So how would you prevent offshoring of US jobs

[HS Thomas]

posted by Pakka Desi:
As I understand, one of the main reason personal automobiles are so common in the US (as compared to the rail road network) is because the US govt. spent huge amount of money in developing the roads in the 50s on tax payers money. While the rail road companies had to install the railways on thier own. The ultimate beneficiary were the auto companies. Isn't that a subsidy?
US automakers Ford and GM are selling cars in India. They should be hit with tariffs as well then.

That is quite a strong argument.

The government laid roads out of tax payers money rather than the auto companies.

Since the time of the Greeks/ Romans this has been the practise in the West/Western Europe. By the time auto-mobile companies came along (which no-one thought would take off the way it did) roads had been in use by armies, horse-carriages.
Unfortunately, no one thought autos (while beneficial) would bring a host of problems with it.
Council taxes �800 -�3500 calculated as a percentage of house price increases estimated every 10 years used to take care of most utility bills,
Water, Gas and electricity now are billed separately, controlled by different companies. Here maintenance of the roads are sub-contracted and seems a never ending task. Now there's a secure job.
In some countries (Malaysia) stretches of highway between cities are built and maintained and taxed per trip by sub-contracted companies. Govts/ govt employees sub-contracting have huge perks paid by the companies winning the contract.
Michael, you over-estimate the powers of Monica Lewinsky!
regards
[ August 06, 2003: Message edited by: HS Thomas ]

[Pakka Desi]

Originally posted by HS Thomas:

The government laid roads out of tax payers money rather than the auto companies.

Isn't that what I said :roll:

[HS Thomas]

Yes, I was trying to emphasize that the practise of a peoples tax for road building was there long before automobiles.
This form of government was copied and modified since Greek/Roman times.(Probably even earlier if one was to follow history back. Maybe even to some ancient Asian civilisation. Mohenjodaro springs to mind. Taxes and death and roads may have been the only certainties even then.)
But it's still a strong argument. Each car owned has a road-tax approx �200. So it's not from the Council tax as I suggested earlier.
regards
[ August 06, 2003: Message edited by: HS Thomas ]

[Vinod John]

Originally posted by Frank Silbermann:
one of the UN's stated goals is the equalization of wealth between the western countries and the poor of the world.

One of the major reason why most the colonies are poor bcos its colonial rules forced people their colonies to import goods from them, so it was a boom time in places like Mancester, and in most case the raw materials were from the colonies. Every developed contries were directly or indirectly benefited during that period, at the cost of these colonies. So I don't see any thing wrong this goal of UN.
Major problem in US is, the Corporate america influece on most of Government decision (though it is bound to happen in capatilist country), so most of the rules/laws were bent to suit the needs of these companies rather than the people. Its high time US should realize the flaws in Capitalism (as it was with Communism) and try to clean up its acts and tighten its control over American companies.

[Bhau Mhatre]

From Tim Holloway ------------------------------------
my own personal concern is that it's a repeatedly-demonstrated fact that when the US economy crashes, it takes the whole rest of the world down with it, so everyone has a vested interest in health of the US economy until the day arrives when this situation no longer exists.
In any event, we are repeatedly reminded that the American middle class drives the American economy. If you take my salary and give it to some exec as a cost-cutting bonus, relatively little of that money goes to the line-level producers of goods and services in either of our two countries - an awful lot of daily consumption is per-capita rather than based on net worth.
------------------------------------------------------
Tim, I agree with you about the effects of the US economy on the rest of the world. And as far as I know, most in India too would agree with you. So please be assured that no one in India wishes that US economy be hurt in anyway. After all, US is the biggest payer for their services. And I do agree with most part of you posts in this thread in others.
But no matter how good you explain the connection between the buying power of the middle class, the Federal taxes, and the ripple effects of a million lost jobs, what I still find hard to understand is this: The US economy is in trillions of dollars!!! How can a few million offshored jobs getting paid "peanut" salaries hurt a trillion dollar economy?
From Mark ------------------------------------
Let's suppose for a second that a bunch of people in the US organized a anti-offshoring group. This group had some degree of resources with which to effect their goals. What would you do? Keep in mind, this would be primarily a workers group, because managers/owners/consumers would prefer the lower cost goods.
------------------------------------------------------
Let me think this aloud---------
If a company had more budget to pay its employees any given year, does that translates to more projects and thus more business and more profit?
Suppose a company has 100 programmers in the US. It can hire similar 100 programmers in India for 1/5th the salary.
That is, salary of 20 US jobs == salary of 100 offshored jobs
That is, a company can have 80 US jobs and 100 offshored jobs and still have the same salary expenses.
Thus if they maintain some ratio like 80% salary to US jobs to 20% salary to offshore, then they are still effectively getting a workforce of 180% == more projects and thus more business and more profit.
End of thinking aloud.---------
If I were a part of that anti-offshoring group, i would recommend that companies should not layoff all the 100% employees. They should not send all the jobs offshore. They can and should maintain some ratio like 80% salary to US jobs to 20% to offshore. This will help maintain the balance on both sides. It will maintain the buying power of the american middle class (as explained by Tim) and at the same time companies get more human resources from same budget, and people in india too get to earn their living. Everyone's happy. Possible?

