—are at risk of having their jobs outsourced.
IT positions will follow the millions of manufacturing jobs already lost, only at a more rapid pace. As Matthew Slaughter of Dartmouth College notes, “IT work will move faster because it is easier to ship work across phone lines and put consultants on airplanes than it is to ship bulky raw materials across borders and build factories.”
Significantly lower labor costs are the primary rationale for this job exodus. While telephone operators in the U.S. earn an average of $12.57 an hour, in India they make less than $1.00 Payroll clerks take home less than $2.00 an hour whereas their counterparts in the U.S. average $15.17 an hour. Business Week reports, “Soon, offshore accountants may do everything but on-site audits.” Medical billing may become the first occupational category to all but disappear.
Some outsourcing advocates contend that shipping jobs overseas is a way of redistributing wealth from rich to poor countries, a potent mechanism for creating a democracy-oriented middle-class in developing countries. However, the reality of the situation belies such “noble” intentions. Between the late 1970s and late 1990s, the CEO to workers salary-ratio in the nation’s top 100 corporations increased from 47 to 1, to approx- imately 1,000 to 1.
What will happen to U.S. workers sacrificed to outsourcing? Job- slashing corporations argue that displaced workers will secure employment in the next wave of economic development. They claim that just as agriculture was supplanted by manufacturing, which in turn gave way to the computer information revolution, today’s corporate casualties will find employment in the coming stage of eco- nomic progression.
Unfortunately, it’s far from clear what that next economic phase will be and when it will occur. Few experts anticipate the materialization of a “white knight” industry to save the day. If such an enterprise does become reality, how long before newly created positions are sent abroad, the cycle repeating itself? Data indicate that when people change jobs as a result of global competition, their wages typically decline, at least initially. For too many outsourced workers, “retraining” for future employment will be a simple matter of learning to say, “Would you like to supersize that order?”
Bardhan and Kroll speculate that surviving outsourced occupations could face a “downward adjustment of salary and wages” making them internationally competitive once again. In this scenario, the domestic IT industry would bounce back, but at a significant loss of purchasing power for workers.
Other than outsourcing corporations, the only segment of the economy benefiting from job flight are organizations linking labor exporting companies to overseas workers. One such service provides an “online outsourcing price quote” formula for how much money will be saved as a consequence of job transfer. “As the world stampedes toward outsourcing,” their ad reads, “don’t get trampled.” Let us “help you navigate efficiently in this new frontier.”
The ramifications of outsourcing are staggering not only for individuals whose positions are terminated, but also for the larger society. Unemployment and “underemployment” (working below one’s level of skill and training) will contribute to a shrinking tax base, as already financially burdened city, county, and state governments cut back additional personnel and services. In a nation where 15 percent of the population has no medical coverage, that figure can only increase as most people secure health insurance through their employment. Fewer good paying jobs will be available to college and technical schools graduates as the societal opportunity structure is diminished.
High-tech cities such as New York, Boston, San Jose, and San Francisco are certain to be the big losers, while rural areas crippled by the loss of family farms have little chance of economic improvement. Suburbs with an employment base of “back office” activities (customer service personnel and medical transcribers, for example) can expect to see their labor force shrink.
What are the chances of checking this employment exodus? While manufacturing jobs were leaving in droves, union membership and power declined steadily. There is no reason to believe that white-collar workers, the vast majority of whom have little if any history of collective organization, will create a viable movement to halt this trend. In addition, corporate America and its conservative allies have successfully demonized unionism, linking worker solidarity to that most “evil” economic system—socialism. Secretary of Education Rod Paige referred to the National Education Association, one of the country’s largest teacher’s unions, as a “terrorist organization.” In a clumsy apology that revealed Paige’s sentiments toward workers’ organizations, Paige said he was referring to the union, not the teachers.
At the national level, neither Republicans nor Democrats have shown any inclination to deal with this problem. Both parties are more or less committed to “economic globalization” and job outsourcing is only one aspect of this pheno- menon.
Perhaps the outsourcing of jobs from rich to poor countries is inevitable. However, the consequences for those on the losing and receiving ends are not. By one estimate, U.S. companies will save $11 billion in 2004 by outsourcing to India alone. A portion of that money combined with enormous industry profits would go a long way toward prolonged unemployment and health benefits as well as job creation for outsourcing victims. Congressperson Tom Lantos of California argues that the aim of globalization should be the maximization of benefits for workers in both the developed and developing worlds. However, in a corporate “democracy” such as the United States, there is little chance of realizing that goal.
George Bryjak is a professor of sociology at the University of San Diego.
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