When I was on C-SPAN the weekend before last, I got a call I didn’t quite know how to field. It was from someone who by his accent was obviously Indian. He claimed that Indians represented 35% of the managers in American companies, and that American visa restrictions meant that they were all going to send those jobs to India. I stumbled around a bit, and took issue with his claim (it certainly isn’t true at the senior levels of major companies), and also pointed out I didn’t think he argument about managerial jobs being sent to India held up, since new MBAs in India are now making more than their counterparts in the US.
In general, simple labor cost comparisons are vastly overrated in manufacturing. Factory labor is only 10% of the product cost of most manufactured goods, so the savings of having the work done in China is not all that large, and is often offset by other factors (shipping and inventory funding costs, greater management costs due to more coordination, plus greater risk, since longer lead times reduce responsiveness and produce greater risk of taking losses due to inability to cancel orders if customer demand falls).
But in those cases like call centers, where the logistical issues are irrelevant, the issue I mentioned on air is coming to apply more broadly: India is no longer offering a cost advantage (and on top of that, most US customers resent dealing with foreign operators, not that what customers prefer matters any more). From the Financial Times:
Call centre workers are becoming as cheap to hire in the US as they are in India…
High unemployment levels have driven down wages for some low-skilled outsourcing services in some parts of the US, particularly among the Hispanic population.
At the same time, wages in India’s outsourcing sector have risen by 10 per cent this year and senior outsourcing managers based in the country command salaries above global averages.
Pramod Bhasin, the chief executive of Genpact, said his company expected to treble its workforce in the US over the next two years, from about 1,500 employees now…
Observers say that while the cost of some senior positions may have equalised with the US and certain call centre services may be more cost-effective to set up in depressed areas of the US, this phenomenon may not outlast the US downturn.
Even after a tripling in numbers, Genpact’s US workforce would still be only about a ninth of its total staff.
I doubt Indians ‘represent’ some double digit % figure in US managerial ranks. Such a ridiculous claim wouldn’t fly anywhere and remains a self-goal for the person making it.
Joblessness will be the #1 issue in the days ahead. I figure protectionism, overt or covert can’t be far behind.
I’m from India and was a grad student in the US till last year. I wish the US well. The world could well do with a strong US economy rather than a comatose one, I guess.
For years those of us with a manufacturing background have maintained that the exodus of jobs from the US was not necessary based on labor costs.
IMHO the private equity banksters and the upper management corporatists have profited from the exodus. At the end of the day however they have killed the goose that laid the golden egg: an upwardly mobile US middle class. So now as same store sales lag they are left scratching their heads about how this happened.
Until the country focuses on creating jobs and dominating areas of industry as our command economy competitors do we’re going to continue a sad downward spiral.
We are in WW III and the US is still waiting to fight the Soviet Union. WW III was never about two armies squaring off. It was/is about economic advantage. Years from now the history books of students around the world will be amazed at how little it cost to bring the US to its knees.
“Until the country focuses on creating jobs and dominating areas of industry as our command economy competitors do we’re going to continue a sad downward spiral.”
We used to do that, in fact, we were noted for it, but it was abandoned in favor of short-term gratification. I think our current business model is based on crack addiction.
“Years from now the history books of students around the world will be amazed at how little it cost to bring the US to its knees.”
Cost? Externally, it cost nothing. It was a Jimmy Jones-style mass suicide. Pass the Kool-Aid. Yummy!
It’s probably true that some significant fraction (10-20%) of the sr. management at high-tech firms in Silicon Valley are Indians. People from India tend to conflate the two, unaware of the fact that the high-tech industry is not all there is of American business.
I don’t agree with Donald that labor costs are not what drove most manufacturing overseas. That is absolutely why low-end manufacturing (assembly-line work) went overseas.
However, that is not true for industries like front-end semiconductor manufacturing, where it is capital (not labor) that dominates the cost of manufacturing. For example, it takes $5B+ to set up a state-of-the-art 300 mm semiconductor foundry that employs ~1000 people. In these cases, it was massive government subsidies for capital investment that enabled the Taiwanese to overwhelm the US. The few times in the recent past when companies have elected to build front-end semiconductor manufacturing facilities in the US (TI in Dallas; AMD in upstate NY), it was because of massive subsidies from the regional governments.
BTW, I think these subsidies were good ideas. Outsourcing a vitally important capability to a part of the world that’s just one Chinese missile from turning into a wasteland is insane and a dereliction of their duty to safeguard national security interests on the part of multiple US administrations. Wall Street is no better, rewarding fabless semiconductor companies with far higher multiples than their asset-heavy counterparts. I often wonder when fabless semiconductor companies’ multiples will start to get compressed to account for the China/Taiwan war risk.
Here in the Princeton, New Jersey area it is not difficult to believe the 35% claim…it seems like Indians are completely taking over this area. They are relentlessly non-assimilationist, marry according to their parents’ wishes and only within their nationality (and caste, which I find abhorrent), give their children Indian names, continue to dress and eat as if they were in India, and bring over scads of relatives as soon as they are able. Their children are not allowed to participate in any social activities during school and are instead made to study constantly, and the only subjects worthy of study are science and business. Their focus on getting ahead is single-minded and all-encompassing. They are always Republican because it’s good for their pocketbooks, and they are extremely racist against blacks, Hispanics, other Asians and Indians not of their caste.
