07 May 2003
The new global job shift
By Jim Pinto
The latest round of globalization is moving more and more upscale jobs offshore. The exported work includes basic research, chip design, engineering, financial analysis, and many other high-income jobs previously considered key local positions.
Can America lose these jobs and still prosper?
This movement of knowledge-work is one of the biggest trends reshaping the global economy. The first wave of job exports started two decades ago with the exodus of manufacturing jobs—shoes, cheap electronics, toys—to developing countries. After that, simple service work like processing credit-card receipts and writing tedious software code migrated to low-labor-cost countries.
These days, a lot of higher-level engineering hardware and software design jobs are going offshore as part of corporate downsizing. But layoffs aren't just happening because demand has dried up—there is an underlying drive for lower costs and higher productivity. Analysts predict that by the year 2015, at least 3.3 million white-collar jobs and $136 billion in wages will shift from the U.S. to low-cost countries.
The driving forces are digitization, the Internet, and high-speed data networks that girdle the globe. Today, jobs that previously seemed truly leading edge, like designing a revolutionary microprocessor, can easily happen overseas. That's why Intel and Texas Instruments are hiring Indian and Chinese engineers to design chips. Dutch consumer-electronics giant Philips has shifted research and development on most televisions, cell phones, and audio products to Shanghai.
Virtually every sector of the financial industry is undergoing a similar revolution. Processing insurance claims, selling stocks, and analyzing companies can all be done in Asia for one-third to half of the cost in the U.S. or Europe. Wall Street investment banks and brokerages, under mounting pressure to offer independent research to investors, are buying equity analysis, industry reports, and summaries of financial disclosures from financial analysts in India. By mining web databases, offshore staff can scrutinize credit histories, access corporate financial disclosures, and troll oceans of economic statistics. Even Wall Street jobs paying $80,000 are getting easier to transfer; big brokerages are starting to use Indian financial analysts for number-crunching work.
What makes this trend so viable is the explosion of college graduates in low-wage nations. The Philippines, with a population of 75 million, churns out 380,000 college grads each year, with an oversupply of accountants trained in U.S. accounting standards. India already has a staggering 520,000 information-technology engineers, with starting salaries of around $5,000. U.S. schools produce only 35,000 mechanical engineers a year; China graduates twice as many.
Bangalore (India), Manila (Philippines), Shanghai (China), Budapest (Hungary), and more tech centers in developing countries have become the new back offices for corporate America, Japan, and Europe. Even Bulgaria, Romania, and South Africa, which have an educated people but remain economic backwaters, are tapping the global market for services.
U.S. engineers, accountants, and other professionals face a tough readjustment. Things will not bounce back to "the good old days"; the trend is clearly downward. Just two years ago, senior software engineers were paid up to $130,000 a year; the same jobs now pay less than $100,000. Computer help-desk jobs used to make about $55,000; now they get $30,000. Companies like Dell have located most of their telephone technical support to India. The trend is spreading to virtually every kind of knowledge-work.
We must recognize that many jobs cannot go offshore because they require face-to-face contact with customers. Americans will continue to deliver medical care, negotiate deals, and audit local companies. The U.S. will become primarily a financial and distribution center. Talented and innovative people will adjust, as they always have.
Some analysts think the U.S. will see a net gain from this shift—as with previous globalization waves. The U.S. labor force and capital will simply redeploy to higher-value industries and cutting-edge research and development. Silicon Valley gurus are already talking about the next wave of U.S. innovation coming from the fusion of software, nanotechnology, and life sciences. The waves of change will continue to increase the levels of productivity and value.
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