[Bhau Mhatre]

Originally posted by Vinod John:

One of the major reason why most the colonies are poor bcos its colonial rules forced people their colonies to import goods from them, so it was a boom time in places like Mancester, and in most case the raw materials were from the colonies. Every developed contries were directly or indirectly benefited during that period, at the cost of these colonies. So I don't see any thing wrong this goal of UN.
Major problem in US is, the Corporate america influece on most of Government decision (though it is bound to happen in capatilist country), so most of the rules/laws were bent to suit the needs of these companies rather than the people. Its high time US should realize the flaws in Capitalism (as it was with Communism) and try to clean up its acts and tighten its control over American companies.

Liked your post. The last sentence wasn't necessary though, imho.

[Michael Bronshteyn]

They should not send all the jobs offshore. They can and should maintain some ratio like 80% salary to US jobs to 20% to offshore. This will help maintain the balance on both sides.

Good point. Situation like this already exists in sports in Europe. The club is allowed to bring players from the other country, as long as they do not exceed certain number. This way the clubs are getting more competitive and at the same time they have local talent, so the fans do not feel isolated from the team, and actually bring more revenue from tickets sale. While this situation is differnt from IT, it shows that there is a place for solution like this in business.

[Tim Holloway]

I could go with an 80/20, I think. I'd like to go one better and suggest that more internal infrastructure (consumption) be built up in India (and similar countries). Part of the problem isn't just low wages, it's that currently, only about 1% of Indian-based company cash is being used on its own IT, so there's little local competition for IT services. And Indian IT companies are shortchanged, because they have to bid against the more lucrative UI/Europe market.
Why would offshoring trash the US economy? Well, it remains to be seen if it will, but if you accept the commonly-quoted 3-5 million jobs lost and multiple them by an (arbitrary) average wage of $40,000, you get well over 100 billion dollars right there. That's enough to make even Bill Gates sit up and take notice.
Also, as they like to point out at the local chamber of commerce, money tends to circulate. When a new company comes to town, they estimate one additional job per each job paying $30K that's added. Caveat: They don't say if the reverse is true, but it's not unreasonable. I think that the formula for major sports events coming to town (we get the Super Bowl in about 2 years, and we already have some major college football and pro golf and tennis events) that each dollar makes its way through 5 other businesses before it stops having an impact. So you can see why I'm alarmed.
In a normal recession, we have money stop flowing, and that's painful enough. In the case of offshoring, money flows out, but little is flowing back in, since we're so $#%$$% overpriced. So this sucks cash out of the local economies and government budgets, further stressing the system.
OK, so what about all the savings? Well, the idea that if a major cash drain is removed from you will cause you to take that cash and hire new people is one of the cornerstones of supply-side economics. I'm afraid to me, that looks rather like pushing a rope. Things can be done, but not all that effectively. You can't sell more than people want (or can afford) to buy, no matter how much you're saving or how much cash you have to hire new people, build new plants or buy more capital equipment. The other problem is that most of the non-offshorable jobs are low-wage jobs. Some of which may be supplanted by robots descended from Aibo, Roomba and other products being developed thanks to the microcomputer revolution.

[Tim Holloway]

Originally posted by Pakka Desi:

It is like saying, "Rich provide most of the jobs in the world, so let them be rich". Well, they can stay rich if they are competetive overall otherwise somebody will take them over.
Why should amrican middle class be helped in letting it drive the American (and thus, world) economy? What does an american middle class person have that other people don't have?

Only one thing. Ten times as many dollars per worker as an Indian/Pakistani/Chinese/African middle class member. That is, in fact why the American middle class is under siege. Not because we're inferior, but because we keep more money circulating. And a lot of that money ends up in China and India - or will until we don't have it anymore.

I disagree with the assertion that to prevent world economy to from sinking, american middle class has to be protected. Middle class is same everywhere. If an indian middle class person has more money to spend, he will spend it just like an american middle class person would. May be on different things. Ultimately it boils down to who is generating more value. The one who generates more value has more power. Total power (on the world scale) remains the same.

But it's not the same everywhere. I hate to break the news, but the offshoring craze isn't because of any inherent superior value of the Indian worker. It's because the Indian worker isn't considered to be worth the same absolute number of dollars per hour worked, irrespective of his or her talent. The people who hand out the cash think Indians living in India are worth roughly one tenth as much as Americans.
Don't get mad at me for it. I'm not the one setting the salaries. If you find that insulting, you'll have to convince the Powers that Be to change things.

So the point is, American middle class is no holy cow. If it is not able to spend that much then somebody else will. So there is no threat to world economy as you would suggest. Of course, there will be tremors while this balance of power shifts but that's all to it.