Madam, I would suggest YOU are racist and a bigot. Since when in america, keeping once names or dress or customs considered bad? Perhaps you should ask obama why he did not change his name to something anglosaxon, like O’brian. Or perhaps ask italians not to cook Pasta.
Anna is absolutely spot on. Typically they are extremely racist against blacks, Hispanics, other Asians and Indians not of their caste. I’ve met some nice ones but I figured the nice ones are from lower caste.
But the same (insularity) can be said for many many other ethnic blocks – the orthodox/ kosher folk, the Amish, many Italians ( till the third generation or so) so why single out Indians for being slow in assimilating. Many are fresh off the boat really.
Let’s see, When Anna goes to India to work would:
– Changes name to Anuradha
– Dresses like Indian
– Eats only Indian food
– renames her children with Indian names
Good luck with that.
Anna, you sound like a bigoted democrat. Whenever I hear a person complain of others “taking over” I know I’m hearing a sad, bigoted loser. Let’s examine and deconstruct the prejudice, disinformation and stupidity in your post.
I see white people mostly marry other whites? Are you/they all racist? Or is something more commonsense of having shared interests and similar backgrounds?
When your forefathers landed here, why did they give you a foreign, European name like “Anna” and not Great Blue-Sky or another native American name?
Why is wrong to study science and business in a free country? Maybe they find the the crap taught as “liberal arts” useful?
Why is it wrong to be Republican? As a matter of fact, there are plenty of democrats who are of Indian origin as well.
Didn’t the Irish bring about “loads” of their relatives? Hell, the US has more Irish now than Ireland itself. Indians do it legally, for the most part.
There might be low level racism by Indians against others, but that is present in all groups. Didn’t a supposedly liberal Jewish writer of Time defame the Indian community recently? Happens all the time. Indian people in the US didn’t turn dogs and hoses on Black people or introduce segregation laws. They don’t have that kind of power in this society (I’ll leave you to guess who does).
Why is it wrong to focus on getting ahead? That’s what makes America great. Perhaps you’re pi**ed off that Indians aren’t asking for handouts, on welfare, committing crimes or dependent on the democrat plantation?
Finally! After 30+ years of Norquist-style government infanticide and anti-union fervor our wages are starting to fall. With any luck, eventually Americans will be the illegal aliens in some other country because we will be the cheapest labor available. Then our immigration problems will be solved. American capitalism is never having to say your sorry. Or “I’ll help.” Or “it’s the right thing to do.” Or “the middle class is not an insult to the upper class regardless of what I think.” Or…
The many hands that hold up the few get tired….what then?
I can’t speak to what Anna says about Princeton now, but when my kids were growing up in Palo Alto in the 80’s it certainly wasn’t true that the Indian kids (both of my kids had best friends who were Indian) were non-assimilationist. In fact they were key in school and church activities, and the parents were quite willing for us to take them along on (laregly) recreational trips as a third member of the family. They did have fairly high standards (particularly for what they expected when I was teaching them in catechism classes), but that was all to the good.
I am in silicon valley, and would have to concur with Anna above. I am sure that it will probably go as most other immigrant groups have gone with the second generation assimilating a bit more, but man this first generation is close to beyond the isolationism of any group before. What I find amazing is that they believe the BS they spew about how good they are, how such a great place India is, blah blah. I just have to scratch my head and wonder why they just don’t go back.
LOL. India is a $hithole. CIA World Factbook puts female literacy at 48% (2001). China, by comparison: 88% (2007).
Commonsense. Why do you think they’d be interested in having anything to do with dumb “go back to where you came” rednecks like yourself?
I’m one of the ones Yves mentions that don’t like dealing with overseas operators. Frequently I find their accent a barrier.
Having lived in India, studied there, and having a large number of South Asian friends I would say there is plenty of evidence not only that they are assimilating well here (lots of intermarriage) but that the relationship between the US and India deserves to be one of the strongest in the world. If there is a shred of good sense left in Washington it will be.
Despite the poverty and obvious cultural differences, India possesses many qualities the US has (or used to have) and needs. It is youthful (more than 60% under the age of 25), forward looking, has very strong family values, a functioning democracy and excellent schools (if only for the upper 20% of the population). They are from a melting pot society (perhaps more of an ethnic quilt), so are not taken aback by our diverse population.
I don’t discount what Ann and Dan say completely. The larger and more specialized an immigrant cohort is, the less assimilationist they behave. Upper caste Indians also have a tendency to push themselves forward in a way that is very off-putting to westerners.
But on the whole I cannot think of another country that is better suited to a full partnership with the US than India. Immigration is just a part of the picture. You have to step back and view the whole.
Where does an absolutely abysmal literacy rate fit into the whole?
What the hell is that supposed to mean? The relationships we have with other countries _should_ be as envisioned by George Washington and John Quincy Adams: we don’t get tangled up in military adventures abroad, and we stay out of other countries’ disputes. If there’s good that would come from cultural and (truly free) economic exchange, great. But formal partnerships of any sort are a bad idea.
Wow that’s interesting that guys at the top in INDIA are getting wages higher than in the US. A friend of a friend claims to make as much in Russia with his warton MBA as he made at Cisco Systems in the US.
I know HP opened up a new call center in Arkansas and CAT has opened up some kind of an operation in Arkansas too. Those wages in Arkansas are lowest in the country and housing is afforable. SO maybe the US can compete now on some fronts.
Lets hope the trend continues.
