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Gurgaon News - 2004

Americans losing jobs to Americans

The US Bureau of Labor Statistics released a report on June 3 which shows that about 182,000 jobs were lost in the first three months of 2004. But only 2.5 per cent of the jobs (around 4,200) were lost to jobs shifted overseas to countries like India, Mexico and Philippines. So the outcry over job loss due to outsourcing is clearly a farce. In fact more jobs (about 10,000 ) were lost as they moved to different states within the US.

The hullabaloo over outsiders taking US jobs is not a new one. In the 60’s it were the robots taking US jobs. In the 70’s, the computers, in the 80’s it was the Japanese and now it is the Indians or the Filipinos.

The shifting of jobs to low-wage countries has in fact helped the US economy over decades. The Japanese were able to manufacture cheaper and more efficient cars in the US giving employment to thousands.

Now the outsourcing of jobs is helping the US economy in a big way. Step into any call centre in Noida, Gurgaon, Pune or Bangalore and you’ll find hundreds of computers, all manufactured by either IBM, Compaq, Dell or HP. The headsets used by the executives are all US manufactured.

The access cards and the security systems are all ‘made in America’. Even the canteen has a Coke or a Pepsi vending machine.

A recent survey showed that each dollar invested in outsourcing jobs not only saves cost but comes back to the US with an extra 42 cents added to it. Moreover the money saved by offshoring a service can be used to diversify a business time or invest in R&D.

The BLS report shows that maximum unemployment exists in the wholesale and retail business (1,183,000), totally unconnected to the outsourcing businesses of back office accounting or software. Moreover the manufacturing sector shows an increase in jobs probably due to the money saved due to offshoring.

Sectors like computers, electronics, food and transportation equipment showed the maximum increase in unemployment. Most of these sectors had jobs shifted to different states within the US. Areas like call centers and tech support were far down on the list.

Nobody wants to buy an expensive service if a cheaper and equally efficient substitute is available, so what if it is from India or the Philippines. The cheaper and more productive labour from across the shores have proved to be a blessing for companies which stood on the point of insolvency after September 11. Delta Airlines is a fitting example.

The BLS website also shows that outsourcing and offshoring have contributed about 1.5 per cent per year to manufacturing output per hour growth between 1973 and 1995.

A report over outsourcing and US economy was released in March 2004 by a research firm Global Insight. It was sponsored by the Information Technology Association of America (ITAA) which includes tech giants like IBM, Electronic Data Systems and Accenture. "

As the benefits of outsourcing compounds over time, the U.S. economy operates more efficiently, achieves a higher level of output, creates more than twice the number of jobs than are displaced, and increases the average real wage,” the report says. It adds that BPO helps US in lower inflation, increased productivity and consumer spending.

A recent Wall Street Journal report states that majority of workers who lost their jobs from January through March in 2004 were due to job relocations either in the US and abroad rather than offshoring. Moreover it accounted for just 7 per cent of the jobs lost.