Outsourcing Alternatives (Get Paid Indian Worker Wages)

http://abcnews.go.com/sections/wnt/Business/outsourcing_alternatives_040309.html

Inside a nondescript Cambridge, Mass., office building, the president of a new company that conducts Internet auctions thinks he has a better idea about outsourcing.

"I have a number of people I know who are unemployed in the tech community and to the degree of keeping jobs here, that's just better for everybody," said Jon Carson, CEO of CMarket.

When Carson started CMarket several months ago, a consultant urged him to send his computer programming jobs overseas to lower his costs.

That's because a programmer in the United States makes about $80,000 a year, but the same job overseas would cost only $40,000.

So Carson placed a help-wanted ad in The Boston Globe offering overseas wages for computer programmers. Within 48 hours, he had more than 100 résumés.

I'm a laid-off IT support person. I'd go back to work doing what I'd been doing for about half the salary right now. I mean it. I would. I liked the work and at half what I was making I'd still be doing okay.

assuming the job itself is decent. It's only when you see "managers" pulling down five or fifty times that for running a company into the ground that it gets ugly.

absolutely. But that wouldn't be right would it? I mean, some of us worked our asses off to make more than a McDonald's manager. I think the better way to do it would be to return to bilateral trade agreements conditioned on worker's right, human rights, and the environment.

I mean, maybe when IT was first developed the skills would have been worth 80k a year. But with a larger force of skilled IT workers, a glut was formed even with the boom in IT. Was IT a victim of its own success?

I agree with you. I thought it myself. The problem was there was a good reason we received those salaries. We worked ourselves into the ground. We were expected to work that way. Then came those that walked in and expected the high salaries. Only they wanted a lot of things. They wanted regular 40 hour a week jobs. With casual dress. Flex time. The bad part was they received them. No other industry could you walk in with little or no higher education and receive that kind of salary. From that respect, a correction would be understandable. Only that is not what happened. It's not as simple as it may seem.

They have written this as if this guy had some grand new idea. Certainly, I believe 40k a year is better than 0k a year. I do think it is better that he hire within the US. I just hate the way that they seem to want to exploit the workers. The last sentence "Reed and Collins have even gotten raises" really drives that point home. Since the company is now "profitable" it was nice the managed to throw some to the developers. They make it sound as if they must have been good girls and boys so they even gave them a raise.

Personally, I believe that tech wages were out of sync with many other careers most of which required more education. The reason that came to pass was because we were expected to work or be available to work 24 hours a day 7 days a week with an unimaginable pressure.

A lot of projects were shelved but many times that was from mis-management, not from lack of skill or motivation. The bottom line is we gave the companies the systems to grow. We gave them the ability to be more efficient. Increase profits. We worked long hours, gave up our social lives, ignored our families. We thought there would be a return somewhere down the line.

We were wrong....

I know what you mean. There used to be company loyalty. But now somebody else will come along and do your job for less and not understand they wouldn't have the job if not for the sweat equity you already put into the company. And society is too mobile and we don't have a sense of working together or fighting for each other. So, we are where we are. Look at this thread, people ready to pounce on your job. And I can't blame them, unemployment is no fun. But scab labor used to be willing to pounce on somebody's job too. I don't know. Everything is out of whack.

and everything else match the price the people in India pay for house, car, etc.

I'm a computer programmer. When I took my first fulltime programming job in 1993, I was making $40,000 a year and thought that a decent wage. By 2000 I was making over $120,000 a year and wondered how I ever survived on such a pittance. Today I make $43,000 per year, live quite well, and wonder why the hell I didn't save more of that money.

"Wealth" doesn't equal "income", and in much of the US you can still live quite well on lower salaries. One of my sisters, as an example, lives in a fairly poor part of Missouri and makes about $20,000 a year. With that $20k, she is a homeowner (3500sf 4/3 on 2.5 acres), a mother of 5, and still managed a trip to Disneyworld last year.