Anna and Dan,
Since you are so much in anguish about Indians in NJ & Si Valley refusing to assimilate, I think you should protest by refusing to ever patronize an Indian-owned-and-run establishment. Make sure you _never_ fill gas in NJ OR stay in a motel anywhere in the US – sure, some of them may not be Indian-owned, but why take the risk? And don’t use most high-tech equipment either – good bet that a lot of the software and hardware was written in India or by their relentlessly non-assimilationist caste brethren (or sisteren) in the US.
Enjoy living in the 18th century, even as Indians are happily leaving it.
I’m not aware of any full scale cost/benefit analysis that measures the actual cost of outsourcing even low-level manufacturing to the far east. I wish there were; even American workers displaced by outsourcing tend to think “well, if it’s really THAT much cheaper, I can see the point, even if I don’t like it.” It would be good to know what outsourcing costs the country in dollar terms.
You’ve got the obvious benefit (to the employer) of lower wages and no benefits or HR issues to worry about, that’s true. But against that, you’ve got fuel costs for shipping (which could skyrocket with the next fuel crisis), costs for administration and coordination, a very cumbersome and inflexible supply chain (try returning and replacing a batch of defective merchandise in a timely way–the shipping costs alone might amount to more than the merchandise).
Then there’s the cost to America’s towns and cities in the form of lost wage earners and lost tax revenues (e.g. sales tax, property taxes for manufacturing facilities, etc.), ancillary businesses going under or laying people off, and so on.
I think any estimation of the benefits of outsourcing that doesn’t include all those costs is a sort of a hollow joke. I am curious though, whether anyone’s done any sort of analysis along those lines.
I completely agree. I think much of the “profit” made by companies is really created by shifting costs on to some one else. It is more than just out sourcing.
For example when a private equity group buys a semiconductor firm, they bleed R&D, destroy the brand, and leverage the shit out the organization. Then try to IPO the turd. I argue they have created little to no value at all, but other folks picked up the costs.
The cost bearers are customers, employees, local governments, and the fools who buy the IPO. Why people would buy such an IPO amazes me. The other folks are just screwed without much control over the situation.
“Why people would buy such an IPO amazes me.”
Ignorance, or because they hope to flip it onto another sucker.
Ultimately it’s a negative sum game, and the question is how can that be changed. There’s a difference between investing and a con game, quaint as that notion may seem to some.
What you say is true – the irony is that your retirement fund probably helped finance the private equity group to buy the company which they proceeded to pluck clean before the IPO. The retirement industry needed to make these exotic deals as the was no yield for regular fixed income opportunities (big thanks to the maestro Alan)
Mind you not that post IPO these funds saw too much returns – the rich plucking first were pared down as management/transaction fees…also if any deal went bad guess who had little skin in the game?
All of what you state is valid – the offset of cheaper costs by the costs to cities etc and therefore on a societal level it is zero sum game.
But the thing is it is also a means to achieve wealth transfer – all gains to the owner and all pains (indirect costs) spread out. So no matter what it will continue as arrayed against are all the concentrated powers of the the powerful wanting to get wealthier still. This phenomenon always occurs (wealth transfer) in some form or the other in every society in history.
Drucker was the last guru in this arena of the cost of manufacturing. It is not that difficult to figure out> Back out all of your bennies and capital assigned to Labor and you will arrive at direct Labor cost or that actual Labor in a product. That and everything else excluding Materials is Overhead or Burden.
A full container in even the most heady of days, including rail, etc. was $3500. Coming back out of China the cost was $4500. If shipped FOB, you own it once it gets on board so there is a 4-5 week supply chain of materials. Most companies wouldn’t carry 5 weeks of inventory in house; but they ignore this plus the 2-3 weeks they have on hand already. Customs and duties are another issue.
I agree with you that no one looks at the hidden cost of outsourcing. Lost tax revenue locally and federally, higher welfare and unemployment costs, etc. One obvious outcome is the lost revenue stream for SS which ustiizes payroll wages taxes to fund it.
I still see work regularly moved, one project at a time, offshore….and wages are no where near equalized (partly because the Indians I work with tend to be 6 days a week x 12 hour days…managers seem to care more about the hours than the output, unfortunately). Someone is trying to con you into thinking the globalized leveling of lifestyles is over…it ain’t, not by a long shot.
As for silicon valley, 35% is probably a good rough number,
but I have no idea if that number applies outside of tech.
To over simplify other things being equal wages can only equalize when you out source about 5 times of all jobs as the population of India is 5 times as much
I am a regular reader of your blog. I am Indian, but have studied and worked in the United States before moving back.
I’m disappointed with the quality of this post. Its no surprise to see the kind of tacky, racist comments this post has generated.
The person who called you had probably something to lose with the introduction of a new visa fee for hiring foreign workers. I wonder why you even bothered to respond to it.
American workers are losing jobs because the financial system had been hijacked by a clique of powerful banksters. Indian labour has little to do with it.
There is really no comparison between America and India possible. Yet, as someone pointed out, the partnership between the 2 countries is definitely mutually beneficial.
There’s nothing remotely tacky or racist about Yves’ post, regardless of the fact that some of the comments are; nor is the quality of the post low.
Anything with “Indian” in the title leads all the “liberal” racists to come crawling out of the woodwork. These loser m0rons see no contradiction in uttering “why don’t you assimilate” and “Go back to where you came from” in the same breath.