I wish that were true. However you can only spend as much as you recieve (unless you're the US government). And if you're only receiving a tithe as much, your purchasing power isn't going to be able to bear the load that - up to now - the American public has. It's not sanctity, just cold economics.
[ August 06, 2003: Message edited by: Tim Holloway ]
[ August 06, 2003: Message edited by: Tim Holloway ]

[Sampige Javits]

My take on why jobs are going to India is quite different from what you
have mentioned.
Every company now wants to show profits.
One of the easist way to do it is to cut costs.
and one of the ways to cut costs is to outsource.
The biggest challenge for large corporations is
they have created an expense structure for an earlier era.
And now they are entering a situation in which revenue is slow,
flat or negative in some cases, pricing growth is very difficult,
profits are not going up, and they really have to bring their expense structure in line with today's reality. They now want more for less. One Solution - outsource.
Jobs go offshore not because the Indian techies are worth 1/10 their US counterparts but in fact because, they(the companies) can get the same (if not better) quality for 1/10th the price.
The quality of the the IT talent is almost the same in US and in India.
This also does not mean that they are underpaying the Indians in India?.
The standards of living are different in the two countries. If we can buy a car for about 1/3 times our salary, they can in their country too.
If you read about globalization, you will see that this(outsourcing) is only following the principles of globalization.
Stopping outsourcing all together is not a solution.
That would be trying to reverse the process of globalization.
India in fact is itself facing a backlash of globalization, although not in the IT sector but in farming. The farmers in India are slowly getting a taste of what globalization is due to products from Sri Lanka, Bangaldesh and others coming to India at much cheaper rates leaving products from the Indian Farmer with no takers.
Another point to think about is:
The United states has India not only as a outsourcing destincation but also as a huge market too.
The products of the United states have practically flooded the Indian Market.
Do you realise what economic backlash would occur if they stopped using the GE products, LG refrigerators, Stopped having coke/pepsi, closed all McDonalds, KFCs,GM cars, Cisco routers and other scores of Us products?
All this is however still economic jargon and will not help a middle class
guy who has just lost his job. There must be middle ground that we can take so that we keep as many jobs here as possible and still have the companies make profits.
I like the 80/20 idea someone here proposed.
We can find a solution to a problem if we understand the problem first.
If we have our concepts of the problem wrong to start off with, we cannot arrive at the right solution.
There is no point in spewing venom against the Indians. They are just doing what you would have done in their place.

[Mark Herschberg]

Originally posted by Mumbai cha bhau:

That is, salary of 20 US jobs == salary of 100 offshored jobs
That is, a company can have 80 US jobs and 100 offshored jobs and still have the same salary expenses.
Thus if they maintain some ratio like 80% salary to US jobs to 20% salary to offshore, then they are still effectively getting a workforce of 180% == more projects and thus more business and more profit.

That's like saying I can invest $100 at 5% interest in one bank, and 10% interest in a second bank. I can put just $50 in the second bank and make the same returns, leaving the $50 at 5% in the first bank for an additional $2.50! Or I can just put it all in the second bank and get even more bang for the buck. Why wouldn't a company want to do this? They can move it all offshore and get a 5 fold workforce increase, 500% == more projects and thus more business and more profit.
Now practially speaking there is reason to keep some employees in the US--mainly for customer interaction and high level work which they don't feel comfortable outsourcing right now. If a company saves a net X dollars offshoring ("net" is the key word here, after *all* costs) you can be sure that they will do it.
--Mark

[Bhushan Jawle]

I hate to break the news, but the offshoring craze isn't because of any inherent superior value of the Indian worker. It's because the Indian worker isn't considered to be worth the same absolute number of dollars per hour worked, irrespective of his or her talent.

I didn't understand the last part. Why ?

The people who hand out the cash think Indians living in India are worth roughly one tenth as much as Americans

This statement looks OK to me as well but is incomplete it should have been completed by "Americans living in US", isn't that correct.
There is a very visible difference in living standards in countries of both middle class and so there are differences in salary expectations but I don't understand the part "Irrespective of his or her talent " Acually it is quite amusing

[HS Thomas]

