Storm in a Thimble

Politicians can’t outsource the vote,’’ says Scott Kirwin, founder of

the Wilmington, Delaware-based lobbying group Information Technology

Professionals Association of America.

It is nice to know that election years are the same in all democracies.

Incumbent governments do their best to pander to mass feelings when election

time draws near. So the Americans pass laws to protect jobs — and we reduce

duties, lower taxes and generally recognize that the way individuals see

economic progress and security is not always the same as the way governments see

them. And if that vicarious pleasure was not enough one also gets a sense of

smug satisfaction when the Americans crib about job losses and the need to

protect their own.

For years we have been told the virtues of opening up our economy to the rest

of the world and let competition thrive. We were reluctant to do so — not all

the reasons were right — but finally have started moving in that direction.

Now that the Americans face some of these challenges — rather small ones —

it is kind of nice. It is wrong — but nice things are often wrong.

But why is this a small problem? The Great Indian Outsourcing Industry will

employ 152,000 people in 2003-04 as per Nasscom. Assuming that even two thirds

of this - 100,000 - was a job loss in the United States, it is small numbers for

an economy the unemployment rate is running at 6 — 7% – that is 8.4 million

people in December 2003. What that means is that Indian companies are

"stealing" just about 1% of the jobs. The real issue therefore for the

US is unemployment and not offshoring. The problem therefore will diminish only

when jobs start reappearing in the US economy. And if that does not happen,

President Bush would see the weapons of mass destruction, that were not found in

Iraq, appearing in the US, in the form of disgruntled voters.

There are calculations that prove that when jobs go out they create more jobs

due to higher efficiencies. There are reports that Indian companies do not only

steal jobs — they also create them by hiring locally in many cases. That is a

lot of work for a thimble-sized industry — and that too for 2% of its business

prospects. The reaction is clearly disproportionately related to the cause.

The present movements may be small by GDP standards, but you are still

talking about 152,000 people. And many many more going forward. The theory is

that as the lower end jobs get moved out there place is taken by up the value

chain jobs and eventually people graduate to these and live happily till the

next job churn happens. That is perfectly acceptable and correct. Therefore

logically what the US government should be doing is creating situations where

such transitions can be made as painless as possible. That means creation of new

types of jobs and making people ready for them. So far one has not heard

anything about this. No one seems to be articulating the need for this. Even if

all offshoring were to halt (which is just about impossible) would that solve

the problems of employment and growth for the US economy?

To my mind even these job migration is not the end of the story. It sort of

assumes that low-end jobs move out and high-end jobs move in. And as a recent

article in Wired would seem to suggest, the movement out of low-end services

jobs would unleash forces that will create high-end "creative" jobs.

The article assumes that offshoring destinations are good enough for low-end

jobs only. And people skills there are not suitable for up-the-

value-chain-jobs. The differences in people abilities are small and rapidly

disappearing. There are likely to be more "creative" people in India

than the United States and Europe put together. And technology makes it possible

for them to work from anywhere. And efficient corporations would try and get the

best people for their work — regardless of the place pf physical being. The

churn will not be limited to one category of jobs. Many vocations will get moved

around. That is the reality that a globalising world has to come to terms with.

In the meantime we can debate about the storm in a thimble.

The author is Editor-in-Chief of CyberMedia, the publishers of Dataquest. Shyam

Malhotra