In support of the fact that Outsourcing to India is beginning to fail the Cost/Benefit Analysis, there is a trend towards “rural-sourcing”:
as long as it contain to outsource to India, it’s not worth you effort anymore.
there are much more efficient ways to do it.
They are cheaper. The GAO, Sloan, Hira, Matloff, Miano, just a slew of credible research has shown H-1Bs undercut wages. More importantly, the H-1B, along with the L-1, is called the “offshore outsourcing Visa” and this is by the head of NASSCOM, the Indian business association vested in capturing the U.S. tech services area (aka BPO).
What they do hire H-1Bs, demand Americans train them in their jobs before being fired and those foreign guest workers are a good 20% cheaper, than their ocunterparts. They play games with job descriptions, often claiming advanced skills for an “entry” level position, then displace the older (keyword here is older) American worker. So, they use loopholes on the law, through bogus job descriptions to undercut wages, age discriminate, U.S. domestic diversity discriminate.
It’s hard to find techies over the age of 35 in a lot of U.S. companies and you can find entire divisions of Indian males, ages 24-32, working in a U.S. company.
They also train, through U.S. workers, that person, then literally offshore outsource the entire division, along with the newly trained L-1 or H-1B workers.
So, it is about wages, it is intensively about age discrimination and it’s also about technology transfer and sector capture by India.
You can set up a plant in India for $2 billion, whereas it might cost $20 billion in the United States.
It’s even more about service sector capture, i.e. “make India the globe’s tech hub” as a longer term strategy.
I’ve seen H-1B job ads for $10 bucks an hour in the U.S., for advanced skills. These jobs literally say “H-1B only need apply”.
Infosys, Wipro, operating in the U.S., just has a few Americans on staff. In other words, they are importing labor from India, at reduced wages in comparison to an American, somehow (and this is where it makes little sense) capturing multibillion dollar contracts where corporations outsource some large function and these “body shops” (known as technical body shops) significantly undercut wages in comparison to U.S. and pocket the difference in profits.
I just read in a comment that “only low end manufacturing and services” are offshore outsourced. That is a myth. The reality is the more advanced the skill set, the higher the costs per worker. Therefore, a huge target area to offshore outsourced is advanced R&D.
We have seen massive, massive movement of advanced R&D abroad. The entire pharmaceutical industry did a mass exodus to China, India and elsewhere in bio-engineering, chemical engineering, and other displines for advanced drug research.
Same is true in software engineering, hardware engineering, computer engineering.
Corporations such as Microsoft, Intel, have invested billions abroad, creating millions of jobs…abroad….in advanced R&D. IBM is the worst of the lot, literally firing every American who isn’t nailed down and even demanding Americans move to India, at Indian wages, to keep their job. HP is another notorious one to move R&D departments abroad. Cisco literally demanded workers move to India, again at Indian wages to keep their jobs and claimed they wanted to become “a Chinese company”.
Now attorneys are being offshore outsourced, in India.
These are all your advanced skill, advanced degree types of services. Obviously an attorney with an internal billable rate of $120/hr doesn’t compare to someone doing the same thing for $10/hr in India.
Same with advanced R&D. You can pay someone in India $10/hr when that same skill list goes $140k, base salary, in Silicon valley.
Also, because countries like China, India, as a national strategy, are out to capture advanced manufacturing and advanced R&D, esp. in the techical fields for their own economies, they give even more incentives to transfer R&D and manufacturing to U.S. corporations.
Also, manufacturing and R&D are linked. Manufacturing spawns R&D, the two interact. So, maybe there are still design centers in the U.S., there is no doubt almost every advanced new venture capitalist demands, literally demands a “China manufacturing strategy” to even obtain funding.
How’s that possible?
Attorneys, along with physicians, benefit from enormous amounts of protection, unlike folks in the tech and other sectors.
I guess some guy in India could do all the real legal legwork, and a US attorney could sign off on it. Given the fraction of congressmen who are lawyers, I doubt the legal profession here has much to worry about.
Read up. The ABA hasn’t been doing much to protect U.S.-trained lawyers. Quite the opposite:
Business is apparently booming, repeating the cannibalization of U.S. intellectual capital seen in other sectors:
The same thing is happening with doctors and medicine. My brother, who is 49 and living outside the United States, but covered under an American Medical Insurance Company has just been sent to India for his open heart surgery on Friday. The would not cover the entire thing in the US. I know that here at Stanford the surgery would have run around $400,00, it is being done in India for about $15,000. More and more insurance companies are going this route.
So are you objecting to your brother getting decent care at a low price?
The 35% number might be believable if we consider the huge number of convenience stores, hotels, and other franchises in the US that are operated Indians, and factor in that each of those has probably 3-4 “managers”.
I’m Indian and I have studied and worked in the US for over 10 years.
First of all, the person who called you obviously has a very limited view. 35% of all managers are not of Indian origin. I think the person who called you has low self-esteem and hence, needs to bolster his sense of himself by saying how great he is.
Truth be told, Indians are not any smarter than Americans or Chinese or any other ethnicity, for that matter. Indians tend to be more successful because they come from more humble backgrounds and hence, have a stronger desire to succeed.
However, I see that of Indians have started seeing themselves as smarter/superior than others. I really think this phenomenon is a way to bolster their self-esteem. It may also be because of the BS that media spews out.
At the same time, not all Indians are non-assimilating and racist. There are plenty that are educated and unbiased. The pendulum swings both ways, you know!