To prevent off-shoring I would put in an on-line voting system and cut out the intermediaries. Turn the White House and House of Commons into places of tourist attraction.
But before that can happen, there are several other things that need to be in place. There should be freedoms of economic choice, by driving up competition which in turn drives up quality and performance in all avenues of life.
Within the limits that there are freedoms that are allowed and things that are not allowed.
American and European middle-classes should not be the only ones to feel priviledged enough to contribute to famines or corrupt regimes in Africa, South America. Indian, Chinese, East European, African middle-classes should feel as priviledged.
[Band Aid was one fine piece of direct-marketing that put all governments to shame.]
In time, the term "off-shoring" would have no meaning. Wealth will be created and you more than likely will be working for a company that has global operations. Companies will have to look after the welfare of all it's employees that contribute to their wealth. Governments still have to look after the social welfare of all people within it's borders - those that pay taxes and those that don't.
There may be some global scheme of taxation to which salaries will be linked. So a big MNC in India may choose to pay a Western salary to an Indian VP because his unit generated so many Western job-creating billions of dollars with associated taxes going to the Indian government.
And this will be repeated in China, Africa.
There has been a precedent in Africa, the Gulf before but most of the jobs were filled by European and Indian foreigners who took most of the wealth back when they returned home. In Africa they left a farly decent educational structure, crumbilng at the edges.
My brother prefers to have his children complete their education at de Witts University in South Africa because the quality is much better than most UK universities regardless of cost. He has got a job offer in Australia which he is reluctant to take up because he isn't convinced that the education is as good. Either way, one country stands to lose a very good consultant gynaecologist.
The shape of government will change and most of it's going to be on-line
sans all redundant and duplicated intermediaries.
BTW, Sampige, very valid points raised.
regards
[ August 07, 2003: Message edited by: HS Thomas ]

[Tim Holloway]

Originally posted by Bhushan Jawle:

This statement looks OK to me as well but is incomplete it should have been completed by "Americans living in US", isn't that correct.
There is a very visible difference in living standards in countries of both middle class and so there are differences in salary expectations but I don't understand the part "Irrespective of his or her talent " Acually it is quite amusing

Good point. Yes, "Americans living in US". But India has no H1-B program, no? I'm afraid that brevity sometimes leads to imprecision.
Speaking of which <standard-disclaimer>In this forum "Indian" is actually referring to people working at vastly inferior salaries relative to the so-called developed nations. India is just a case in point, and not the only one - just the most obvious. It is not a disparagement of nationality</standard-disclaimer>
When I say "irrespective of his or her talent" I mean that given two people with the same level of skill/talent/training, the one in India is considered to be worth about 10 per cent as many US Dollars (or the equivalent in Rupees, etc.) as the one in the US. Only the fact that many - but not all - of the things you'd buy in India also cost 10 per cent as much as they do in the US keeps this from being rank exploitation.

---

On a slightly different tack, Mark's making the typical supply-sider's mistake of thinking that if you free up an additional $900,000 from salaries that means you'll go out and hire $900,000 more workers. That's counter to fundamental business sense.
Despite the common corporate mantra of "Our People are Our Greatest Asset" (and evidently a liquid asset, at that ), employees are one of the last investments a company wants to make. If there's no market for what they produce, you're not running a company, you're running a welfare program. Employees can't be depreciated like capital purchases, require a start-up period before they become fully productive, demand supporting infrastructure like desks, lighting, HVAC and office supplies, demand benefits, can't easily be switched on and off during slack periods, require a bigger HR and benefits department to handle the headaches they produce, and can be a real problem to terminate. It's often easier to just say "screw it", pass out executive bonuses and go shopping for a yacht and a house on the seashore.
In fact, this is one of the reasons we're in so much pain right now. The majority of businesses consider IT as a "cost center", not a "profit center", since productivity due to IT in infamously hard to demonstrate, while the salaries and equipment costs are very real. When companies are in a cost-cutting mindset, IT is a ripe target. Conversely, when they are in money-making mode, IT is a potential way of getting a competitive advantage.

[Mark Herschberg]

Originally posted by Tim Holloway:

On a slightly different tack, Mark's making the typical supply-sider's mistake of thinking that if you free up an additional $900,000 from salaries that means you'll go out and hire $900,000 more workers. That's counter to fundamental business sense.

I never said that. I simply said if you felt that it made good business sense to remove 20 US jobs and replace them with 80 jobs overseas, the logic would likely hold to remove more then just the 20 jobs.
--Mark

[San Su]

Tim,

It's because the Indian worker isn't considered to be worth the same absolute number of dollars per hour worked, irrespective of his or her talent.

Salaries are driven by the local cost of living, not the "worth" or "unworth" factor. For a second, let us forget about other countries and let us come to US. There are salary differences between say California and Texas. Check this site2000 Java Pro Salary Survey Results It is old but still valid in this discussion. There is 25K salary difference between California and Texas. Does that mean "Texas workers are not worth the pay in the scale of Californian workers?"(Replace "Indian" with "Texans" in the above quote) Why? Are Texans inferior? Or is it because the cost of living in Texas is less than California? Companies are exploiting the local cost of living factor. A Bangalorian can not go and demand the salary in US worker's scale (Californian or Texan?? )
Forgive me if it hurts you, but I feel the above quoted statement is plain stupid statement.