So here was my thought: Take a bunch of these hard-luck programmers, shove them into Podunk Iowa, MiddleOfNowhere Alaska, or Cowtown Missouri, and have THEM start their own outsourcing businesses. If it is simply a cost issue, why not relocate the job centers from the big cities like Atlanta, New York, and San Jose (where survival rate wages are in the $50k to $75k range) to the more rural areas where cost of living is much lower? That will keep the jobs in the US while STILL reducing overhead for these companies. I couldn't work and survive in the Silicon Valley on $43k a year, but I do just fine on that wage in the Central Valley. I could do just as well with half that in even cheaper areas of the country.

Hmmm...opportunity...

I totally hear what you're saying, that it's not how much you earn, it's how much you save. I'm a believer there for sure. Studies show, however, that the creative people (like programmers, designers, graphics people, etc.) want to be in urban places where there's diversity, cultural happenings, and a level of hipness.

Further, I read a story that some professor somewhere did a study that showed that the general environment for these creatives is getting worse in the U.S., while places like Scandinavia (according to a specific index of qualities) scored more points that the creatives value. The religious right, consumerism, etc. of the U.S. is hurting the software industry, IOW.

I don't know if that's all true, but certainly lots of people prefer the urban setting rather than the rural. I'm in the city and want a more rural environment, but I'll need to build some skills in my field first before getting out and working remotely on my tech projects.

I've lived in both, and definitely prefer my current pop 10k small town to the millions who lived in the Bay Area.

Also, by concentrating a large number of big city escapees in these small town, you can actually end up with a better ratio of "hipness" than in the big cities. 500 educated computer programmers in a city of 1,000,000 are almost imperceptible in their effect on the city. 500 educated computer programmers in a city of 5000 can change the course of the entire city and CREATE the art, the cultural happenings, and the diversity they want. Heck, if they were dedicated, they could probably take over the city council and local government!

Do you think it will stop there?

Here's a portent: Remember back in the 1980's, when a lot of major manufacturing jobs went down the to 'maquiladora' factories in Mexico? Well, now a lot of those factories have closed up, since the jobs found somewhere even cheaper.

The same will be true with IT and any other exportable job if things continue the way they are. After India, it will be Chinese wages, then somewhere even cheaper if possible. There will be no end in the race to the bottom.

I can only think of one real solution, and that is a global IT worker's union. Unfortunately, American IT workers are about as anti-union a group as I've ever met, so that is unlikely to happen. I have heard about some movement toward IT worker unionization in India, however. I wish them luck.

Unionizing China will be a real task, however. A real bloody task, no doubt.

This is the old squeeze game, in which today's ascendant Indian is tomorrow's downsized Californian. Funny, yet sad, too, that it can be played upon one generation after another, in one field after another.

It's a bitter irony that the IT industry reviles liberalism. Classic liberalism uses tools like market controls and the strength of organized labor to counter the squeeze game. But under the guidance of Wired and charlatans like Friedman and Gilder, the average geek has fallen for the empty promises of market fundamentalism.

Another a few years of our broken economy should turn some heads. Which way, though, who can say? Toward liberalism? Toward fascism and more war? Let's hope that as the darkness gathers, there's a party willing to embrace the political refugees who will be demanding change.

...as well as cost of living issues. Some people can't move readily because of the need for particular specialized medical services, communities or schools available to the family only in the place in which they already live.

As a parent, I know it is difficult to support a family on 40K a year and I know I live in a relatively low cost area. The low cost area is also a low opportunity area although some services are excellent and worth staying for. Moving to the job involves additional costs that are not warranted by a 40K salary (especially for an experienced worker with a family) particularly if it results in having to maintain two households because of a child in school or the need to retain access to a clinic or a spouses job. I recently lost an opportunity in the high 40s because I expressed reservations about the costs (not just monetary) of moving to this lower paying job. (In fact, I would be losing ten thousand a year out of pocket by taking the job, not including the costs of moving my home when my child graduated. I didn't mention these) I just expressed a preference regarding the proposed moves as the pros and cons of the position were being frankly discussed. The job as initially proposed involved one move, then it became two. From my perspective, it actually involved three moves from places hundreds of miles apart over a period of eighteen months. I told the boss that I wanted to move once to the place where I would be working. End of interview. There never was any discussion of how temporary moves would be paid for such as per diem or how leases could be obtained from month to month.