Also, how can you only blame cheap labor for all the woes of the middle-class? Are you forgetting that the number of students studying science/math in US colleges is abysmally low? When the Chinese and Indians turn out record number of engineers and doctors every year, what do you think will happen? Granted those engineers won’t be as good as the MIT-trained ones but they are still better than art-majors and college drop-outs.
My point is, China and India, both had the highest GDP in the world just a few hundred years ago. In order for the US to stay at the top of the game, it has to compete and compete smartly, not just complain.
On the whole I agree with your comment, but differ on a few points.
“Also, how can you only blame cheap labor for all the woes of the middle-class? Are you forgetting that the number of students studying science/math in US colleges is abysmally low?”
First, there are more American graduates in those fields, as well as related fields like engineering and CS, than there are jobs, and have been for years (I don’t just mean the current meltdown).
Second, to the extent that the number of graduates has declined, or is nowhere near its potential, why do you think that is? High school seniors aren’t dumb, and know that jobs in IT and engineering are being offshored like mad.
“China and India, both had the highest GDP in the world just a few hundred years ago. In order for the US to stay at the top of the game, it has to compete and compete smartly, not just complain.”
Given their large populations I would, in a more equitable world, expect China and India to have larger GDP’s than the US. What matters is GDP per capita.
And what do you mean by “compete and compete smartly”? Is offshoring as currently practiced part of competing smartly? If not, what should the US do about it?
I can comment on one of your claims on the basis of firsthand knowledge. I graduated from a top-10 technical college in US within the last 10 years. During my time, computer science and computer engineering were the hottest majors, as in, the percentage YOY increase was the greatest. However, a large number of students who joined, changed their majors within a year because it was too hard. Not only that, a vast majority of in-state students came in scholarships only to lose them after one year because their grades weren’t high enough.
My point is, IMO, the kids are not motivated enough to pursue the math and science courses. It is not necessarily due to the lack of opportunities either. If you can live a comfortable life, based on credit cards and debt, as a high-school grad working at BestBuy or whatever, what is your incentive to work harder.
This is a complex problem that requires a multi-faceted approach and I don’t have all the answers.
“a large number of students who joined, changed their majors within a year because it was too hard. Not only that, a vast majority of in-state students came in scholarships only to lose them after one year because their grades weren’t high enough.”
That’s common in highly competitive schools.
“It is not necessarily due to the lack of opportunities either.”
Not necessarily, but it sure is a good place to look. And not just entry level jobs either. Contrary to popular belief, many high school and college graduates realize when deciding on a career that they won’t be young forever, and may need to work when they’re past 30 (or even 40!). Why choose such a career when all you hear about is a trend towards increasing offshoring and age discrimination?
“If you can live a comfortable life, based on credit cards and debt, as a high-school grad working at BestBuy or whatever, what is your incentive to work harder.”
Come on, while I bemoan what’s happened to employment in technical fields in this country over the years I’m still confident that, if you can find a job, you’ll get paid a lot more than in a sales job at BestBuy. The real question is what can you earn with a technical degree (and what are your chances of finding a job and retaining one over the years) compared to other fields. Maybe you’re better off, or at least as well off, with a degree in accounting or business. Likely law school is a better deal – they seem to have no shortage of applicants.
Really good comment.
I would not recommend computer science as a major for folks intending to stay in the US.
To that list I would add:
Physics, Math, and Mech Eng.
Now if you want to study any of these because you love the subject, you should. But don’t do it for high paying jobs. You will need to figure on a different career by the time you retire. Each of these subjects is good training for the mind, so doing well in them will allow you to show well in your future career eventually.
Politically protected professions are the place to be now
Banking / Finance
Medicine / Insurance
Government Jobs (fire, police, prison guards)
That is where the growth and money is. I mean the average prison guard in CA makes way more than the average programmer, and that is before selling cell phones, drugs, and other stuff to the inmates.
I agree, and many times I tried to discourage young people from going into fields such as computer science or engineering.
As a former (and highly experienced) software engineer, due to my age (I’m in my late 40s) I think it would be nearly impossible to get hired in that industry today. I anticipated this a while back, so I went back to school and became a psychologist (which required a doctorate and lots and many years of clinical training). Unfortunately, diploma mills are now issuing doctorate degrees in psychology to just about anybody who qualifies for a student loan, so this field is likely to be destroyed as well before I reach retirement age.
An interesting take on computer science or engineering in this country is that not a single programmer or engineer I know wants their children to go into the same line of work, and most actively discourage them from doing so. As an electrical engineer I know quite a few such people, and I also plan to actively discourage my own children when they become old enough to think about a career.
The contrast is startling between that reality and the Tom Friedman style pundits, not to mention the industry and academic “leaders” that the media act as mouthpieces for. It’s as though the media regularly proclaimed that the sky is green.
“Granted those engineers won’t be as good as the MIT-trained ones but they are still better than art-majors and college drop-outs.”
As a high-achieving college-dropout, I am offended by this bigoted point of view. I also have known some art-majors and many of them are pretty nice people. Some of them definitely draw better than I do. (Hope that’s not a stereotype.)
Hey, hey. You need to choose your words carefully in a conversation like this.
I apologize but I was simply making a point. I guess no one likes stereotypes, do they??
This engineer thanks you for this paragraph:
“In general, simple labor cost comparisons are vastly overrated in manufacturing. Factory labor is only 10% of the product cost of most manufactured goods, so the savings of having the work done in China is not all that large, and is often offset by other factors (shipping and inventory funding costs, greater management costs due to more coordination, plus greater risk, since longer lead times reduce responsiveness and produce greater risk of taking losses due to inability to cancel orders if customer demand falls).”