[Bhau Mhatre]

No need to get tacky guys. I'm sure Tim was talking from an employer's perspective. For an employer, who knows the cost of living differences, "the Indian worker (working in India on an offshored job, ofcourse) isn't considered to be worth the same absolute number of dollars per hour worked, irrespective of his or her talent."
What's so offensive about that?
[ August 07, 2003: Message edited by: Mumbai cha bhau ]

[Bhau Mhatre]

Tim Holloway ---------
I'd like to go one better and suggest that more internal infrastructure (consumption) be built up in India (and similar countries).
---------------------------
Yes, that'a good observation. It has been happening for quite some time, and is now happening faster then before. Just that initially it takes more time to get things rolling. Once it gathers momentum, it will take its own course. But it has always been a catch 22 situation. Initially, companies didn't have enough to spend on IT to begin with, and since the IT was not given enough priority, companies did gain from IT, and thus were not ready to spend anything. As you mentioned in one of your posts, the Indian tech labor market is one of the greatest things that's happened for India since the Brits went home. And it was this tech labor market (H1B,L1,offshore,etc.) that helped us gather the required initial external force. Things have just started. Now, at this point if you completely abolish these H1B/offshore programs overnight, we may lose that acquired momentum, and go back to square one. That will reduce our capacity to buy American goods, which in turn will hurt american companies. Where shall we all be heading? 20th century?

Tim Holloway ---------
Why would offshoring trash the US economy? Well, it remains to be seen if it will, but if you accept the commonly-quoted 3-5 million jobs lost and multiple them by an (arbitrary) average wage of $40,000, you get well over 100 billion dollars right there. That's enough to make even Bill Gates sit up and take notice.
---------------------------
What I gather from your posts is that if we, third world programmers, can manage to steal away a couple of million jobs, we can hurt a trilion dollar economy that has been superpower since decades with solid and firm foundations? Either you are under-estimating the economic power of the USA, trying to be humble, or being just plain funny, flattering and giving undue importance to us third world programmers
Okay, jokes aside. Let's do some math. Bear with my economic naiveness and correct me wherever I go wrong; I'll use the worst case scenario. Suppose 5 million jobs @ 50 thousand USD per annum are offshored overnight. How much is that? 250 Billion Dollars of salary. But as you said, programmers in India are considered 1/10 the worth in absolute dollars per hour worked, and that would mean, 5 million jobs @ only 5 thousand USD per annum. How much is that? Only 25 Billion dollars of salary. The rest (250-25 = 225) Billion dollars is saved by the US companies and enjoyed by the share holders. Mark has said this several times before, I am just adding numbers to it.
So how much money will actually be flowing out of the US? Only 25B. And just one company like Wal-Mart itself has revenues of around $246 billion according to Fortune Magazine in 2002. Others are General Motors ($186.8 billion), Exxon Mobil ($182.5 billion), Ford Motor ($163.6 billion), and General Electric ($131.7 billion). And i am sure there are others.
Yes it will be painful for those 5 million replaced american workers, (which i won't like either, and hence my 80/20 proposal) but what I am trying to say is that even if five million jobs are offshored overnight, it won't even make a scratch to the US economy, let alone creating a dent in it.
Tim Holloway ---------
In a normal recession, we have money stop flowing, and that's painful enough. In the case of offshoring, money flows out, but little is flowing back in, since we're so $#%$$% overpriced. So this sucks cash out of the local economies and government budgets, further stressing the system.
---------------------------
So what do you think, third world countires are economic black holes? Out of the $25 billions flowing in from US to India, most will return back to US, EU, Japan, etc. because people in India do buy products from Hollywood, Microsoft, Intel, IBM, Mokia, Erricson, Ford, Totyota, Pepsi, Coke, Pizza Hut, Cadburry, Hershey's, Kelvin Clain, Rayban, Nike, Reebok, ... atleast a 1000 companies, i am sure.

[Tim Holloway]

No, I don't think that Third-World countries are economic black holes. Although it's worth remembering that most of the "Big Name" US companiues actually franchise their names. They do get paid, and quite well, but the actual "Coca Cola" in Mumbai is an Indian company paying for the name (and in Coke's case, the secret formula), so a fair amount of that money is recirculating within the local economy and Coca-Cola, Inc. skims from the top (more or less). So in actuality, one of the biggest US/UK exports is branding. Japan I'm not so sure of.
If you think that money saved by US companies has been flowing into shareholders pockets, I suggest you look at both the stock prices and the dividends paid over the last several years. The only number that has really skyrocketed has been executive compensation. If the shareholders had been seeing that much benefit, I wouldn't have to worry about being unemployed, because I'd be retired off the proceeds. Not even close.
Actually, one of the biggest reasons money isn't flowing is that we're in the middle of what's considered a jobless recovery. The US economy continues to falter because US employers aren't hiring, and unemployed people don't spend as much money on either domestic OR imported goods or services. I'm one of them.

[Pakka Desi]

Originally posted by Tim Holloway:
[QB]
Only one thing. Ten times as many dollars per worker as an Indian/Pakistani/Chinese/African middle class member. That is, in fact why the American middle class is under siege. Not because we're inferior, but because we keep more money circulating. And a lot of that money ends up in China and India - or will until we don't have it anymore.