Look, my point was simple. It is better to have jobs "outsourced" from the urban to the rural areas than have them leave the country entirely. Would it hurt urban professionals to do this? Sure, but it would IMPROVE the standard of living for other Americans and keep those tax dollars in-country.

Would a migration hurt people like you? Absolutely, but people like you are going to be just as hurt when your job gets outsourced to India, Russia, or China. The difference with migration is that it helps as many Americans as it hurts, so the whole thing becomes a wash. I have no problem with jobs moving from New York to Podunk Idaho because those jobs stay in-country and in our economy...and because when it comes right down to it, New Yorkers are really no more deserving of those jobs than Idahoans (one of the downsides to living in a "free and equal" democracy).

The alternative, which we see today, is those jobs vanishing into a permanent Indian blackhole.

...whether it increases their standard of living is questionable. I'm not disputing your basic point, only making the point that opportunity costs involved in moving to take lesser pay do act to lower living standards. You simply can't get the services in a rural area. Now if you are single, young and with no family, maybe you can go for that it. But then the young do have an easier time getting hired and this may be a part of the reason, no social baggage.

Maybe a very experienced and educated programmer in India goes for ~$40K.

Americans cannot compete with these prices. And it extends to ALL engineering and accounting jobs. If it is a job that can/must be done on a computer or drawing board where the finished work can be sent to HQ over the telephone line, it is an outsourcable job.

Read the WSJ or some of the CEO oriented magazines for a while and you pick up some interesting info. One of the most interesting that I've seen bandied about lately is that the average company sees labor savings of only about 50% after outsourcing. This gap is low because of the peripheral costs: India is a quasi-socialist country and has relatively high corporate income taxes...the companies that hire the outsourced workers typically pay 35% to 40% in corporate income taxes. On top of that, most of the companies hiring the outsourced workers are publicly held and must add a profit layer. On top of that, these companies are continually having to educate their workforce in "Americanisms" to make them compatible with U.S. business. On top of that, MOST companies that take outsourced work in India work through U.S. partners or subsidiaries, and those partners or subsidiaries often add their own profit layers.

All told, a company replacing an $80,000 a year American programmer with a $10,000 a year Indian programmer may only see a 50% cost savings. If you can start an outsourcing company employing $35,000 a year American programmers, you can be competitive. Finding American programmers willing to work for $35k a year is another story.

according to proponents. Also, others want tariffs placed on countries that will not float their currencies anytime in the near future, like China and India (I think), or refrain from intervening in the markets, like the Japanese. Perhaps some of us will have to tighten our belts a bit to be competitive world-wide (starting with ridiculously compensated management), but I don't think that a nation should have to tolerate the tearing of its social fabric without even any way to stop the tear long enough to mend it.

Frankly, I don't see that the free trade dogma is working as advertised. It is supposed to work like "trickle down" economics, in that all boats rise. I have read articles that state that the assumptions underlying free trade theory are not valid in today's world as they may have been in the time of Ricardo. I'd love to see an economist write a article for wide publication outlining the assumptions of free trade theory, tell us exactly why they apply today and explain why the theory is not working as expected--do you see all kinds of good jobs, particularly those involved in export activities, springing up here?


Of course Bush can't do it because of 1) his buddies; 2)GATT/WTO; and 3)the war on terror. Calling Dennis Kucinich!

This book might be of some help.

"The Race to the Bottom: Why a Worldwide Worker Surplus and Uncontrolled Free Trade are Sinking American Living Standards."

by Alan Tonelson

we will beg for any crumb they may drop from the table. They want us dependent on them. They do not want a business/labor partnership. They want us to know our place, and to accept any crap they hand us.