Now if we could just get CEO’s and economists to understand the rudimentary factors involved in manufacture we’d be halfway to restoring a decent life in the US. Not that either CEO’s or economists are likely to open their eyes wide enough to allow the light of logic to penetrate to their neural fibers.
I think oftentimes the tradeoff is that labor is cheaper but management costs increase due to the issues Yves mentions.
So why would it be a big surprise that management would want to outsource the labor?
“I think oftentimes the tradeoff is that labor is cheaper but management costs increase due to the issues Yves mentions.
So why would it be a big surprise that management would want to outsource the labor?”
Once upon a time, lots of companies were created to make new inventive stuff that people wanted, or to make something better, or even cheaper. There was satisfaction in the whole process because it made sense to do that. To be a good leader of a company like this was a respected, good, and satisfying job.
Then business schools started studying all the details and learning how to finesse things even better. The “business” graduates started leading the businesses and learned from watching each other.
Look at people as a model. They have lots of stuff they don’t really need. If they sold some of the extra, like a kidney or an eye, the bank account could be quickly and easily improved. Even simple flow stuff like blood can be tapped almost continuously. The leader of a company is unlike the brain, in that he can move on if too much stuff gets sold and still keep a lot of the banked money.
That’s the way I see the current big “business leaders” operating. They really don’t have any affection for the company, its traditions, its people, or even its products. It is all about finessing things to make the numbers look good and getting out with a bunch of cash before the corporate body falls over completely.
The trade-offs work in the short term, especially if you don’t care about all the stuff that used to be understood to make companies good and worthwhile.
Does have anyone have any good data on what Indian salary costs are for programmers now?
I am constantly been told I am too expensive and that India is much much cheaper. It would be interesting to see if that is true any longer.
The real question is not the salary of a programmer in India vs. you, but the total cost of a project executed in whole or in part in India vs. one done completely in the US. As Yves has frequently pointed out, add in the communication problems, additional overhead and management, etc. and the savings of offshoring are often small to nonexistent.
I don’t disagree this. But I think managers just look at the hourly rate to make the decision. If I know what the cost structure is you can at least call them on the B.S.
There is a larger problem that programmers (and I think lawyers and other professions suffer from). In my experience both professions have trouble price differentiating between good performers and bad performers.
Hence a great lawyer might not cost much more than a pretty bad one. In programming the same thing holds true. I think your salary is more determined by how many times you switch jobs, rather than your ability to produce results.
I think in both professions the level of quality between the best practitioners and the poorest players is large. Maybe 10:1. However the salary levels don’t reflect this.
Correct assumptions from an anecdotal stand-point I have viewed first hand.
The lower Indian wages for programmers but massive surplus labor remind me of how software programmers acted in the 1990’s. Milk the development into years to retain the job if it gets completed at all.
Good tech managers earn their wages be it American or Indian by making sure the client gets the project completed on time. Providing value instead of attempting indefinite job security still works in this world.
Seems like it’d be reasonable to assume that for mgt, this is a feature not a bug.
America is not investing in its own as a posting on this website about the article about the grey versus the brown generational mismatch so eloquently described. America’s debt is going to be paid by the now “lost” generation to be followed by the “brown” generation. They will be weighed down by prior generations buck passing, so will not have funds to pay for their own challenges. It is really unfair and selfish of the current generation and bad for America’s future.
By the way, Indian education from what I have been told by someone in the know is producing a lot of dumbed down degree grads. The quality of education is going down. This might be why as noted in a NYT article Indian grads were not employable.
For many Indians, higher education does more harm than good – Asia – Pacific – International Herald Tribune
Indians are also complaining about being coolies.
Indian IT Industry – Leaders or Cyber Coolies?
Where have our young ones gone?: The coolieization of India
By Dr. Gangan Prathap
I think it is sad that the best and brightest of India end up becoming cyber coolies.
By the way,India faces its own “brown generation” problem demographically. See:
Doubts over India’s ‘teeming millions’ advantage
The commentator who thinks 20% of Indians go to the best schools while living in India must have been living in a bubble. A very small percentage is educated at that level.
The India you may not know
Come to South Carolina .. cheapest labor in the southeast.
….especially now that all the South Carolina furniture manufacturers have outsourced it all to China and other points east. Doing a little googling this morning on the subject of outsourcing, I learned that Lexington, SC, for generations a thriving furniture producing area, now has hundreds of acres of vacant furniture factories just sitting. Thinking of all the people who used to work there, wondering what they’re doing with themselves now…
The CSPAN caller did not say that the 35% figure represented managers — he said “employees”. I don’t know where that number comes from — 10 minutes with Google did not turn anything up.
Oddly enough, I just ran across a recent quotation from Paul Craig Roberts, Asst. Sec. of Treas. during Reagan’s presidency:
“The only way that the US will again have an economy is by bringing back the offshored jobs. The loss of these jobs impoverished Americans while producing oversized gains for Wall Street, shareholders, and corporate executives. These jobs can be brought home where they belong by taxing corporations according to where value is added to their product. If value is added to their goods and services in China, corporations would have a high tax rate. If value is added to their goods and services in the US, corporations would have a low tax rate.
“This change in corporate taxation would offset the cheap foreign labor that has sucked jobs out of America, and it would rebuild the ladders of upward mobility that made America an opportunity society.”