But it's not the same everywhere. I hate to break the news, but the offshoring craze isn't because of any inherent superior value of the Indian worker. It's because the Indian worker isn't considered to be worth the same absolute number of dollars per hour worked, irrespective of his or her talent. The people who hand out the cash think Indians living in India are worth roughly one tenth as much as Americans.
Don't get mad at me for it. I'm not the one setting the salaries. If you find that insulting, you'll have to convince the Powers that Be to change things.
I wish that were true. However you can only spend as much as you recieve (unless you're the US government). And if you're only receiving a tithe as much, your purchasing power isn't going to be able to bear the load that - up to now - the American public has. It's not sanctity, just cold economics.
[QB]

Companies do not decide how much a person is worth. They only decide how much "low" they can pay to get certain services. So trying to find out how much an Indian or an American is worth is useless.
The salaries are determined by the environment not by the worth of the employee. If every programmer on earth starts demanding exact same level of salaries then the companies will have to give that much salary (or not develop the product). But it does not happen. People live in different environment and so some people can quote less for there services so the companies go to them. It is as simple as that. Companies don't want to hire Americans (I am using Americans just for the name sake. It could be any body.) because they are overpriced. They have too much overheads. Not because Indians are cheap. An american goes to work in his own SUV, sipping Latte, talking over the cell phone. An Indian goes to work by a city bus.
When I asked, "What does an american middle class person has that somebody else doesn't", I meant why should the amrican middle class person have "Ten times as many dollars" as any other person. The reason is simple, an american just can't survive at anything less. He has to make loan payments, groceries, etc. all at the same overprices levels.
Similary the cost of a product is not based on how good it is or how much it is worth. Cost of a product is determined by the market. By how much "high" people are willing to buy it for. If american can't pay $100 for an item and if the company is forced to sell it at $10, then $10 is the price. So when you say that american have more purchasing power, it does not make any sense. They have more purchasing power because they are getting more and paying more for an X item. While an indian is getting less and paying less for the same item. Both have the same purchasing power.
The point that I am trying to make here is, it does not matter (on a global level) whether american (or indian) middle class survies or not. If american middle class is not able to contribute to the global economy as much as it is contributing today, it will not break loose any hell. Somebody else will do their part.

[Michael Bronshteyn]

Only 25 Billion dollars of salary. The rest (250-25 = 225) Billion dollars is saved by the US companies and enjoyed by the share holders. Mark has said this several times before, I am just adding numbers to it.

If you think that money saved by US companies has been flowing into shareholders pockets, I suggest you look at both the stock prices and the dividends paid over the last several years.

I would suggest taking a look at the share price with the last couple of years for Oracle, Sun, and other companies who outsourced jobs. Do you see the increase in value?
Very often companies which should simply go out of business outsource and these ways save money. For people in US this outsourcing is benign because they would loose their jobs anyway. Still, the company continues to pay money, which they never made in revenue, in salaries and finally go bankrupt. In this case shareholders loose everything.
On the same note, if you would be right our 401k would rise by now, instead of going down the pipes.

Yes it will be painful for those 5 million replaced american workers, (which i won't like either, and hence my 80/20 proposal) but what I am trying to say is that even if five million jobs are offshored overnight, it won't even make a scratch to the US economy, let alone creating a dent in it.

I wish you would be right. Besides jobs in IT, there is a leakage of jobs in manufacturing. There are still some manufacturing facilities left in US, such as Harley-Davidson, and they are concern loosing their jobs to China ( reference: C-SPAN meeting with labor, commerce and treasury secretaries ). On top of that, other industries are loosing their jobs in US as well. Pretty much anything which can be done in the office or in cubicle without interaction with the customer can be outsourced and offshored.
As a ripple effect, businesses which are local, loosing their money as well, because people simply can not afford to spend. People who are employed, and see their colleagues loose their jobs, try to save more, understanding that they can loose their jobs tomorrow ( many of them will should the trend continue).
Even states like California are having a lot of troubles. California unemployment insurance ( source of income for nine months for unemployed ) is going to dry out in January 2004. Currently the state already facing $38 billion deficit.
What do people do? Well, they are looking and getting frustrated with the situation. Thus, should somebody arrive on a political arena and say that he can fix the problem with offshoring, people would probably vote for him. Would they care about globalization or global economy? I am afraid they will go with any measure which would benefit them personally.

[Bhushan Jawle]

No need to get tacky guys. I'm sure Tim was talking from an employer's perspective. For an employer, who knows the cost of living differences, "the Indian worker (working in India on an offshored job, ofcourse) isn't considered to be worth the same absolute number of dollars per hour worked, irrespective of his or her talent."
What's so offensive about that?

Seems reasonable to me. But the first version i.e. w/o

(working in India on an offshored job, ofcourse)

was quite offensive and plainly illogical as I have been working out of India in American firms for most of my career and my experience proved otherwise.