You got to do what you got to do to survive, so take what you can get.

only 5-10% of jobs should be outsourced per registration of unemployed by job category. If 100,900 mainframe programmers are unemployed, only 5% of mainframe programming jobs can be shipped PROVIDED (this is the second criteria) PROVIDED the foreign employee or their employer pays the U.S. income tax and all the other taxes that the U.S. citizen or resident would have paid to help pay and sustain the tax debt to run this country and provide funds for unemployment and for all other purposes (ideally without funding killing).

<Rant/>

Of COURSE that's how it works.

The whole purpose of total world-wide business deregulation is to drive the cost of employee compensation down as far as possible. With complete free trade, wages around the world will equalize. America will be the richest country in the world, but the people who do the work will be dirt-poor. The only way to realize that is if America becomes a two-class society, like the less-developed countries.

I'm a programmer, and yes, I'd work for half of what I made in 2001, and I wasn't making even close to $120k. But I'd still be bitter, and with good reason -- I now know that I am NOT a valuable part of a business enterprise, but a "resource" to be used, used up, and discarded. The result? I'll do the bare minimum to keep my job, not go the extra mile to achieve excellence.

Now, my bitterness isn't an all-consuming disease that has crippled me. I know where I stand, and it's not in the Winner's Circle. The same gang of pirates has lectured me on the Work Ethic, the Ethic of Responsibility, the Bill of No Rights, the Anti-Victimization Ethic, the Right-To-Work Ethic, and other candy-coated lies.

But it's interesting how the same corporations that are making all the money depend on their corporate charters to hold their officers harmless against any conceivable charge. Isn't it a fundamental precept of Free Enterprise to fix a price for a valuable good or service? So let's give those businesses a complete tax break of 100% -- and charge them a fair market rate of, say, 15% of what their legal liability would be, as computed by actuarial analysis of gross national business-related losses.

That ought to raise enough money to pay off the national debt AND give everybody about $15,000 spending money each year. That way, in our godless indolence, we can sit around smoking marijuana, inhaling twinkies, and becoming immoral fatties.

I, for one, am sick of a system that invokes Freedom, Justice, the Flag, the Bible and the Weeping Eagle of 9-11 to force the world into a state of contractual poverty. It's no longer just about empowerment, it's about survival -- a few more years of falling income, and we'll have a demand-side depression the likes of which has never been seen.

All because Greed and Ideology tag-teamed the remnant of free people around the world. Our "Masters" are robbing us, raping us, killing us.

They really don't give a damn. Why should we?

--bkl
Ah, that felt good!

McKinleyism strikes again! Cut the benefits especially health care and create enough unemployment such that people will work 60-80 hrs/week without complaining.

Chinese wage.

When factories move oversees, money is saved on environmental and worker protection also. IT may be a clean industry, but manufacturing can get down and dirty. Companies wanna do as they please and we haven't gutted protection fast enough to suit them. We are being blackmailed. The real terrorists do not wear tubbans, they wear expensive suits and golf togs.

Factories moving just south of the border between and Arizona can flush what ever they want into the Santa Cruz River, require that their female employees take birth control, there are no OSHA rules (however unenforced) to contend with and so on. There are reports of abuse of workers that would curl your hair.

Twelve years ago, I haggled with a bunch of Rushbots about what is really happening to the American worker. They insisted that the fall of real earnings was because the 'femenazis' insisted on getting women into employment which was traditionally male dominated. That, they said. lowered everybody's wages. I tried like the dickens to show them that the corporations just wanted the American workers to sink to the level of third world workers in what they would work for and accept in conditions. Could not convince them the enemy was the corporations addicted to obscene profits at any cost and their tactics were to divide and conquer the workers via the propaganda spewed on hate radio.

Have received a couple of "You were right" apologies. A little too little a little too late, I fear.