Hmm. Using tax policy to bring the jobs home, instead of to encourage corporations to send them overseas. Hmm!
Between that class of comments on the economy (which is typical for Roberts), plus how anti war the guy is, he’s a raging liberal. Not sure what kind of migration he made politically.
You have all forgotten about taxes.
Even IF it is cheaper to keep the manufacturing work in the US and employ US Workers, companies reduce their US Corporate income taxes by creating subsidiaries overseas, have the US branch buy their OWN products which were made by their subsidiaries overseas, and deduct the ‘cost’ of their own product made by their own subsidiaries overseas, then have the profit declared as foreign income earned by their own overseas subisidiary, reducing their US Tax bill.
Saving on taxes, federal, state AND local, appeals to companies trying to maximize profits. One more reason companies relocate outside the US.
Not to mention that regulations in many of these countries (labor, environmental, business) are presumably much weaker than in the US. (Not that they’re always stellar in the US, as the bubble showed.)
What to major in? Which field to enter?
What about political science?
I doubt they oursource politics to China.
They are not going to make an Inidan the Secretary of Defense just because he’s cheaper. Right????
How can so many comments go by w/o mention of purchasing power parity?
One reason that Indian workers are so much cheaper than American workers is that by PPP measures, the currency is grossly undervalued. (That applies to many other countries, too, of course; and it doesn’t mean all the undervaluation is caused by mercantilist policies.)
Nationmaster claims that the PPP/exchange rate ratio for India was 0.21 in 2005. WOW. That means an Indian worker has a 500% head start in a competition against an American worker, if I’m reading the definition correctly.
China is at 0.25, which means that India’s currency is even more undervalued than China’s, if you believe in PPP.
“if you believe in PPP”
I don’t believe in it as a measure of the “correct” exchange value of currencies. The “correct” exchange value is the one that balances the current account. India actually runs a deficit, so I wouldn’t call the rupee undervalued. China is another story.
As for Indian outsourcing, I’d eliminate the H-1B visa and severely curtail the use of the L-1 visa. As Bob above pointed out, these visas are openly called the “offshore outsourcing visas” by the head of NASSCOM (the Indian business association vested in capturing the U.S. tech services area). Much of the offshoring wouldn’t be profitable without the cheap guest workers (H-1B and L-1 are officially and explicitly non-immigration visas) to provide services here in person.
Alex, you said:
“As for Indian outsourcing, I’d eliminate the H-1B visa and severely curtail the use of the L-1 visa. As Bob above pointed out, these visas are openly called the “offshore outsourcing visas” by the head of NASSCOM (the Indian business association vested in capturing the U.S. tech services area). Much of the offshoring wouldn’t be profitable without the cheap guest workers (H-1B and L-1 are officially and explicitly non-immigration visas) to provide services here in person.”
Now, I will be the first to agree that H1Bs are misused many times. The culprits are big firms but also the small, 1-2 person staffing shops. These smaller staffing firms are actually worse as they almost indulge in bonded labor. I have heard that they will get you a job and then keep 40-50% of your salary while you contract is still valid.
Anyway, my question is this: I agree H1B needs to be cleaned up but what the many students who come and finish advanced degrees from US universities in math/science etc. I’m sure you know, the percentage of Asians (Chinese, Indians) enrolled in PhD programs is quite high now.
Do you recommend that students with advanced degrees simply leave and go back, if no H1Bs are available or should get a chance to find work here? If they stay, they compete for jobs but if they go back, they take their expertise back with them. It’s almost a no-win situation. Btw, a lot of industry insiders predict the next Google or Microsoft won’t originate in Silicon Valley rather in Asia somewhere.
It’s scary that in the name of capitalism that USA can’t stop the bleeding of jobs to other countries. Are we going to see a rebellion of the middle class or middle class degraded to the new poor to vote in a socialist government that will put America first, profit second?
Depends on what you want to measure. Of course, with no government interference, the exchange value is _the_ value, since by default “value” is usually taken to mean “exchange value”. In this case, of currency.
But if someone says that Indian programmers are cheaper by factor X, that doesn’t mean they themselves are living that much more cheaply in India than an American programmer does in America. In fact, given the absurd ratio I found on Nationmaster (0.21!), it wouldn’t be unreasonable to wager that they live _better_. If you don’t mind living in a country where a large fraction of the population is illiterate, of course.
It’s not just an Indian thing, of course.
There was some kind of Congressional hearing on this a few years ago, and some blithering idiot small business owner testified in support of the H-1B, saying that because of it she was able to hire a really good sysadmin (IIRC) for $35K.
Yes, everyone would like next-to-free factors of production for their business; that doesn’t mean they should be provided.
Of course, I meant that at least a fraction of them might.
“with no government interference, the exchange value is _the_ value”
I’d settle for that rather than the current situation, although Mr. Market tends to be bipolar (e.g. the Asian Crisis).
“It’s not just an Indian thing, of course.”
No, although India is dominant in the sort of offshoring of services that particularly benefits from H-1B and L-1.
“There was some kind of Congressional hearing on this a few years ago, and some blithering idiot small business owner testified in support of the H-1B, saying that because of it she was able to hire a really good sysadmin (IIRC) for $35K.”
There have been hearings about this for years – just no action. As for the idiot who testified, she should have just said “I like cheap labor, as long as it’s not my labor that’s cheap”.