[Tim Holloway]

How much are a few million jobs worth?
Well, in 1932, 12 million Americans were unemployed. That was the Great Depression. The ripple effects of all those unemployed Americans were 3 million English unemployed and 6 million Germans unemployed. The world enconomy was in the cesspit for well over a decade. The Germans got fed up and started World War II. There are over 4 million unemployed Germans today, last time I noticed. So unemployed Americans DO matter even if we are a snotty obnoxious lot. When you have that much absolute cash to throw around, it has an effect. And while job creation in India and China is robust, when you have to create 10 times as many jobs to spread the same amount of money around, it's going to take quite a while.
Raw dollars aside, the image of the US as the bastion of commerce has not little effect itself on the world economy. When the US is booming, the world is booming, and when it's dragging, the world drags with it. Or, as economists like to say "When the US sneezes, the world catches pneumonia". This isn't an eternal truth, but it's been the truth for around a century now and will remain true until some other country emerges as the new financial leader.
Even Indian corporate shares have been impacted by the misery. In a mild downturn, you look for bargains. In a severe downturn, you don't look at all. Right now the overall state of the US economy is routinely compared to the end of the Depression and it's teetering on the possibility of a new recession and possibly serious deflation (which would wipe out a lot of the Third World salary advantage).
This isn't a war between the haves and the have-nots. You don't make war in a rowboat. We're all in this together, and we all need to come up with a solution that contributes to prosperity everywhere.

[Bhau Mhatre]

Tim Holloway ---------
If you think that money saved by US companies has been flowing into shareholders pockets, I suggest you look at both the stock prices and the dividends paid over the last several years.
---------------------------
Michael Bronshteyn ---------
I would suggest taking a look at the share price with the last couple of years for Oracle, Sun, and other companies who outsourced jobs. Do you see the increase in value?
On the same note, if you would be right our 401k would rise by now, instead of going down the pipes.
---------------------------
We arrived at that big amount of 225 B dollars for companies and share-holders savings only because we were talking about a worst-case scenario of 5M offshored jobs in the future. Offshoring at that scale has not happend yet. Whereas the low stocks and dividend paid off last year that you are looking at are because of a series of events that happend in the past. Here they are -
1. Companies got burned by the dotcom burst.
2. Suddenly the 9/11 happened and insurance companies lost a great deal of money. Many in the airline industry almost went bankrupt. The tourist industry and all related businesses (lodggin/travel/restaurants) took a great hit. A lot of money stopped circulating there itself.
3. This was followed by the war expenses in Afghanistan
4. Add to it the corporate scams.
5. Then came the expenses in Iraq.
In a time-span of just three years, there have been a series of major events that stalled billions of dollars. So if the stocks are not looking good today, then it is because of the above mentioned past events, when offhsoring was still in its infancy.

[Bhau Mhatre]

Tim Holloway ---------
How much are a few million jobs worth?
Well, in 1932, 12 million Americans were unemployed. That was the Great Depression. The ripple effects of all those unemployed Americans were 3 million English unemployed and 6 million Germans unemployed. The world enconomy was in the cesspit for well over a decade. The Germans got fed up and started World War II. There are over 4 million unemployed Germans today, last time I noticed. So unemployed Americans DO matter even if we are a snotty obnoxious lot. When you have that much absolute cash to throw around, it has an effect. And while job creation in India and China is robust, when you have to create 10 times as many jobs to spread the same amount of money around, it's going to take quite a while.
---------------------------
I am not sure if the later half of the above was your reply to Pakka or Bhushan but I'll discuss about the first part.
1932 and 2003 are two totally different timeframes. 1930s were the years between wars and colonial expansion. The 12 million Americans who were unemployed in 1932 were not a direct effect of replacement by offshore workers. Third world countries were mere suppliers of raw materials under european rules. International trade and communication was limited to the big and powerful countries. Today, the world is entirely different, thanks to the advencement in transportation and communication fields. The third world countries are developing and are considerd as a great market (sometimes to dump outdated surplus western products, but it is a market nonetheless) to generate renvenue.
So while it can be argued and counter-argued that Germans started World War II in 1939 because 12 million americans lost the jobs in 1932 , the situation is really different today and they both can't be compared that way, imho.

Tim Holloway ---------
This isn't a war between the haves and the have-nots. You don't make war in a rowboat. We're all in this together, and we all need to come up with a solution that contributes to prosperity everywhere.
---------------------------
Yes, I do agree with that. How about 80/20?

[Mark Herschberg]

I believe what Timmeant by his posts is as follows (correct me if I'm wrong Tim):
The US middle class has no inherent entitlement to wealth. However, the US middle class comprises a significant portion of the US economy, comprises a significant portion of the world economy. If the US middle class disappears over 15-20 years, it may hurt the US, but that's how things work sometime. The government will have had time to shift the economy to meet the new reality. On the other hand, if the US middle class disappears over the next 15-20 months, the government cannot react that quickly. If the US enters a major recession, then the world could, too as well, and eveone will be worse off. Hence, the world should be concerned about an overly quick "US middle class depression."
Now you may or may not agree about how accurate the above analysis is; but basically Tim is simply arguing about the US middle class' economic impact, not any special status it should possess.
--Mark

[Tim Holloway]

You don't want to destroy the middle class in any country. Look around and you'll see that countries where there are only the very rich and the very poor are politically unstable and prone to revolutions and/or terrorism. And you really don't want to destroy the middle class of a country that has (ahem) "nukuler Weapons of Mass Destruction".
When you're unemployed, you don't care if it's because the stock market blew out or because of offshoring or because of automation or even because of Martian invasion. In any case, the response is going to be the same. 1) Stop spending. 2) If things don't start improving, start looking for someone to blame.
The company that laid me off (after 13 years of service, BTW) was already offshoring 3 years ago. They are not a dot-com, and they aren't in a line of business that was directly impacted by 9/11. In any event, I'd already been unemployed several months on that fateful day. Nevertheless, the shares and dividends in that company haven't reflected the savings that they realized from saving on my salary or the dozens of people they discarded in my city alone.
Actually, while the US has a big impact, even Japan isn't totally lacking in influence. If you'll recall, they had an economic blowout about 3-4 years back that seriously stressed the entire Pacific Rim. Took a year or 2 to recover.

[Bhau Mhatre]

Mark --- I believe what Tim meant by his posts is as follows ...
Yes, I know and I do agree with most of Tim's posts. I already said that before.
I do agree that middle class of any country forms the real working backbone of that country. I do agree that the US middle class has collective more buying power then the entire populations of most other nations. And i do agree that if the US enters a major recession, then the world WILL too as well and everyone will be worse off. Hence, the world should be concerned about an overly quick "US middle class depression."
If I m correct, there are more than 250 million people that we can call middle class americans. Right? So obviously, if 250 million americans lose their buying power suddenly, it is going to be an unrecoveralble recession.
But who's talking about 250 million people? The impression that i m getting here again and again from these discussions is this:
Mark --- On the other hand, if the US middle class disappears over the next 15-20 months, the government cannot react that quickly
Tim --- And you really don't want to destroy the middle class of a country that has (ahem) "nukuler Weapons of Mass Destruction".
If only a couple of million jobs get offshored, it is enough to "destroy" or "disappear" the entire US middle class == 250 Million people in thousands of different fields from scientists to medical to finance, farming, agriculture, sports, to ...etc.?
I firmly believe that is completely absurd, incorrect, and higly exaggerated. But then I may be wrong. Or as Tim said, someone has to be blamed, regardless!

[Terrance Turpin]

For the most part everybody so far has suggested preventing the free will of corporations. What would you do if somebody tried to prevent you from doing what you wanted to do? From doing what you felt was in your own best interest? Most likely you would find away around their authority. I am not saying that I wouldn't want to place some stiff tariffs or tough laws. But would they really be effective?
That may mean moving (from Seattle to Vancouver), bartering (Setting up shell corporations) or any number of other methods. Regardless, you cannot prevent someone from eventually doing something that they deem is in their own best interest (however short sighted). You can only change what they believe is in their best interest.
Addressing Marks original question. What would do I think such a group should do?
It should first answer the following questions:
First know what lies at the heart of the issue? That’s easy. Decreased costs.
Next what are the risks involved? What are the inherent weaknesses of off shoring? What are the weaknesses of the labor markets in the countries that are being off shored too?
Thirdly, how can we exploit their weaknesses? As many here have argued labor costs are not all there is to software development. So what are those other elements? Once we know their weaknesses we can work on a plan of action to exploit those weaknesses.
I would be a fool to think this would stop off shoring. The lower costs offer a huge advantage. However, if the organization could work on tipping Mark’s formula a little more in favor of the workers they are looking out for.
Example: If one element of the problem is the cost of training US workers then the organization should help to decrease those costs. Again it will not end off-shoring but it will help to tilt Mark’s formula from dU + tC < U to dU+tC +1 < U. Every point that we can line up will mean extra jobs that will stay here.

[Mark Herschberg]

Originally posted by Mumbai cha bhau:

Yes, I know and I do agree with most of Tim's posts. I already said that before.

My response was more to other postings (I figured you got what he meant).

Originally posted by Mumbai cha bhau:

If I m correct, there are more than 250 million people that we can call middle class americans. Right? So obviously, if 250 million americans lose their buying power suddenly, it is going to be an unrecoveralble recession.

Good question. It looks like the US population is at 290 million. I don't know what defines the middle class, but I suspect it's more around 100-150 million. Even so you, you're point holds. You and I tend to agree. I suspect that less then 10% (probably even far less) of all US IT jobs can effectively be offshored. Of course, increased competition from overseas will be real and effective in some areas.
--Mark

[Al Newman]

I suspect that less then 10% (probably even far less) of all US IT jobs can effectively be offshored.

Effectively is the operative word, Mark. They can try, and right now that is what they are doing. It will work about as well as previous efforts to stuff 12 months of work into 3 months, I predict.
And then there will be (another) backlash.....