“it wouldn’t be unreasonable to wager that they live _better_”
I suspect that India and the US are so different that a meaningful comparison is difficult if not impossible. The American can afford a car, but the Indian can afford live-in help. Who’s better off? I dunno – sounds like a matter of preference.
In response to “I suspect that India and the US are so different that a meaningful comparison is difficult if not impossible. The American can afford a car, but the Indian can afford live-in help. Who’s better off? I dunno – sounds like a matter of preference.”
I suspect the best place is to be the Indian who can afford the car and the live-in help…
“There was some kind of Congressional hearing on this a few years ago, and some blithering idiot small business owner testified in support of the H-1B, saying that because of it she was able to hire a really good sysadmin (IIRC) for $35K.”
And she thereby admitted that she violated the rules of the H-1B program, as it’s only supposed to be for jobs for which no Americans are qualified, rather than to get cheap help. Of course I know that’s a joke, and the government has never lifted a finger to enforce even the weak rules of the H-1B program, but it’s still interesting to hear such a blatant admission.
Foamy the squirrel tackles Indian tech support: [lol]
Tech Support I: Foamy The Squirrel
Tech Support II : Foamy The Squirrel
Tech Support III : Foamy The Squirrel
All off target as usual.
Offshring is a hedge against increased energy costs; if one factor of goods production increases a decrease must be found elsewhere in the production scheme or the enterprise falters.
As a hedge offshoring has failed and the ‘reverse version’ is also failing. The facts speak for themselves; as real oil prices rise the rate of unemployment rises along with them. At some point the level of unemployment reduces the price of fuel to the point where new production cannot be brought to the market. The array of goods for sale in America is very broad and the required aggregate demand is very high. Various ‘shoring’ techniques are completely counterproductive.
Its an odd article. If wages go down in US so can they go down in India. Outsourcing is only increasing and moreover the only way for some US companies to remain viable. In fact in a couple of years I fully expect Americans to immigrate to India for a job as American plutocracy has really no use for an American middle class that can be replaced by cheaper Indians (now thats an American class warfare issue).
Ms Anna is almost hilarious here, I have lived in US since 1981 and am single. I am an Indian immigrant and have never dated an Indian girl. ANd oddly I have only dated American women (may I add they all wanted to marry me- explains why I never got married.). Now here is why Indians largely intermingle in their own community-
1) Religion is still a big Indian issue, and thats acceptable
2) Diet e.g even eating an egg could be unacceptable to some Indians- thats fair too.
3) Cultural differences are vast as family is a very big deal in Indians. So thats understandable.
4) Caste system- simply abhorrent, but thats something that needs slow social change. I mean how many blacks and whites inter marry even in 2010?
5) The number 1 reason Indian-Americans do not marry non Asian Americans is because the non Asian Americans do not want too. Of the Indians that do mingle with non-Asian Americans find that they are discriminated against as the Caucasians do not want to adjust. I have 2 instances of Caucasian and Indian marriages and they all went to divorce primarily because the Caucasians were simple impossible to live with. And after 9/11 its more so even though most Indians are not Islamic.
6) Another thing is why are Indians singled out here as I know loads of Jews who only marry Jews, loads of seventh day adventist who strictly marry their own religion,etc. It takes 2 to 3 generations to lose that bondage. Personally I think the Asian community is integrating very strong, that includes Indians, Chinese and Koreans etc etc, but true that Caucasian, blacks and hispanics are not likely to marry Asians as much. Its not just an Indian phenom, Asian value system is just too different and I see no reason to force some social program. I prefer free markets here, let people make their own choices.
Indian programmers at 3 to 5 years experience make $1000 to $2000 per month, I can find call center folk for $100-$300 a month and lawyers at $30/hr. This article is completely offbase. There is not even a small chance that outsourcing will decline. Its because American elite are getting huge profit margins for the same level of service( do not listen to the baloney that a US University education is better than an Indian no name brand school. I have been educated in both countries and US education system is extremely easy regardless of the ratings – reminds me of Moodys and Dagong. I mean any 4 year school with aPC can provide an IT education and Indians have far less distractions like cable TV or college sports. ACtually Indian graduates are way better than American graduates- no cable- no college sports= a dull but smart Indian IT worker). The accent issue is a non-issue unless you deal with older Americans so call centers are not gonna decline. WHat will happen is middle class America is gonna swallow its pride, pack its bags and move to India for a job. The American plutocrats has no use for them. Short of an American revolution if you are unemployed better get ready to move to Asia. Illegal aliens will have a job in America as the rich Americans require cooks & gardners, programmers etc can be located anywhere in the world, cheaper the better.
Thank you for the data. Even at $2000 per month the Indian programmers are much cheaper than the valley. Oh well, I guess it is another 10 years of falling wages, or I need to figure out how to brand myself differently.
I am in IT staffing Silicon Valley and let me tell you outsourcing is very high in the background. It happens in small quantum packets so as to avoid declaring a layoff. The only way an American IT worker can stay relevant is quarterly upgrading of skills, taking on architect roles, becoming a PMP project manager. But I fear the worst. AMerican leadership in industry has little regard for folks like you and you may face a severe risk of job loss in 10years. Wage decline is the least of your worries. On the good news side US immigration has begun to refuse H-1s even though quota is available. All in all American working class stands no chance in this new global economy.
Considered with a long enough time line no working class any where stands a chance – has been so always.
Intresting post and very good response from the viewers.